Sun, Jan 10, 2016 - Page 13 News List

New fund to support China’s electronics supply chain

‘STRONG MANUFACTURING COUNTRY’:The US$30 billion fund is likely to be used as stimulus to support smaller firms highly exposed to slowdowns in global demand

NY Times News Service, HONG KONG

A Chinese technology regulator on Friday said that it would cooperate with a bank to set up a US$30 billion fund to support the country’s huge electronics supply chain.

The creation of the new fund underscores China’s ambitions to expand its tech capabilities and also signals how those ambitions are being threatened by slowing growth and recent market turmoil.

Official accounts of the fund did not make clear precisely how the money would be spent. However, given the recent weakness in Chinese manufacturing and lower-end electronics manufacturers, it might be intended as a form of stimulus to the tech industry.

The terminology used in media accounts signals China’s bold technology ambitions. Reports about the new fund said it would be used to build a “strong manufacturing country” and an “Internet power.”

A report in state-run media said the fund was created to address problems faced by small and medium enterprises that have come under pressure or folded recently because of a lack of funding.

The report made reference to recent factory closures, specifically pointing out the closing in October last year of Fu Chang Electronic Technology Co (福昌電子), a supplier to telecom equipment makers Huawei Technologies Co (華為) and ZTE Corp (中興).

The fund is to be created through a partnership between an industry group controlled by the Chinese Ministry of Industry and Information Technology and Ping An Bank (平安銀行).

Signaling the importance of the initiative, the signing ceremony was held at the Diaoyutai State Guesthouse in Beijing, which is often used to host visiting dignitaries, and was attended by representatives of many of China’s largest technology companies, including Lenovo Group Ltd (聯想) and Alibaba Group Holding Ltd (阿里巴巴), according to an official release.

Chinese shares have been hit hard this week by concerns about a depreciating currency and slowing growth. That volatility is most likely worsening an already difficult situation for lower-end electronics makers and component suppliers in China.

While China’s largest hardware brands and booming Internet companies tend to attract media attention, the country also has huge numbers of companies that support the electronics supply chain. With low margins and inconsistent orders, many are highly exposed to slowdowns in the worldwide demand for electronics.

The headwinds were highlighted again on Friday, when the Taiwanese electronics manufacturing giant Foxconn Technology Group (富士康) said that last month’s revenue was 20 percent lower than it was in December 2014. The company operates a number of city-size production facilities in China.

In another indication of the pressures on manufacturing in recent months, workers’ rights group China Labour Bulletin said in a recent report that there had been a “massive upsurge” in worker strikes and protests during the second half of last year.

Tracing the uptick in disputes to market turmoil last summer, the organization said it had tracked twice as many incidents last year as it had in 2014

The new fund seems to resemble a separate multibillion-dollar fund, announced in 2014, to provide financing and enable acquisitions to increase the size and sophistication of the country’s semiconductor industry.

In a speech, Zhou Zixue (周子學), who leads the industry group overseeing the new fund, emphasized the importance of market forces, using language similar to that used in announcing the semiconductor fund.

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