Evolving Supply Chain CHRIS LEUNG , DBS NATHAN CHOW , DBS MA TIEYING - - PowerPoint PPT Presentation

China — BRI, Automation, and the Evolving Supply Chain

CHRIS LEUNG, DBS NATHAN CHOW, DBS MA TIEYING, DBS MODERATED BY LESLIE TEO, GIC

BRI Tactics

• The rail line originating in Kunming will improve connectivity between China and Southeast Asia.
• High-speed railway will better facilitate mobility of capital and labour.

Sources: CSIS Reconnecting Asia Project (reconnecting asia.csis.org), DBS Group Research

Table 1: Selected BRI projects Status USD bn Hungary: Huawei logistic centre Completed 1.5 Sri Lanka: Hambantota deep sea port Phase I and II Completed 1.3 Iran: Rudbar Lorestan hydropower dam Completed 0.6 North Korea: New Yalu Bridge Completed 0.4 Indonesia: Sumsel-5 power plant Completed 0.3 Kazakhstan: Khorgos dry port Completed 0.2 Pakistan: Gwadar Port construction of breakwaters Completed 0.1 Cambodia: National Road No. 214, Stung Treng- Mekong River Beidge Completed 0.1 Laos: China-Laos railway Under construction 5.8 Bangladesh: Payra power plant Under construction 1.7 Israel: Haifa Bay port Started 1.1 Turkey: Third nuclear plant Announced/ under negotiation 25.0 Mongolia: Travan Tolgoi rail project Announced/ under negotiation 1.0 Ukraine: Kiev metro's forth line Unknown 1.3

Southeast Asia – a low-hanging fruit

• The most feasible, and the most important in Southeast Asia, is the central line, which involves the richest

ASEAN countries.

• China and Japan competed fiercely to sell high-speed railway to the Thai government.
• China should (i) import more from Thailand; (ii) increase FDI to protect economic ties.

Note: GDP per capita of Singapore, a high-income economy, is not comparable and therefore, not included in the chart. Sources: Macrobond, CEIC, DBS Group Research

• 2,000

2,000 4,000 6,000 8,000 10,000 12,000 2012 2013 2014 2015 2016 2017

Foreign direct investment in Thailand

China Japan USD mn

GDP per capita

Automation drive is essential and welcome

Faced with aging, rising cost, and declining economic growth, China needs automation to boost productivity and maintain competitiveness.

Sources: International Federation of Robotics, DBS Group Research

100 200 300 400 500 600 700 Korea Singapore Germany Japan China

Robot density of selected countries in 2016

Units per 10,000 workers China South Korea Japan US Germany Taiwan Italy Spain

• 5

5 10 15 20 25 30 35 20 40 60 80 100 % (YOY) Thousand Units

Robot shipments in 2016

Size of bubble indicates nominal GDP of the economy

Automation drive is essential and welcome

Automation enables lower-skilled workers to work on higher value-added jobs.

Sources: National Bureau of Statistics, DBS Group Research

• 40
• 20

20 40 60 80 Farming, Forestry & Fishery Mining Accommodation & Catering Trade Education Public Admin. & Social Security Culture, Sport & Recreation

• Environ. & Pub. Utility Management

Utility Production and Supply Manufacturing Healthcare and Social Work Resident & Repair Services Wholesale & Retail Trade Financial Intermediation

• Sci. Research & Polytechnic Service

Transportation, Storage & Post Construction Real Estate Management Software and IT Service Leasing & Commercial Service

Cummulative labour growth (2012-16; %)

Asia’s electronics supply chain – scale is large

Sources: CEIC, UNCTAD, DBS Group Research

0% 20% 40% 60% 80% 100% Electronic components Consumer electronics Communication equipment Computers All products Asia US Others

Asia vs US: share in global ICT goods exports

Asia’s electronics supply chain – interdependence is high

Sources: CEIC, UNCTAD, DBS Group Research

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2000 2002 2004 2006 2008 2010 2012 2014 Exports Imports

Asia: share of intra-Asia trade in ICT goods exports / imports