Finance

For China’s yuan to be used more globally, the currency needs more “applications” such as stocks and bonds, Bonnie Chan, CEO of Hong Kong Exchanges and Clearing Limited, said on a panel Tuesday.
“We’re not just going to hold on to a bunch of RMB and put it into this bank account,” she said.
Fred Hu, founder, chairman and CEO of Primavera Capital, said on the same panel Tuesday that the internationalization of the yuan is probably going to take longer than many expect, despite increased statements from Beijing.

A bank employee count China’s renminbi (RMB) or yuan notes next to U.S. dollar notes at a Kasikornbank in Bangkok, Thailand, January 26, 2023.
Athit Perawongmetha | Reuters

DALIAN, China — For China’s yuan to be used more globally, the currency needs more “applications” such as for stocks and bonds, Bonnie Chan, CEO of Hong Kong Exchanges and Clearing Limited, said on a panel Tuesday.
Beijing has long touted its ambitions for increasing global use of the Chinese yuan — also known as the “renminbi” or “RMB” — in an international financial market where the U.S. dollar is the dominant currency. U.S. sanctions on Russia have also increased the pressure on some countries to have alternatives to the greenback.

Chan, speaking during the World Economic Forum’s “Summer Davos” meeting in Dalian, China, noted that people hold a currency for trade, or, more importantly, as a store of wealth.
“We’re not just going to hold on to a bunch of RMB and put it into this bank account,” she said. “You want to have bonds, you want to have equities, etc.”
“One of our strategic imperatives [has] been changed to make sure that we continue to produce more RMB-denominated security products,” Chan said, “so that investors around the world can actually see more applications of the RMB and be able to use those as the medium to store wealth in the form of the RMB.”

Last year, the HKEX announced a “Dual-Counter” program that allows investors to trade Hong Kong-listed securities in Hong Kong dollars or Chinese yuan.
In a significant step toward internationalization of the yuan, the International Monetary Fund in 2015 announced that it would add the yuan to its basket of reserve currencies the following year.

The yuan was the fourth-most active currency for global payments by value in May, accounting for nearly 4.5% of such transactions, according to the interbank messaging network SWIFT. The U.S. dollar had a nearly 48% share.
In trade finance, the yuan ranked third at about 5.1% in May, according to SWIFT. The euro was slightly higher at 5.6%, while the U.S. dollar dominated with a nearly 85% share, the data showed.
Fred Hu, founder, chairman and CEO of Primavera Capital, said on the same panel Tuesday that the internationalization of the yuan is probably going to take longer than many expect, despite an increased amount of statements from Beijing.
While China is the largest trading nation and has large financial centers, “we’re not as big, as deep as the U.S.,” Hu said. “Besides our capital account is also closed, it’s not fully convertible, [which] also in some way [is] hampering the internationalization of the renminbi.”

A maturing financial market

Developing more Chinese yuan-denominated investment products also requires a maturation of the local financial sector. Part of that includes having a more sophisticated investor base.
Chan said that during the annual Lujiazui Financial Forum in Shanghai last week, nearly every conversation with top leaders included the term “patient investing.”
The phrase has emerged in official releases to encourage long-term investing over short-term speculation.
“Patience comes from learning through the market volatility,” Kenny Lam, CEO of Two Sigma Asia-Pacific, said during the same panel on Tuesday.
He said that policymakers have been giving more thought to making their policies more stable and consistent.

