Bowen: Five new realities after four weeks of Israel-Gaza war. Events are still moving fast. Fears that the war could spread are very real. New realities in the Middle East are out there somewhere, but their shape and the way that they will work depend on the way this war goes for the rest of the year, and probably beyond. (BBC)

Crumbling buildings and broken dreams: China’s unfinished homes. Tens of millions of homes lie vacant across China following the country’s credit-fueled construction boom. (Al Jazeera)

Biden announces ‘strongest’ regulations yet to ensure safety of AI. Developers of powerful AI will have to share safety results and critical information with the US government. (Al Jazeera)

Japanese consumers are eating more local fish in spite of China’s ban due to Fukushima wastewater. Local fishing communities feared the worst when the wrecked Fukushima nuclear power plant began discharging treated radioactive wastewater into the sea. (AP)

US employers pulled back on hiring in October, adding 150,000 jobs in face of higher borrowing rates. The nation’s employers slowed their hiring in October, adding a modest but still decent 150,000 jobs, a sign that the labor market may be cooling but remains resilient despite high interest rates that have made borrowing much costlier for companies and consumers. (AP)

Biden will host Americas summit that focuses on supply chains, migration and new investment. In a preview of the first Americas Partnership for Economic Prosperity Leaders’ Summit, White House National Security Council spokesman John Kirby told reporters on Thursday that the two-day event would be a “once in a generation opportunity” to shift more of the global supply chains to the Western Hemisphere. (AP)

United Auto Workers union hails strike-ending deals with automakers that would raise top assembly-plant hourly pay to more than $40 as ‘record contracts.’ The pending agreements have halted the industry’s longest strike in 25 years. (The Conversation)

Yellow’s rivals are getting a boost from the trucker’s demise. The collapse of one of the largest U.S. trucking companies is propping up competitors in a lean freight market. (WSJ)

Panama Canal to halve daily sailings this winter due to drought. Rainfall levels are down by a third this year, hampering the ability for vessels to move through the waterway. (WSJ)

Maersk cuts 10,000 jobs as shipping demand falls. One of the world's biggest shipping firms is to cut 3,500 more jobs due to lower freight rates and demand. (BBC)

The US and European economies are diverging. With eurozone economic activity weakening and inflation tumbling, rate rises appear to be having greater traction. (WSJ)

China-Taiwan Conflict Spurs Economic Uncertainty

Jamilex Gotay, editorial associate

Since 1949, Taiwan has been governed independently of China, but Beijing views the island as part of its territory. Beijing has vowed to eventually unify Taiwan with the mainland, using force if necessary, according to Council on Foreign Relations. “Taiwanese President Tsai Ing-wen, whose party platform favors independence, has rebuked Beijing’s efforts to undermine democracy. Beijing has ramped up political and military pressure on Taipei,” the article reads.

The China-Taiwan geopolitical conflict has already made an impact on Taiwan’s GDP. The International Monetary Fund (IMF) has lowered Taiwan's 2023 gross domestic product (GDP) growth forecast by 1.3 percentage points from its April estimate to 0.8% amid an ongoing global economic slowdown.

In the October 2023 World Economic Outlook (WEO), IMF predicted Taiwan's consumer price index (CPI) will increase by 2.1% in 2023 and 1.5% in 2024, well below the expected global average of 6.9% in 2023 and 5.8% in 2024. As for China, the IMF forecasts GDP growth of 5.0% and 4.2%, respectively, in 2023 and 2024.

A recent conflict between the U.S. and China over computer chips, or semiconductors, has been escalating in recent months. “In particular, the U.S. has taken steps to limit China’s access to advanced chip technology amid heightened international competition in the area,” reads an article by The Economic Times. “The U.S. recently tightened export controls to undercut China's access to high-end chip manufacturing equipment and has banned top talent from working for Chinese semiconductor firms. Beijing retaliated by banning U.S. chip maker Micron from operating in China.”

The conflict with China increases economic uncertainty and instability in Taiwan's business environment as it has a huge share of the global semiconductor industry. “Semiconductors are produced by a remarkably global supply chain, with design often stemming from U.S., Japanese or European firms, and manufacturing taking place in Taiwan and South Korea,” the article reads.

A significant disruption to Taiwan’s semiconductor industry would cause major implications for the global economy, including the U.S. It could affect as much as $1.6 trillion or roughly 8% of America’s annual gross domestic product, hurting industries like personal electronics, automotives and telecommunications, according to the Hudson Institute.

Chinese President Xi has long said that uniting with Taiwan is essential to China's rejuvenation, according to Investor’s Business Daily. “Last October, he began discussing it less as a distant hope than as a promise. ‘Reunification definitely must be achieved and reunification definitely will be achieved,’” the article reads. “Only the battle for global technology leadership, to make China's economy and military unsinkable, matters as much to Xi. The two goals are very much intertwined.”

According to the September Political Risk Newsletter by PRS Group, the growing threat of a protracted economic slowdown that contributes to increased political difficulties for Xi increases the risk that he might be tempted to deflect public attention from his government’s domestic policy failures with provocative foreign policy moves designed to stoke nationalist passions. “Such a scenario would hold especially ominous implications for Taiwan, but would also create heightened risks for the several countries that dispute mainland China’s expansive territorial claims in the South China Sea and could complicate efforts to contain the risk of conflict between China and India over unresolved border disputes,” the newsletter reads.

Customers in China are paying on average 28 days beyond terms, and 37% of credit professionals say payment delays are increasing, according to FCIB’s Credit & Collections Survey. Whereas customers in Taiwan are paying 19 days beyond terms, and 31% of credit professionals say payment delays are increasing. The most common causes of payment delays in China are:

• Supply chain/shipping issues (46%)
• Cash flow issues (39%)
• Billing disputes (31%)
• Customer payment policy (31%)
• Inability to pay (31%)
• Unwilling to pay (31%)

The most common causes of payment delays in Taiwan are:

• Customer payment policy (64%)
• Billing disputes (36%)
• Cashflow issues (36%)
• Supply chain/shipping issues (36%)
• Inability to pay (27%)
• Unwilling to pay (27%)

What FCIB’s Credit & Collections Survey respondents are saying:

For China:

• “Always require payment in advance unless you can get insurance through the Export-Import Bank of the United States (EXIM) program.”
• “Maintain a good relationship with your customer. Have a standby letter of credit to secure the credit line and conduct business in Hong Kong only.”
• “We currently employ mortgage agreements and security deposits as security against open AR.”

For Taiwan:

• “It is important to know your customer's payment process to avoid misunderstandings or delays due to administrative issues. Our customer account is prepaid in Taiwan.”
• “Build a relationship with your customer early on, and include your salesperson. Monitor accounts closely and keep the relationship close.”
• “Obtain financial statements on your customers and backstop sales with credit insurance.”

 

Week in Review Editorial Team:

Annacaroline Caruso, editor in chief

Jamilex Gotay, editorial associate

Kendall Payton, editorial associate