America, China and a World of Choice

We should walk with care in our presumption of how the world of choice sees us today, compounded by decades where we have acted like we were the best, if not only, choice.

(Cartoon, L Pinn, The Financial Times)

A few years ago, a good friend hosted what to this day was one of the most interesting discussions I’ve witnessed on China.

What in the cacophony of hawk and dove endless panels did he do differently?

He had no one from America, let alone Washington. He had, instead, world class actors who have known China for decades NOT from the United States – but from Singapore, Latin America and global business more broadly. Their lens, more bottom-up, experienced on the ground, seeking neither Thucydides Trap academic or Cold War frameworks, and having a LOT of data was eye opening throughout.

In all my travels, and in much of what I have tried to convey in this blog, the perspectives I am blessed to hear and see are not only about the countries I am in, but their world views. I’m asked often what, generally, do I get to understand in all my work that so many miss especially in America and there are many lessons. But, overall, I think we – from Washington, DC to Silicon Valley – have the hardest time appreciating a world that has choice.

Not choice for choice’s sake. Choice of world-class product, service and price.

I was recently in Riyadh speaking to many business executives, and no one wanted to talk about War or our elections. They wanted to talk about opportunity, about millions of tourists who will be coming, that their time had come, that they in many services well beyond oil could be the global choice.

And they wanted to talk about China. To a person.

Every industry had its own nuance, but what I heard repeatedly was some version of this: We have a long history with America and have enjoyed that overall; we want our kids to go to American Universities; we all love Taylor Swift. But, they would ask me, do Americans understand how good China is as business partners? “They take us seriously, really listen to what our needs are and try to address them, offer superb design and manufacturing, offer world class, Four Seasons like customer service – often at 30% less.”

I pushed on this here as I have in other parts of the world. You are considering building nuclear facilities and in your global bidding are you really going to take a Chinese operator over, say, France? You are considering putting your data in the cloud, have you no concerns over Ali Cloud vs. AWS?

It’s not the words I hear back that intrigue me, but the universal facial expressions: they shake their heads, squint their eyes in puzzlement and say: “Why not?”

Many American friends in business and government dismiss this as anecdotal. For all the talk of turning inward, America’s economic footprint in the world including rising markets has never been larger.

I think both may be true. But if you had to project the trend lines, I am less sure. As one leading Singapore official once said to me, “The best way for America to compete in the world is to compete. The advantages you think of as your birth right may remain strong – but in a world of choice you have to deliver the goods reliably and consistently – and affordably – in the face of for you may be unprecedented competition.”

A world projected where America fights regulatory capture and emphasizes an unleashing of its innovation and competitive advantage may be just this. How that world plays out in an era of tariffs and pushing back on one unique asset we have in the world of choice – decades long alliances – time will tell.

But we should walk with care in our presumption of how the world of choice sees us today, compounded by decades where we have acted like we were the best, if not only, choice.

A good friend from Singapore shared with me this study, The Rising Role of Chinese Firms in Southeast Asia’s Automotive Supply Chains, which is, despite its dull title, a fascinating, data-filled look at shifts in resources, supply chains, chips, innovation and policy in China and Southeast Asia. And it focuses heavily on the latter’s views the former. Like that China gathering I opened with, I find the perspective of Southeast Asia on China riveting, and one we too often ignore.

Even for those who study the worlds of EV and auto far more closely than I – which is to say pretty much everyone who follows the world of EV and auto – the data, focus and trends from this part of the world are eye opening. For those who chortle that China will sink under its own weight of central planning, there is much to consider.

A few examples:

In 2024 China was home to almost 100% of the world’s installed production capacity for lithium iron phosphate batteries used in EVs, and over 75% for nickel-based batteries. It has accounted for almost all of the global production of battery components with massive dominance in installed manufacturing of key components. Two Chinese companies have over half of the global market share for EV batteries. It is clear here, as I wrote about my recent experience at TSMC, that dominating the ecosystem of minerals, parts and other suppliers, with an enormous market at home and in rising parts of the world is not only competitive advantage but all but ensures pricing decreases in manufacturing with time.

And these ecosystems are not merely Chinese, but regional partners. For example, the Philippines and Indonesia are nearly 60% of the global nickel output, with the Philippines being a significant exporter to China. Indonesia, with over a fifth of the worlds’ nickel reserves, is dominated by Chinese investment in processing facilities there. Malaysia is playing an ever-increasing leadership role in electronics and joins Indonesia and Thailand in battery manufacturing. Thailand, in fact, is significant in full vehicle manufacturing, and world class related R&D is found in Singapore. Regulatory restraints in America have slowed down our investments in automotive here – reasonable as some on environment and safety may be – but has pushed us to seek higher cost alternatives. Southeast Asia is hardly standing still or waiting.

They have choice.

It’s a good read. In fact, it is worth quoting the conclusion in some detail:

If ASEAN countries want to participate in EV production and move quickly with the green transition, there is no alternative to involving Chinese firms. As this paper describes, this is already a reality across the region’s EV supply chain. At the time of writing, there were few indications that Chinese automotive OEMs, components and systems suppliers would be shut out of major automotive markets except for the US. There too uncertainty remains, with Donald Trump floating his openness to Chinese OEMs manufacturing in the US during his re- election campaign.

Even if Chinese firms eventually face significantly reduced market access across the advanced economies, they will likely retain access to growing markets in Latin America, the Middle East and Africa.

In India, the Modi government’s latest economic survey described integration with Chinese firms as “inevitable” if domestic manufacturing goals are to be achieved.175 In 2024, under pressure from domestic industry, the Indian government started to again approve investment proposals from Chinese firms in the electronics manufacturing sector.

Within ASEAN, the EV market’s average compound annual growth in the six biggest economies was recently estimated at up to 39 per cent from 2021 to 2035, when annual sales may reach US$100 billion.

Another recent study forecast that among Southeast Asia’s six largest economies, by 2024 EVs may constitute 56 per cent of total vehicle sales, requiring a cumulative investment in charging infrastructure of over $US3 billion. Meeting such growth in demand for EVs and supporting infrastructure over the coming years will require Chinese involvement.

ASEAN states cannot expect their firms to be equal players in this sector, or to be insulated from conflict over it between China, the US and others. But they can extract much value from plugging into the EV supply chain, without committing to opposing camps that are defined by the perceived interests of non-ASEAN nations. As a region with severe air pollution that sits on the front line of destructive and accelerating climate change, Southeast Asia would be ill-advised to take a course that slows down the green energy transition, globally or at home.

One smart American friend said to me, “Look Chinese dominance in EV and Solar Panels are exceptions, and we will see over time how this plays out as America remains ahead in innovation.”

Maybe.

When I was in the Gulf, I saw lovely $7,000 cars – NOT EVs, cars. I asked a local executive what he thought of them. “Regular people are buying them up.” I asked if they were any good. He paused and smiled and said, “At $7,000 one can go through three of them and that will still be cheaper than most of the competition….” He added, “But they are reliable and beautiful also.”

I have no crystal balls, except to say however these uncertain times play out the world – especially the newest entrants to the global economy – will have more choice. From China and India. And from themselves.

There is enormous opportunity for those who embrace this reality and … compete.