Waiting for more Chinese IPOs

Chinese companies have long sought to tap U.S. financial markets for the prestige and greater market liquidity they offer, but increased regulatory scrutiny by both Beijing and Washington, D.C., has drastically slowed such listings in the last three years.
“I think IPOs are essential for attracting investors to come back in the market. All of the storytelling around it, it shows that there’s a lot of progress happening,” Jonathan Krane, the founder and CEO of KraneShares, also said on the panel on Tuesday.
“In the U.S. we see all this innovation, AI and all these companies going public and doing well, and then in China, the same industry, same innovations happen and those stories should be told through the IPO market,” Krane said, noting he is hearing that the IPO market “is going to start coming back.”
Chinese authorities last week announced a new effort to support initial public offerings, especially in Hong Kong.
Chan said so far this year the Hong Kong exchange has received 73 new listing applications — a 50% increase versus the second half of last year, she said. “The pipeline is building up nicely,” she said, noting about 110 IPOs in total are in line. “All we need is a set of good market conditions so these things get to launch and price nicely,” she added. More

Fewer U.S. households have bought life insurance in recent decades.
Life insurance policies pay a death benefit, generally tax-free, to beneficiaries when a policyholder dies.
Getting married, having kids and buying a home are common triggers for a purchase.
Term life insurance policies rather than permanent policies (like whole or universal life) tend to be best for most people, experts said.

Shapecharge | E+ | Getty Images

Fewer Americans are buying life insurance than in the past, which suggests households may be at financial risk in the event of an unexpected death, experts said.
About half, 52%, of consumers had a life insurance policy in January 2023, down from 63% in 2011, according to a poll by Limra, an insurance industry trade group.

Data from the National Association of Insurance Commissioners, a group of state insurance regulators, shows a similar trend: By 2019, coverage had fallen to 59% of households from 69% in 1998.
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“It’s absolutely clear to me there’s a very large gap here,” said Scott Shapiro, U.S. insurance sector leader at KPMG. “There’s a literal protection gap where Americans are flat-out underinsured.”
The main purpose of life insurance is to provide financial security for loved ones if the policyholder dies. At that point, beneficiaries receive a death benefit (which is generally tax-free).
That makes it “kind of a funny product: It’s something we buy and hope to never have to use,” said Matt Knoll, a certified financial planner based in Moline, Illinois.

Why life insurance purchases have ‘steadily’ fallen

Many Americans fail to plan ahead for their mortality, neglecting to draft wills, put a power of attorney in place or designate beneficiaries for financial accounts.
Overall, the share of households with life insurance has “steadily” decreased since the early 1970s, according to the NAIC.
There are likely many reasons for that drop-off.

For one, younger generations are deferring big financial and life milestones like getting married, buying a home and having kids relative to older generations. Each is generally a key trigger to buy life insurance, experts said.
Higher costs for homeownership and child care coupled with rising debt burdens (for student loans, for example) may mean younger households are less willing or able to pay monthly insurance premiums, said Knoll, a senior financial planner at The Planning Center.
Insurance costs themselves are also generally rising for consumers, Shapiro said.
Additionally, life insurance is often not typically easy or quick to buy due to factors like medical testing for underwriting, Shapiro said.
“It’s a complex transaction,” he said.

There are more benign factors at play, too: For instance, fewer consumers have sought out the tax benefits of certain life policies as other tax-advantaged savings options like 401(k) accounts and 529 plans have come into existence, Knoll said.
That said, even as fewer people buy life insurance, “I do think there’s a need for it,” he added.
Life insurance isn’t necessarily right for everyone, though. Here are some key considerations.

When to buy life insurance

Supersizer | E+ | Getty Images

Consumers should consider their financial situation and the standard of living they want to maintain for survivors (like dependents or a spouse), according to the Illinois Department of Insurance.
Absent a policyholder’s income, there might be a financial shortfall in paying day-to-day household expenses, or for debts and big-ticket items like tuition, for example.
“Who will be responsible for your funeral costs and final medical bills? Would your family have to relocate? Will there be adequate funds for future or ongoing expenses such as daycare, mortgage payments, or college?” the department said in a consumer guide.
Single people without kids may also have financial obligations for which they want to insure, the department said. Those may include funeral expenses, medical bills, debts like credit cards or student loans, and financial support for elderly parents, the IDOI said.

