Investment has kept flowing into China from abroad. This is despite the recent escalation of Sino-US tensions and the pandemic that may have prompted many countries and international companies to consider cutting their exposure to China. Any decoupling from the world’s second-largest economy is likely to be a protracted process.
Beijing has been trying to juggle between fighting a trade war while maintaining China as a benign destination for foreign investment. So far, Beijing has refrained from retaliating against US trade war tactics and the continuation of inflows of foreign direct investment (FDI) appears to show that this balancing act is working.
Decoupling, not yet
Balance of payments (BoP) data shows continued inflows, although the flow has slowed recently[1] (see Exhibit 1). This likely reflects foreign companies restructuring their supply chains in response to
Rising cost in China
Higher tariffs on Chinese exports due to the trade war
Rising geopolitical risk
The risk of China shutting down due to the pandemic.
FDI utilisation data (BoP data minus foreign firms’ undistributed and unremitted profits) shows the same trend. However, the narrowing gap between the BoP and the utilisation data (see Exhibit 2) suggests foreign firms have been repatriating profits rather than reinvesting their earnings, or withdrawing investment, from China.
Financial market integration has deepened
Despite the US tariff battles and investment restrictions on China, China-US financial integration has deepened rather than being reversed. This has been a result of China accelerating financial liberalisation, prompted in part by US pressure.
Formerly, foreign financial firms in China were allowed only to operate joint ventures with minority ownership stakes. The liberalisation since 2019 has led to a sharp increase in the number of majority or wholly foreign-owned financial institutions. They include large US firms such as PayPal, Goldman Sachs, JP Morgan, American Express, Fitch Ratings and S&P Global.[2]
Meanwhile, China has been integrated further into the global financial markets: foreign portfolio inflows into onshore stocks and bonds have risen sharply. Inflows have not abated (although equity inflows are more volatile than bond inflows) despite the trade war and the pandemic. They are set to grow as Chinese assets are added to international benchmarks, prompting global investors to increase the weighting of these assets in their portfolios.
Supply chains’ incentive to decouple
Nevertheless, the risks of a prolonged Sino-US trade war and the pandemic have prompted countries and companies to consider moving supply chains away from China to diversify risks. As an example, the Japanese government set up a JPY 243.5 billion fund to assist Japanese companies to leave China[3]. Although the amount is small (about 3.5% of estimated total Japanese investment in China), the signal and incentive are loud and clear.
President Donald Trump’s threat to decouple from China[4] may turn out to be a long-term US foreign policy because if there is one thing Democrats and Republicans agree on, it is that they both want to check the rise of China, and decoupling from China is seen as a means to that end. Indeed, US companies including Apple, Google and Microsoft have recently moved production to Asian countries such as Vietnam and Thailand and are considering further moves to India and Mexico.
It is all interconnected
However, the world’s integrated supply chains are centred on China and much of the foreign investment is targeting China’s domestic market.[5] A 2019 survey found that 95% of US companies invested in China for its domestic market and 87% had no intention of leaving.[6] Although views may change, decoupling is not an imminent and quick process, as the experiences of some countries can attest.
Japan, South Korea and Taiwan have tried to reduce concentration risk in China and increase investment in southeast Asia. However, their stock of FDI in China has remained large. Furthermore, southeast Asia is deeply integrated into the global supply chains that depend on China, so relocating productions there does not benefit diversification. China’s lockdown during the COVID-19 outbreak hit Japan, South Korea and Taiwan’s production lines directly and indirectly as supply chains in southeast Asia which rely on Chinese inputs for production shut.
De-globalisation means decoupling
Arguably, decoupling from China is part of the de-globalisation trend that has been unfolding for some time. International trade was stagnating before the pandemic, and global FDI had fallen by 31% in 2019 from its peak in 2007. COVID-19 sped up the reshoring as a risk management measure, especially for the production of strategic goods.
The process of de-globalisation forcing supply chain restructuring and decoupling from China may well continue, but it will unfold only slowly. It may lead to the emergence of two competing trading (and technology) blocs in the long term, with one led by China and the other led by the US. Such an outcome will reshape the global trade and technology landscape and have far-reaching investment implications.
Any views expressed here are those of the author as of the date of publication, are based on available information, and are subject to change without notice. Individual portfolio management teams may hold different views and may take different investment decisions for different clients. This document does not constitute investment advice.
The value of investments and the income they generate may go down as well as up and it is possible that investors will not recover their initial outlay. Past performance is no guarantee for future returns.
Investing in emerging markets, or specialised or restricted sectors is likely to be subject to a higher-than-average volatility due to a high degree of concentration, greater uncertainty because less information is available, there is less liquidity or due to greater sensitivity to changes in market conditions (social, political and economic conditions).
Some emerging markets offer less security than the majority of international developed markets. For this reason, services for portfolio transactions, liquidation and conservation on behalf of funds invested in emerging markets may carry greater risk.
