FirstFT: US concern over planned Chinese electric vehicle factories in Mexico

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Good morning. Washington has raised concerns with Mexico over an imminent wave of Chinese investment into the country, as three of China’s largest electric-vehicle makers prepare to build factories south of the US border.

MG, BYD and Chery have all been speaking to officials in Mexico to find sites this year, according to several people with knowledge of the talks. Another Chinese company is planning to build a $12bn battery plant, one person said.

The investment push, which could give producers in China a valuable foothold in the region, puts Latin America’s second-largest economy in the middle of the US-China trade war.

“The interest of Chinese companies in the Mexican market has grown exponentially,” said Francisco Bautista of EY Latin America, which is working with four Chinese electric vehicle companies looking to locate production in Mexico. Here’s why Washington is worried.

• UK power network concerns: National Grid has started removing components supplied by a Chinese state-backed company from Britain’s electricity transmission network over cyber security fears, according to two people familiar with the matter.

Here’s what I’m keeping tabs on today:

• Jimmy Lai trial begins: The Hong Kong media mogul and Chinese Communist party critic is being tried under a sweeping national security law introduced in 2020 in the wake of pro-democracy protests. If he is found guilty, as expected, he faces a maximum penalty of life in prison.

• Meetings: Japan hosts a commemorative summit to mark the 50th anniversary of Asean-Japan co-operation. The event runs until Wednesday.

• Egypt: Results are expected to be announced in the presidential election.

Five more top stories

1. China’s Tsingshan Holding Group, the world’s biggest nickel producer, is set to raise up to HK$2.39bn ($306mn) in an initial public offering of a battery-making subsidiary today. The IPO of Chinese lithium-ion battery manufacturer REPT Battero Energy will test investor appetite at the end of another lacklustre year for listings in Hong Kong.

2. The head of the IMF has urged Ukraine’s allies to rapidly unlock tens of billions of dollars for the country, as she warned that delays in providing the extra funding would jeopardise Kyiv’s tentative economic recovery. Kyiv can manage a likely short-term funding gap of “a couple of months,” said Kristalina Georgieva in an interview.

3. Israel faced growing pressure from its European allies over the humanitarian cost of its offensive against Hamas, as the UK, Germany and France stepped up calls for a ceasefire in Gaza. The calls came as Israeli protesters urged Prime Minister Benjamin Netanyahu to negotiate another hostage release deal with the armed group after the Israeli army admitted on Saturday that it had shot and killed three Israelis. They were waving a white flag and are presumed to have escaped from Hamas captivity in the strip.

4. UK drugmaker GSK is on the hunt for deals in China having rebuilt a “very strong” relationship with the government and local companies after a corruption scandal hit a decade ago. Chief commercial officer Luke Miels told the FT that the company was working on further deals with Chinese companies after it signed a licensing agreement in October worth up to $1.5bn for a cancer drug developed by Hansoh Pharma.

5. Last week’s rally in global bond markets has shattered investors’ months-long assumption that interest rates in the US and elsewhere will remain higher for longer. The sharp moves came after the Federal Reserve signalled it would cut interest rates in 2024. “Higher for longer is dead,” said Kristina Hooper, chief global markets strategist at Invesco. Here’s more on the dramatic about-turn.

News in-depth

Destroying Hamas’s tunnel network is arguably the hardest part of the Israeli military’s mission in Gaza, and among its most important. The tunnels have enabled Hamas fighters to survive 10 weeks of relentless air strikes, ambush Israeli ground forces and prolong the fighting. On Friday, the Israeli army took a group of journalists — among them the FT’s John Paul Rathbone — to see a “flagship” tunnel as it came under further western pressure over the human cost of its Gaza offensive.

We’re also reading . . . 

Chart of the day

Japan’s currency has run up its biggest monthly gain against the dollar this year, reflecting growing expectations that the Bank of Japan will be forced to tighten monetary policy just as the US Federal Reserve is signalling rate cuts.

Take a break from the news

Mispronouncing a colleague’s name at work can be hazardous — and not just if it’s the boss. Read FT columnist Pilita Clark on the perils of mangling a name and what one group is doing to correct it.