What type of life insurance to buy

There are two broad types of life insurance: Term and permanent.
Term insurance will typically be best for most consumers, according to financial advisors.
These policies last for a designated term, perhaps 10, 20 or 30 years. They generally carry fixed monthly premiums.
The length of one’s financial obligation is a good guide to the term one should choose, Shapiro said.

It’s absolutely clear to me there’s a very large gap here.

Scott Shapiro
U.S. insurance sector leader at KPMG

If a policyholder’s spouse is 35 years old and the policyholder seeks a financial hedge until their spouse retires — perhaps at age 65 — the buyer might choose a term of 30 years, for example. Ensuring there’s enough money for young kids to go to college might mean having a policy that lasts about 20 years.
Permanent life insurance, such as a whole or universal life policy, is meant to last throughout life.
It may make sense for consumers to pay for a lifelong policy if they want to leave a financial legacy for charities, or reasonably expect to develop a medical condition that can make it harder to get insurance later.
Permanent insurance is generally more costly and complex than a term policy, advisors said. For example, it often carries an interest-bearing account in addition to the insurance component.
Policyholders can build up cash value over time depending on factors like dividends or investment returns. The cash value can have various uses: to pay insurance premiums, as collateral for a loan, or as cash in the event a buyer surrenders their policy in the future.
However, there’s a lot of fine print and consumers should avoid buying something they don’t understand, advisors said.

How much life insurance to get

Luca Sage | Digitalvision | Getty Images

Each buyer is different when it comes to hedging against financial risk, Knoll said.
Some consumers may want a policy that would pay survivors the equivalent of all future annual income for years into the future, he said. Others may wish to replace only their debt obligations or kids’ college educations, or some combination of these and other costs, Knoll added.
Consumers may have life insurance coverage through their workplace. If so, assess whether additional funds are needed.
Here’s an example of what a household might need, according to Jim Bradley, CFP, founder of Penobscot Financial Advisors based in Maine: “Lucy and Ricky are planning on putting two kids through college at a cost of $400,000 and purchasing a house for $200,000. They haven’t been able to accumulate much toward these goals. They should consider covering the shortfall, in this case $600,000, with life insurance,” he wrote. More

Cisco is “very optimistic” about its growing business with Chinese electric car companies as they expand overseas, Cisco’s Greater China head Ming Wong told CNBC.
Chinese electric car companies have ramped up their global expansion in the last year as competition domestically has intensified.
“At least as of now, we don’t hear anything from the [EV] customers saying that, ‘Oh, because of this, we need to stop investing, or we need to slow down,'” Wong said.

Cisco established operations in China in 1994.
Sopa Images | Lightrocket | Getty Images

DALIAN, China — Cisco is “very optimistic” about its growing business with Chinese electric car companies as they expand overseas, the company’s Greater China head told CNBC on Tuesday.
The EV segment is the U.S. tech giant’s second-largest for the region — Cisco generates most of its revenue in Greater China from manufacturing companies, and within that, electric cars form the largest category, said Ming Wong, vice president and CEO of Cisco Greater China.

Chinese EV-makers have ramped up their global expansion in the last year as domestic competition intensified.
However, trade tensions have escalated, with the U.S. and likely the European Union, increasing tariffs on imports of Chinese electric cars.
That doesn’t necessarily restrict their growth. Chinese automakers, such as BYD, are investing in local factories.
Cisco, which provides networking equipment and software for businesses, is working with at least 10 electric car customers as they build factories, offices and research and development centers overseas, according to Wong.
“At least as of now, we don’t hear anything from the [EV] customers saying that, ‘Oh, because of this, we need to stop investing, or we need to slow down,'” he added.

“It’s actually the other way around. A lot of things happening. They will keep pushing, going forward, and we’ll see how this will evolve.”

It’s unclear how much spending such business expansion will generate, said Shiv Shivaraman, Asia region leader, and partner and managing director at consulting firm AlixPartners.
“But you should expect that there is going to be manufacturing-related capex as well as office-related capex,” he said. “And I think tariffs will definitely accelerate, if not increase it.”

