Image source: Xinhua News Agency
The G7 still has the upper hand in public opinion, but the industrial advantage has been sidelined. Any economic or industrial policy issue initiated by the G7 will be difficult to achieve without China's participation.
Author丨Zitze
Editor丨Tian Kusana
Produced 丨Automobiles full media
On May 21, the three-day G7 Annual Summit concluded in Hiroshima, Japan. Whether from the point of view of the process or the result (it was issued in the form of a "summit declaration" on the 20th), it is very screwed, which is manifested in the deviation between the public desire and the actual goal, and the deviation between the goal and the means.
Like last year's summit, China, as the "elephant in the room", covered the three-day discussion process. In the past, some media have specifically counted how many times the "declaration" or communiqué mentioned China. It may seem like there are no numbers this year, but China is everywhere. What is avoided is not the "elephant" itself, but the G7's true attitude towards the "elephant".
The G7 claims that China is "economically coerced", demands "de-risking", and demands that China act in accordance with "international rules", while saying that "the policy guidelines are not intended to harm China or hinder China's economic progress and development".
The G7 claims to be committed to "leveling the playing field" and says it "protects certain advanced technologies from being used to threaten their national security."
The G7 said it was "moving forward with measures to reduce dependence on China on key supply chains" and said it wanted to establish a "stable and constructive" relationship with China.
All of the above is not the schizophrenia of the G7, but the inability of the G7 to decouple from China "without injury" (European Council President Michel, French President Macron, and German Chancellor Scholz refused to mention "decoupling"), but they could not play the trump card to make China comply.
1
The G7 whose influence is declining
Marginalized economic issues
The G7 (member states: the United States, Germany, France, the United Kingdom, Italy, Japan and Canada) has been hosting the summit of the advanced industrial countries of the West for nearly 50 years.
The original intention of the G7 was that the energy crisis required a direct platform for policy discussion, and its theme should revolve around economic policy. But as the G7's economic influence declined, the G7 began to become a platform for coordinating political positions, and now it has degenerated into a platform for shouting.
The G7 is no longer the center of policy attention in the world, marked by the establishment of the G20. If the G7 platform reaches a consensus that doesn't work, says something that doesn't work, it works on the G20 (all G7 members are also G20 members). This is determined by objective reality.
Over the past 10 years, China alone has contributed more to global economic growth than the G7 members combined. During the same period, China and the United States generated 78% of the global economic increase. At present, the added value of China's industry alone exceeds that of the G7 combined.
This does not mean that the two are comparable, because China's industrial sector is more efficient (energy consumption does not equal efficiency itself), more cost-intensive, and better coordinated (after all, the interests of seven countries are much more difficult to coordinate than one country). This is also consistent with China's economic contribution rate.
Compared to political issues, this year's economic issues have shrunk into the corner. The reason is also because the G20 is more performant.
2
The development of electric vehicles stems from a global consensus
After stressing the need to "significantly accelerate" the deployment of renewable energy and next-generation technologies, the G7 "called" on G7 countries to develop domestic policies with the goal of 100% or most of the light vehicles sold being net-zero emissions by 2035 and beyond.
This sentence fully reveals that the G7's current influence and weak execution are almost the same as those of the Economic Forum. There is no hard goal or a single forceful approach in the wording.
"Call", "or", "net zero", there is a lot of room for interpretation and manipulation. The reason why the "carbon reduction" environmental protection banner is now a little faded is because at that time it was determined that developing countries could not keep up with the "green carbon" economy, which could weaken the cost advantage of the latter. Unexpectedly, China has mastered the full value elements of the electric vehicle supply chain and energy generation. So, this card doesn't work very well anymore.
It doesn't work, why do you still fight? Simply put, because of strategic inertia. Energy, climate, and automotive industry policies, which have become global consensus, have been hammered into the rare consensus of the world's major industrial countries (except for the Republican administration in the United States) through the Kyoto Protocol, to the Copenhagen Conference, to the Paris Climate Agreement.
All countries have adjusted their industrial policies to this line, and everyone bargains for a question of how fast and how much, not whether they can do it or not. Countries have also invested astronomical amounts of money in "carbon reduction" and will not accept other routes until a new global consensus is formed.
3
"Reduce dependence on China"
Reduced to a showcase
For the 2035 "electrification" or "zero net emissions" scenario, the G7 has not come up with specific measures. The domestic policy of the United States is to exclude the Chinese supply chain. At the practical stage, every step needs to rely on Chinese upstream supplies. The G7 acknowledges this (which will reduce over-reliance on China for vital supply chains).
