Bulgarian companies should urgently look for production partners outside of China
The attempt to integrate authoritarian states into the world economy, to tie them to capital and trade flows to prevent war, has not worked. China and Russia continue their aggressive behavior and pursuit of imperial goals, and the separation of Western economies from Beijing is a reaction to this. This was commented by Nikola Yankov, managing partner at “Expat Capital”, on the air of the program “Business Start” with host Hristo Nikolov.
“The main risk facing the world in the coming years is China’s aggressive policy and China’s forceful imposition of its interests in the Asia-Pacific region, including a possible seizure of Taiwan. This would cause enormous turbulence in the world economy – Western countries would impose terrifying sanctions on trade turnover and capital flows to and from China. This will affect a huge number of international corporations that currently rely on China as a major manufacturing partner.”
Even without direct military conflict, China could impose a blockade on Taiwan, which would stop the flow of chips to the global economy. Major manufacturers such as TSMC and Intel have already announced new production centers in Europe in preparation for such a possibility, Yankov said.
The US has already taken measures to limit trade and capital flows to China in 2022, warning institutional investors against investing in the Chinese stock market and delisting Chinese companies from US exchanges. This was followed last week by a ban on US persons investing in China’s technology sector. The EU is currently taking a different line by restricting Chinese investment in strategic sectors, but will most likely adopt US-like action by the end of the year, Yankov said.
“The policy of reversing globalization, of rebasing basic production in America and Europe will continue at an alarming pace… A large number of Bulgarian companies rely on raw materials, parts or production of their entire product on the territory of China with Chinese partners. This was a very successful model. These companies urgently need to rethink their strategy and diversify their risk by choosing manufacturing partners outside of China. They need to have a plan B,” said the guest.
The hard core of Donald Trump’s supporters has reached its maximum and there is hardly anything to sway or mobilize them any more. But another indictment against the former president — for involvement in an organized crime ring to rig the 2020 Georgia state election — greatly diminishes his chances of winning the GOP nomination, especially if he is not released on bail after his arrest, Yankov said. in commenting on the latest lawsuit filed against Trump.
“This unties the hands of President Biden’s administration a little more to reduce the populist rhetoric, so that it is not liked so much on the fringes, and to concentrate on more reasonable and urgent policies, including in the economic sphere,” Yankov believes.
Reducing the threat of another Trump term will reduce pressure to spend public money in the US. Planned large spending during the upcoming election cycle was one of the reasons for the debate in Congress over the country’s debt ceiling, Yankov recalled.
The administration may now begin fiscal tightening measures, and there may be signs of a return to interest rate policy by the Federal Reserve. The Fed will have to be careful with historically high mortgage rates – above 7% – as a cooling housing market could increase the likelihood of a recessionary scenario.
A possible return of Trump to the White House will not have such a big effect on US support for Ukraine, believes Yankov, and he recalled that Trump first called on American companies to leave China.
In his words, despite calling Putin his friend, Trump will not stop supporting Ukraine, but will continue to follow the strategic interest of the United States in defeating Russia in its attempt to restore the empire of the USSR.