Getting China businesses back to growth

The U.S.-based tech company has run into challenges in the China market as the two countries increasingly rely on domestic players in the name of national security.
Cisco CEO Chuck Robbins told analysts in 2019 that the U.S.-China trade war resulted in a “significant impact” on its business in China.
The company’s revenue in the country fell by 25% on an annualized basis in the quarter ended late July 2019, Cisco said at the time.
“What we’ve seen is in the state on enterprises … we’re just being — we’re being uninvited to bid,” Robbins said. “We’re not being allowed to even participate anymore.”
Sales to carriers declined more forcefully as well, he said.
Looking ahead, Wong is hopeful that the China business can return to growth this year. He did not specifically reference the 2019 period in his remarks.
He pointed out that state-owned and non-state-owned businesses are turning to Cisco as they expand globally. “So we are shifting our focus and portfolio to that side,” Wong said.
Also supporting Cisco’s business are Chinese internet companies such as Alibaba that are expanding globally, Wong said. He added that Cisco also benefits from its ability to connect different graphics processing unit providers together in a market where AI giant Nvidia is restricted.
GPUs are the chip systems powering the training and implementation of the latest artificial intelligence models.
In Cisco’s latest quarterly reporting period, which ended in late April, total revenue fell by 13% from a year ago, with revenue in Asia-Pacific, Japan and China falling 12% during that time.
Wong pointed out the latest slump in the Asia-Pacific, Japan and China revenue is off a high base, and he expects it to grow more quickly in the next one or two years.
“Asia Pacific is still the highest growth area for Cisco,” he said.
— CNBC’s Jordan Novet contributed to this report. More

In April a New York fried-chicken shop went viral. It was not the food at Sansan Chicken East Village that captured the world’s imagination, but the service. Diners found an assistant from the Philippines running the till via video link.The service is provided by Happy Cashier, which connects American firms with Filipino workers. Chi Zhang set up the business after his restaurant failed during the covid-19 pandemic. He says that overseas workers also answer phone calls and monitor security-camera footage—doing so at a fraction of the cost of locals. More

Ledgers of the failed fintech middleman Synapse show that nearly all the deposits held for customers of the banking app Yotta went missing weeks ago, according to one of the lenders involved.
A network of eight banks held $109 million in deposits for Yotta customers as of April 11, Evolve Bank & Trust said in a bankruptcy court letter filed late Thursday.
About one month later, the ledger showed just $1.4 million in Yotta funds held at one of the banks, Evolve said.
In a letter sent Thursday, bankruptcy trustee Jelena McWilliams pleaded with five U.S. regulators to get more involved in the Synapse collapse.

Tsingha25 | Istock | Getty Images

Ledgers of the failed fintech middleman Synapse show that nearly all the deposits held for customers of the banking app Yotta went missing weeks ago, according to one of the lenders involved.
A network of eight banks held $109 million in deposits for Yotta customers as of April 11, Evolve Bank & Trust said in a bankruptcy court letter filed late Thursday.

About one month later, the ledger showed just $1.4 million in Yotta funds held at one of the banks, Evolve said. It added that neither customers nor Evolve received funds in that time period.
“These irregularities in Synapse’s ledgering of Yotta end user funds are just one example of the many discrepancies that Evolve has observed,” the bank said. “A detailed investigation of what happened to these funds, or alternatively, why the Synapse-provided ledger reflected money movement that did not actually occur, must be undertaken.”
Evolve, one of the key players in a deepening predicament that has left more than 100,000 fintech customers locked out of their bank accounts since May 11, has been attempting to piece together with other banks a record of who is owed what. Its former partner Synapse, which connected customer-facing fintech apps to FDIC-backed banks, filed for bankruptcy in April amid disputes about customer balances.
But Evolve itself was reprimanded by the Federal Reserve last week for failing to properly manage its fintech partnerships. The regulator noted that Evolve “engaged in unsafe and unsound banking practices” and forced the bank to improve oversight of its fintech program. The Fed said the enforcement action was separate from the Synapse bankruptcy.
Yotta CEO and co-founder Adam Moelis said in response to this article that Synapse has said in court filings that Evolve held nearly all Yotta customers deposits. Evolve and Synapse disagree over who holds the funds and who is responsible for the frozen accounts.