[1] The sharp drop in net FDI flows to China in 2015 and 2016 was due to massive outward direct investment by Chinese firms in those years that put significant downward pressure on the renminbi and finally triggered Beijing’s capital control response at the end of 2016.
[2] Lardy, Nicholas and Tianlei Huang (2020), “Despite the Rhetoric, US-China Financial Decoupling Is Not Happening”, China Economic Watch, Peterson Institute for International Economics. July 2.
[3] Reynolds, Isabel and Emi Urabe (2020), “Japan to Fund Firms to Shift Production Out of China”, Bloomberg, April 9.
[4] Lawder, David (2020) “Trump Threat to ‘Decouple’ U.S. and China Hits Trade, Investment Reality”, Reuters Business News, June 24.
Watch Yield Curve For When Stocks Begin To Price Recession Risk
Authored by Simon White, Bloomberg macro strategist,
US large-cap indices are currently diverging from recessionary leading economic data. However, a decisive steepening in the yield curve leaves growth stocks and therefore the overall index facing lower prices.
Leading economic data has been signalling a recession for several months. Typically stocks closely follow the ratio between leading and coincident economic data.
As the chart below shows, equities have recently emphatically diverged from the ratio, indicating they are supremely indifferent to very high US recession risk.
What gives? Much of the recent outperformance of the S&P has been driven by a tiny number of tech stocks. The top five S&P stocks’ mean return this year is over 60% versus 0% for the average return of the remaining 498 stocks.
The belief that generative AI is imminently about to radically change the economy and that Nvidia especially is positioned to benefit from this has been behind much of this narrow leadership.
Regardless on your views whether this is overdone or not, it has re-established growth’s dominance over value. Energy had been spearheading the value trade up until around March, but since then tech –- the vessel for many of the largest growth stocks –- has been leading the S&P higher.
The yield curve’s behaviour will be key to watch for a reversion of this trend, and therefore a heightened risk of S&P 500 underperformance. Growth stocks tend to outperform value stocks when the curve flattens. This is because growth companies often have a relative advantage over typically smaller value firms by being able to borrow for longer terms. And vice-versa when the curve steepens, growth firms lose this relative advantage and tend to underperform.
The chart below shows the relationship, which was disrupted through the pandemic. Nonetheless, if it re-establishes itself then the curve beginning to durably re-steepen would be a sign growth stocks will start to underperform again, taking the index lower in the process.
Equivalently, a re-acceleration in US inflation (whose timing depends on China’s halting recovery) is more likely to put steepening pressure on the curve as the Fed has to balance economic growth more with inflation risks. Given the growth segment’s outperformance is an indication of the market’s intensely relaxed attitude to inflation, its resurgence would be a high risk for sending growth stocks lower.
COVID-19 lockdowns linked to less accurate recollection of event timing
Participants in a survey study made a relatively high number of errors when asked to recollect the timing of major events that took place in 2021, providing…
Participants in a survey study made a relatively high number of errors when asked to recollect the timing of major events that took place in 2021, providing new insights into how COVID-19 lockdowns impacted perception of time. Daria Pawlak and Arash Sahraie of the University of Aberdeen, UK, present these findings in the open-access journal PLOS ONE on May 31, 2023.
Participants in a survey study made a relatively high number of errors when asked to recollect the timing of major events that took place in 2021, providing new insights into how COVID-19 lockdowns impacted perception of time. Daria Pawlak and Arash Sahraie of the University of Aberdeen, UK, present these findings in the open-access journal PLOS ONE on May 31, 2023.
Remembering when past events occurred becomes more difficult as more time passes. In addition, people’s activities and emotions can influence their perception of the passage of time. The social isolation resulting from COVID-19 lockdowns significantly impacted people’s activities and emotions, and prior research has shown that the pandemic triggered distortions in people’s perception of time.
Inspired by that earlier research and clinical reports that patients have become less able to report accurate timelines of their medical conditions, Pawlak and Sahraie set out to deepen understanding of the pandemic’s impact on time perception.
In May 2022, the researchers conducted an online survey in which they asked 277 participants to give the year in which several notable recent events occurred, such as when Brexit was finalized or when Meghan Markle joined the British royal family. Participants also completed standard evaluations for factors related to mental health, including levels of boredom, depression, and resilience.
As expected, participants’ recollection of events that occurred further in the past was less accurate. However, their perception of the timing of events that occurred in 2021—one year prior to the survey—was just an inaccurate as for events that occurred three to four years earlier. In other words, many participants had difficulty recalling the timing of events coinciding with COVID-19 lockdowns.
Additionally, participants who made more errors in event timing were also more likely to show greater levels of depression, anxiety, and physical mental demands during the pandemic, but had less resilience. Boredom was not significantly associated with timeline accuracy.
These findings are similar to those previously reported for prison inmates. The authors suggest that accurate recollection of event timing requires “anchoring” life events, such as birthday celebrations and vacations, which were lacking during COVID-19 lockdowns.
