Supply Lines: China’s import binge

Supply Lines

Tech exporters in places including Taiwan and South Korea made record sales to China last month, as the pandemic caused robust demand for electronic entertainment and companies stocked up before the U.S. imposes sanctions on Huawei.

In total, Chinese companies bought $37 billion worth of integrated circuits in September, according to data released by the Customs Administration Tuesday. That surge wasn't just about Huawei securing supplies before America bans it from purchasing chips using U.S. technology. It reflected the rational actions of other companies worried that the tech confrontation will broaden and affect them, too.

The effects are rippling through Asia's tech supply chain. Overall, China's purchases from Taiwan jumped 35.8% in September, while imports rose 13.4% from Japan and 17.2% from South Korea.

There's also reason to expect that once the effect of the Huawei ban fades, the resurgence of Covid-19 in Europe and the U.S. will act to drive demand again for Asian exports of tech equipment. Chinese exports of electronic devices that make working from home possible, or just more bearable, expanded more than 45% in September.

China is still seeking to reduce its reliance on imported high-end manufactured goods like semiconductors and earn a bigger piece of the final selling price itself. A major push to enhance semiconductor capacity is under way, and that effort is likely to be given a major political boost on Wednesday, when Chinese President Xi Jinping gives a speech in the southern tech hub of Shenzhen.

It'll be interesting to watch out for any specific policies like subsidies to drive that goal. But it's also significant that the Communist Party leader is making himself personally identified with the long-term effort to supplant other countries' dominance in high-tech goods.

Jeff Black in Hong Kong

Charted Territory

The Australian government is seeking clarification from Beijing on reports that China has suspended purchases of Australian coal amid heightened diplomatic tensions between the two countries.

Today's Must Reads

  • Prime time | Amazon's two-day Prime Day sale kicks off on Tuesday and is expected to give the world's largest e-commerce company an early advantage over brick-and-mortar rivals still contending with consumers wary of crowds.
  • Smoother sailing | Maersk, which transports about 15% of the world's seaborne freight, raised its full-year earnings guidance amid stronger demand, cost cutting and capacity reductions that have boosted the cost of shipping during the pandemic.
  • Dress rehearsal | Faced with the double challenge of Brexit and Covid-19, U.K. supply chains are bracing for a chaotic winter. Meanwhile, EU leaders will discuss preparations for a potential collapse of trade talks with the U.K. at a summit later this week.
  • Aviation next | With relations between Washington and Beijing deteriorating and companies caught in the crossfire, Aviation Industry Corp. of China could join Huawei, ByteDance's TikTok and Tencent's WeChat among the targets of U.S. politicians wanting to crack down on China's reach.
  • Second-hand planes | Allegiant Airlines is weighing purchases of used Airbus planes as soon as early 2021, bucking an unprecedented travel collapse that has gutted demand for jetliners.
  • Engines off | The U.K. town of Barnoldswick, the birthplace of the jet engine, has become a microcosm of the crisis confronting Britain amid the pandemic and an economic meltdown made more perilous by Brexit.

On the Bloomberg Terminal

  • Forwarding tailwinds | DSV Panalpina again highlighted how it's positioned to emerge stronger from the pandemic's shock to global supply chains and the successful integration of its largest deal to dat, Bloomberg Intelligence writes.
  • Good for beans | Mean-reversion potential in the highest-ever trade-weighted dollar, U.S.-China trade tensions and the end of paying U.S. farmers to produce are likely to result in higher grain prices, Bloomberg intelligence says.
  • Use the AHOY function to track global commodities trade flows.
  • Click HERE for automated stories about supply chains.
  • See BNEF for BloombergNEF's analysis of clean energy, advanced transport, digital industry, innovative materials, and commodities.
  • Click VRUS on the terminal for news and data on the coronavirus and here for maps and charts.

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