“According to the Synapse trial balance report provided on May 17, there are $112 million of customer funds held at Evolve,” Moelis said.
Evolve, which is headquartered in Memphis, Tennessee-based, had this statement late Friday:
“We believe that a meticulous forensic accounting investigation will reveal that these purported funds are not, and were not, in Evolve’s possession, contrary to Synapse’s claims,” a spokesman told CNBC. “Evolve will continue cooperating with the Trustee and other banks to perform reconciliation and determine the most appropriate path forward for any funds actually held at Evolve.”
The bank has been trying to separate itself from Synapse since late 2022 because of ledger problems it has found, the Evolve spokesman said.

Unclear timeline

Despite mounting pressure on the banks involved to unfreeze all the locked accounts, the messy records and a dearth of funds to pay for an outside forensic analysis has created uncertainty over when that will happen.
Evolve maintains that because of discrepancies in the ledgers, it is hesitant to allow payments to be made to many customers until a full reconciliation of the mismatched ledgers is complete, in particular related to a group of banks used in the Synapse brokerage program.
Synapse moved most of the fintech customer funds held at Evolve to a group of banks affiliated with its brokerage program in late 2023, Evolve has said in court filings.
Last week, the court-appointed trustee, former FDIC Chairman Jelena McWilliams, noted that a “full reconciliation to the last dollar with the Synapse ledger” may not be possible.
Even the total shortfall in funds owed to all impacted depositors isn’t known. Earlier this month, McWilliams pegged the amount at $85 million; but in subsequent reports stated that it was between $65 million and $96 million.

Pleading with regulators

Meanwhile, the disruption to thousands of fintech customers has stretched into its sixth week. Many Yotta customers contacted by CNBC said they used the service as their primary checking account, and have had their lives turned upside down by the situation.
In a letter sent Thursday, McWilliams pleaded with five U.S. regulators to get more involved in the Synapse collapse, asking for resources to help impacted customers understand where their funds are held and to aid communication with banks.
“The impact of Synapse’s bankruptcy on end-users has been devastating,” McWilliams wrote to the regulators. “Many end-users are unable to pay for basic living expenses and food. I appreciate your prompt attention to this request and respectfully request that your agencies act on it as quickly as possible.”
McWilliams is scheduled to present her latest status report in the bankruptcy case during a hearing starting 1 p.m. E.T. Friday. More

Banking regulators on Friday disclosed that they found weaknesses in the resolution plans of four of the eight largest American lenders.
The Federal Reserve and the Federal Deposit Insurance Corp. said the so-called living wills of Citigroup, JPMorgan Chase, Goldman Sachs and Bank of America filed in 2023 were inadequate.
Regulators found fault with the way each of the banks planned to unwind their massive derivatives portfolios. Derivatives are Wall Street contracts tied to stocks, bonds, currencies or interest rates.

Jane Fraser, CEO of Citigroup, testifies during the Senate Banking, Housing, and Urban Affairs Committee hearing titled Annual Oversight of the Nations Largest Banks, in Hart Building on Thursday, September 22, 2022. 
Tom Williams | CQ-Roll Call, Inc. | Getty Images

Banking regulators on Friday disclosed that they found weaknesses in the resolution plans of four of the eight largest American lenders.
The Federal Reserve and the Federal Deposit Insurance Corp. said the so-called living wills — plans for unwinding huge institutions in the event of distress or failure — of Citigroup, JPMorgan Chase, Goldman Sachs and Bank of America filed in 2023 were inadequate.