The authors add: “Our paper reports on altered timescapes during the pandemic. In a landscape, if features are not clearly discernible, it is harder to place objects/yourself in relation to other features. Restrictions imposed during the pandemic have impoverished our timescape, affecting the perception of event timelines. We can recall that events happened, we just don’t remember when.
#####
In your coverage please use this URL to provide access to the freely available article in PLOS ONE: https://journals.plos.org/plosone/article?id=10.1371/journal.pone.0278250
Citation: Pawlak DA, Sahraie A (2023) Lost time: Perception of events timeline affected by the COVID pandemic. PLoS ONE 18(5): e0278250. https://doi.org/10.1371/journal.pone.0278250
Author Countries: UK
Funding: The authors received no specific funding for this work.
Journal
PLoS ONE
DOI
10.1371/journal.pone.0278250
Method of Research
Survey
Subject of Research
Not applicable
Article Title
Lost time: Perception of events timeline affected by the COVID pandemic
Article Publication Date
31-May-2023
COI Statement
The authors have declared that no competing interests exist.
Hyro secures $20M for its AI-powered, healthcare-focused conversational platform
Israel Krush and Rom Cohen first met in an AI course at Cornell Tech, where they bonded over a shared desire to apply AI voice technologies to the healthcare…
Israel Krush and Rom Cohen first met in an AI course at Cornell Tech, where they bonded over a shared desire to apply AI voice technologies to the healthcare sector. Specifically, they sought to automate the routine messages and calls that often lead to administrative burnout, like calls about scheduling, prescription refills and searching through physician directories.
Several years after graduating, Krush and Cohen productized their ideas with Hyro, which uses AI to facilitate text and voice conversations across the web, call centers and apps between healthcare organizations and their clients. Hyro today announced that it raised $20 million in a Series B round led by Liberty Mutual, Macquarie Capital and Black Opal, bringing the startup’s total raised to $35 million.
Krush says that the new cash will be put toward expanding Hyro’s go-to-market teams and R&D.
“When we searched for a domain that would benefit from transforming these technologies most, we discovered and validated that healthcare, with staffing shortages and antiquated processes, had the greatest need and pain points, and have continued to focus on this particular vertical,” Krush told TechCrunch in an email interview.
To Krush’s point, the healthcare industry faces a major staffing shortfall, exacerbated by the logistical complications that arose during the pandemic. In a recent interview with Keona Health, Halee Fischer-Wright, CEO of Medical Group Management Association (MGMA), said that MGMA’s heard that 88% of medical practices have had difficulties recruiting front-of-office staff over the last year. By another estimates, the healthcare field has lost 20% of its workforce.
Hyro doesn’t attempt to replace staffers. But it does inject automation into the equation. The platform is essentially a drop-in replacement for traditional IVR systems, handling calls and texts automatically using conversational AI.
Hyro can answer common questions and handle tasks like booking or rescheduling an appointment, providing engagement and conversion metrics on the backend as it does so.
Plenty of platforms do — or at least claim to. See RedRoute, a voice-based conversational AI startup that delivers an “Alexa-like” customer service experience over the phone. Elsewhere, there’s Omilia, which provides a conversational solution that works on all platforms (e.g. phone, web chat, social networks, SMS and more) and integrates with existing customer support systems.
But Krush claims that Hyro is differentiated. For one, he says, it offers an AI-powered search feature that scrapes up-to-date information from a customer’s website — ostensibly preventing wrong answers to questions (a notorious problem with text-generating AI). Hyro also boasts “smart routing,” which enables it to “intelligently” decide whether to complete a task automatically, send a link to self-serve via SMS or route a request to the right department.
A bot created using Hyro’s development tools. Image Credits: Hyro
“Our AI assistants have been used by tens of millions of patients, automating conversations on various channels,” Krush said. “Hyro creates a feedback loop by identifying missing knowledge gaps, basically mimicking the operations of a call center agent. It also shows within a conversation exactly how the AI assistant deduced the correct response to a patient or customer query, meaning that if incorrect answers were given, an enterprise can understand exactly which piece of content or dataset is labeled incorrectly and fix accordingly.”
Of course, no technology’s perfect, and Hyro’s likely isn’t an exception to the rule. But the startup’s sales pitch was enough to win over dozens of healthcare networks, providers and hospitals as clients, including Weill Cornell Medicine. Annual recurring revenue has doubled since Hyro went to market in 2019, Krush claims.
Hyro’s future plans entail expanding to industries adjacent to healthcare, including real estate and the public sector, as well as rounding out the platform with more customization options, business optimization recommendations and “variety” in the AI skills that Hyro supports.
“The pandemic expedited digital transformation for healthcare and made the problems we’re solving very clear and obvious (e.g. the spike in calls surrounding information, access to testing, etc.),” Krush said. “We were one of the first to offer a COVID-19 virtual assistant that deployed in under 48 hours based on trusted information from the health system and trusted resources such as the CDC and World Health Organization …. Hyro is well funded, with good growth and momentum, and we’ve always managed a responsible budget, so we’re actually looking to expand and gather more market share while competitors are slowing down.”
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