"Autobots" is in
"The dilemma of Korean power battery companies"
In the article, it was mentioned that the global power battery, no matter who produces it, the vast majority of its metal supply depends on China. Let's transcribe these numbers again: battery anodes produced in China account for 87% of the total market share (nickel is higher); The share of precursors is 85%; The cathode is slightly smaller, but also has a 77% market share.
There are two ways to supply batteries in Europe: imported and localized (mostly in Eastern Europe) production. Needless to say, imports mainly rely on China; For localized production, Chinese and Korean manufacturers invest and deploy production capacity. The new battery production capacity in the United States is covered by Korean companies (Panasonic's expansion plan is much smaller than LG and SKI).
However, Korean companies rely on China's upstream supply, and this dependence cannot be avoided in the medium term (3-5 years).
The latest data shows that in early May (1-10), South Korea's exports to China fell by 14.7% to US$3.2 billion; Exports to the United States rose 8.9% to $2.5 billion; Exports to the EU rose 11.5% to $1.6 billion; Exports to Vietnam fell 9 percent to US$1.3 billion. Exports to Vietnam are also bad, which we did not expect, and indirectly shows that Vietnam's assembly and processing entrepot trade is very problematic.
Exports to China are no longer possible, and it seems that it can explain the cooling of Sino-South Korean relations. However, from the perspective of electric vehicles, the "cooperative relationship" between the upstream and downstream of the two sides has not changed. South Korea estimates that lithium hydroxide alone is expected to import more than $7 billion from China this year, not counting other upstream products. In the 10 days of May, South Korea's vehicle exports doubled to USD 1.34 billion.
According to last year's ratio, these vehicles include 32.4% of new energy vehicles. The destination of vehicle exports, the United States ranked first, accounting for 29.7%. This means that the industrial chain strung together by China, South Korea and the United States has not been weakened, but strengthened.
And that's not counting batteries made in the United States. The source of the latter metal is more complex, some from Mexico, some from ASEAN countries, but these countries' nickel, cobalt, lithium, rare earth and other metal smelting capacity, in fact, is very clumsy. The United States is very clear that these are all OEM products, the source is in China, but they can only be pretended, otherwise the IRA will not be able to promote.
Last year, the U.S. government granted 24 months of tariff exemptions for photovoltaic equipment produced in Cambodia, Malaysia and Vietnam. Of course, the United States knows where these photovoltaic equipment come from, but as long as the final screw is screwed in Southeast Asia, even if there is a "non-neutral" origin proof.
4
The G7 is also not superior in new technologies
As for the future battery track, in fact, the situation is similar. The G7 is counting on new investment, turning over in new technologies, especially establishing dominance in the industrial chain, and excluding China's influence.
Solid-state batteries, which have high hopes, have not yet formed large-scale capacity deployment because of immaturity in technology. But sodium batteries unexpectedly stand out.
There is a battery raw materials consulting company in the UK called "Benchmark Mining Intelligence Institute". The company published a report saying that 16 of the 20 sodium battery factories currently planned or under construction around the world are in China. In the next two years, China's sodium battery production capacity will account for nearly 95% of the world.
Japanese media also mentioned that the current number of valid patents in the field of sodium batteries in the world is 9,860 (as of the end of 2022), of which China accounts for 55.6%. Now, it is possible to count the sodium battery production capacity to be completed by the end of 2023. Japanese media expect that the world will have 13.5GWh of dedicated capacity for sodium batteries, and China will account for 80%.
Although there are differences in the two data, the conclusion that China has an absolute advantage is fine.
Sodium batteries will be used in low-end models or energy storage, and in this new track, China's advantages are greater than the reality of lithium battery tracks.
This is because industrial accumulation has its own laws, that is, companies with large-scale lithium battery production capacity and commercial returns have the incentive to invest in new technology development. When a certain technology is mature, there is spare time to invest in the construction of new technology production lines. The current commercial returns can better balance the risk of enterprises investing in new production lines. The investment will be endorsed by the huge downstream vehicle production capacity and the world's largest end-user group.
If you don't have scale and make money from the beginning, it's impossible to directly participate in a new round of games, and the technology will stop at the lab stage.
Such a simple business principle does not need to be suggested by professional think tanks, and the G7 leaders must be very clear. Unless they are held back by party strife or domestic political issues, pretending to be confused.
In today's world, the G7 still has the advantage in public opinion, but the industrial advantage has been sidelined. The latter is not recent, probably dating back to 2009. The status quo makes it difficult to achieve any economic or industrial policy issue initiated by the G7 without China's participation.
In this way, the G7 summit declaration seems to be interpreted as "we need China's help at this stage to achieve the goal of weaning ourselves off China." It's very hilarious. This is the real reason why little attention has been paid to the G7's "2035 Initiative" in the world.
【Copyright Statement】
This article is an original manuscript of Autobots
Unauthorized reproduction is prohibited