Regulators found fault with the way each of the banks planned to unwind their massive derivatives portfolios. Derivatives are Wall Street contracts tied to stocks, bonds, currencies or interest rates.
For example, when asked to quickly test Citigroup’s ability to unwind its contracts using different inputs than those chosen by the bank, the firm came up short, according to the regulators. That part of the exercise appears to have snared all the banks that struggled with the exam.
“An assessment of the covered company’s capability to unwind its derivatives portfolio under conditions that differ from those specified in the 2023 plan revealed that the firm’s capabilities have material limitations,” regulators said of Citigroup.
The living wills are a key regulatory exercise mandated in the aftermath of the 2008 global financial crisis. Every other year, the largest US. banks must submit their plans to credibly unwind themselves in the event of catastrophe. Banks with weaknesses have to address them in the next wave of living will submissions due in 2025.
While JPMorgan, Goldman and Bank of America’s plans were each deemed to have a “shortcoming” by both regulators, Citigroup was considered by the FDIC to have a more serious “deficiency,” meaning the plan wouldn’t allow for an orderly resolution under U.S. bankruptcy code.

Since the Fed didn’t concur with the FDIC on its assessment of Citigroup, the bank did receive the less-serious “shortcoming” grade.
“We are fully committed to addressing the issues identified by our regulators,” New York-based Citigroup said in a statement.
“While we’ve made substantial progress on our transformation, we’ve acknowledged that we have had to accelerate our work in certain areas,” the bank said. “More broadly, we continue to have confidence that Citi could be resolved without an adverse systemic impact or the need for taxpayer funds.”
JPMorgan, Goldman and Bank of America declined a request to comment from CNBC.

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The S&P 500 has gone 377 days without a 2.05% sell-off.
That’s the longest stretch for the benchmark since the great financial crisis, according to FactSet data compiled by CNBC.
This market lull comes as investors pile into megacap tech stocks, such as Nvidia, amid bets that artificial intelligence will boost profits.

Traders work on the floor of the New York Stock Exchange during morning trading on Jan. 11, 2024.
Angela Weiss | Afp | Getty Images

Wall Street’s climb to record highs has come with conspicuously little volatility.
The S&P 500 has gone 377 days without a 2.05% sell-off. That’s the longest stretch for the benchmark since the great financial crisis, according to FactSet data compiled by CNBC. The index hasn’t experienced a gain of at least 2.15% in that time either.

Arrows pointing outwards

The S&P 500 has gone 377 days without a selloff of 2.05% or more, which is the longest period since the Great Financial Crisis.

This market lull comes as investors pile into megacap tech stocks, such as Nvidia, amid bets that artificial intelligence will boost profits. Year to date, the S&P 500 is up more than 14%. Expectations of Federal Reserve rate cuts have also buoyed the broad market index in 2024 as new data shows inflation moving closer to the central bank’s 2% goal.
“At a high level, the clouds of macro uncertainty have parted over the last 12 months as receding inflation provided much-needed clarity into the future path of monetary policy,” said Adam Turnquist, chief technical strategist at LPL Financial. “The changing narrative from rate hikes to rate cuts and recessions to economic resilience helped drag the VIX down to multiyear lows, ultimately shifting the backdrop for stocks to a low volatility from high volatility regime.”

Arrows pointing outwards

The S&P 500 has notched the longest stretch without a 2.15% or more gain since the Great Financial Crisis.

Many investors consider the CBOE Volatility Index (VIX) the de facto fear gauge on the Street. Last month, it hit its lowest level going back to November 2020. On Friday, it traded around 13, near historically low levels.
“[T]he low VIX reflects the options market’s complacency, with VIX at a three-year low,” said Joseph Cusick, senior vice president and portfolio specialist at Calamos Investments. “This makes sense since institutions have been actively hedging; there is no urgency to sell underlying with these insurance products in place.”
It’s unclear how long this low-volatility period will last.
In 2017, the S&P 500 recorded just eight daily moves of more than 1%, while the VIX fell to historic lows below 9. The following year, however, volatility came back into the market, and the VIX surged above 50 before easing.

