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. 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- Completed 0.1 Mekong River Beidge Laos: China-Laos railway Under construction 5.8 Bangladesh: Payra power plant Under construction 1.7 Israel: Haifa Bay port Started 1.1 Announced/ Turkey: Third nuclear plant 25.0 under negotiation Announced/ Mongolia: Travan Tolgoi rail project 1.0 under negotiation Ukraine: Kiev metro's forth line Unknown 1.3 Sources: CSIS Reconnecting Asia Project (reconnecting asia.csis.org), DBS Group Research

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. Foreign direct investment in Thailand GDP per capita USD mn 12,000 China Japan 10,000 8,000 6,000 4,000 2,000 0 2012 2013 2014 2015 2016 2017 -2,000 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

Automation drive is essential and welcome Faced with aging, rising cost, and declining economic growth, China needs automation to boost productivity and maintain competitiveness. Robot shipments in 2016 Robot density of selected countries in 2016 Size of bubble indicates nominal GDP of the economy Units per 10,000 workers % (YOY) 700 35 China 600 30 500 25 400 US 20 300 200 15 Japan 100 10 Taiwan 0 South Korea 5 Korea Japan China Singapore Germany Germany Spain 0 Thousand 0 20 40 60 80 100 Units -5 Italy Sources: International Federation of Robotics, DBS Group Research

Sources: National Bureau of Statistics, DBS Group Research Automation enables lower-skilled workers to work on higher value-added jobs. Automation drive is essential and welcome -40 -20 Cummulative labour growth (2012-16; %) 20 40 60 80 0 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

Asia’s electronics supply chain – scale is large Asia vs US: share in global ICT goods exports All products Computers Communication equipment Consumer electronics Electronic components 0% 20% 40% 60% 80% 100% Asia US Others Sources: CEIC, UNCTAD, DBS Group Research

Asia’s electronics supply chain – interdependence is high Asia: share of intra-Asia trade in ICT goods exports / imports 100% Exports Imports 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 2000 2002 2004 2006 2008 2010 2012 2014 Sources: CEIC, UNCTAD, DBS Group Research