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China spent $230.8 billion over more than a decade to develop its electric car industry, according to the Center for Strategic and International Studies.
The scale of government support represents 18.8% of total electric car sales between 2009 and 2023, said Scott Kennedy, trustee chair in Chinese Business and Economics at CSIS.
“There are some exceptions, but in general Western automakers and governments have dilly dallied and not been aggressive enough,” he said.

Workers assemble a Wuling Hongguang Mini EV, an all-electric microcar manufactured by SAIC-GM-Wuling, at a plant of the joint automaker in Qingdao in east Chinas Shandong province Tuesday, Nov. 30, 2021.
Future Publishing | Future Publishing | Getty Images

BEIJING — China spent $230.8 billion over more than a decade to develop its electric car industry, according to analysis published Thursday by the U.S.-based Center for Strategic and International Studies.
The scale of government support represents 18.8% of total electric car sales between 2009 and 2023, said Scott Kennedy, trustee chair in Chinese Business and Economics at CSIS. He noted the ratio of such spending to EV sales has declined from more than 40% in the years prior to 2017, to just above 11% in 2023.

The findings come as the EU plans to impose tariffs on imports of Chinese electric cars over the use of subsidies in their production.
Last month, the U.S. announced it was raising duties on imports of Chinese electric vehicles to 100%.

There are some exceptions, but in general Western automakers and governments have dilly dallied and not been aggressive enough.

Scott Kennedy
trustee chair in Chinese business and economics, CSIS

Kennedy pointed out that Beijing’s support for electric cars has included non-monetary policies that favored domestic automakers over foreign ones. But he also noted that the U.S. has not created conditions that are as attractive as China’s for developing its own electric car industry.
“There are some exceptions, but in general Western automakers and governments have dilly dallied and not been aggressive enough,” he said. Kennedy had laid out seven policy initiatives in a report four years ago about potential trade tensions from Chinese electric cars.

Government subsidies did not necessarily go straight into car development. In the early years of China’s EV development, the Ministry of Finance said it found at least five companies cheated the government of over 1 billion yuan ($140 million).

China-made vehicles have also benefitted from growing penetration of electric cars in the country, cutting into a once-lucrative fuel-powered market for foreign automakers. The competition is so fierce that Bank of America analysts said this week that major U.S. automakers should leave China and focus their resources elsewhere.
“Independent auto analysts and Western automakers with whom I’ve spoken all agree that Chinese EV makers and battery producers have made tremendous progress and must be taken seriously,” Kennedy said.

But he pointed out that extensive government support and market growth for Chinese EV companies have yet to boost profits significantly.
“In a well-functioning market economy,” he said, “firms would more carefully gauge their investment in new capacity, and the emergence of such a sharp gap between supply and demand would likely result in industry consolidation.”
BYD’s net profit per car has declined over the last 12 months to the equivalent of $739, according to analysis from CLSA as of the first quarter. Tesla’s has dropped to $2,919, the data showed.
The EV industry in the last year has faced an intense price war, with car companies either slashing prices or launching lower-priced product lines.

Chinese electric car startup Nio, which is still operating at a loss, said last month it expects about 10 automakers will lose out on the China market, leaving 20 to 30 players.
The U.S. has been increasing its efforts to support electric cars. The Inflation Reduction Act, signed into law in August 2022, allocated $370 billion for promoting clean technologies.
Kennedy pointed out the legislation provides a $7,500 credit for qualifying electric car purchases. That’s in contrast to the average Chinese support per electric car purchase of $4,600 in 2023 — which is down from $13,860 in 2018.
— CNBC’s Dylan Butts contributed to this report. More