From Europe to Asia & much more
While Italy moves out of China's BRI, we look at EU & it's aid for Ukraine. We look at India's growth in manufacturing while doing a deep dive in a new battery-making innovation coming out of Sweden.
Italy walking out of China’s BRI initiative
As was reported in our earlier newsletter wherein there was speculation that Italy is likely to call off the agreement on China’s Belt & Road Initiative, the same has happened in reality.
The Italian government, under Prime Minister Giorgia Meloni's leadership, has formally communicated its decision to withdraw from the Belt and Road Initiative to China. This move deals a notable setback to Beijing's ambitious plans for expanding this extensive investment program.
Italy, standing as the sole G7 nation to participate in the initiative launched a decade ago, aimed to bolster economic ties and augment the influence of the world's second-largest economy.
Commencing in 2019, Italy's involvement was slated to conclude in March 2024, with a decision on renewal expected by the year's end.
The Belt and Road Initiative, drawing an estimated $1 trillion in the decade since its inception in 2013, has encountered a deceleration in momentum in recent years. Factors such as the global economic disruptions caused by the pandemic and China's economic slowdown have contributed to this slowdown.
Furthermore, Beijing has faced allegations of irresponsible lending practices, which have been accused of pushing nations towards defaults.
The geopolitical and economic implications of Italy's exit underscore the evolving dynamics surrounding China's global infrastructure and trade initiative. It remains to be seen how China will react to this major development.
China now changing its focus area for its BRI initiative
China has recently announced a strategic shift in its Belt and Road Initiative (BRI), indicating a focus on prioritizing smaller projects and advocating for increased utilization of the Chinese currency. This decision comes against the backdrop of the initiative, which has garnered an estimated $1 trillion in the decade since its inception in 2013.
The momentum has waned in recent years due to the global economic disruptions caused by the pandemic and China's economic slowdown.
Additionally, Beijing has faced allegations of irresponsible lending practices, accused of driving countries toward default.
As part of this recalibration, the average deal size within the BRI has seen a significant decline. The average BRI deal size in the first half of this year fell to $392 million, marking a 48% reduction from its peak in 2018.
This shift in project size emphasizes a new direction in China's approach to its global infrastructure and trade initiative.
Furthermore, China has articulated its intention to actively promote the internationalization of the yuan within the framework of BRI projects.
These adjustments in the BRI strategy reflect China's adaptability to changing global dynamics and its ongoing efforts to navigate challenges while maintaining a prominent role in international economic initiatives.
Aid for Ukraine from the EU under risk?
EU leaders are at risk of leaving Ukraine in a precarious position in its conflict with Russia due to internal divisions over finances.
Ongoing disputes within the EU regarding money and the future of Ukraine pose a threat to vital commitments made to Kyiv months ago.
The €50bn lifeline for Kyiv faces jeopardy, with Hungary expressing opposition to its EU membership talks. Hungary's opposition to the funding package adds another layer of complexity. While EU officials acknowledge Prime Minister Orbán's previous shifts on Ukraine-related decisions, they are exploring whether there are conditions for his support, potentially involving the release of some of the €22bn in EU funds blocked by Brussels over rule-of-law concerns. Hungarian officials, however, deny any direct link between Ukraine and the funds issue.
Complicating matters, the recent victory of a far-right party in the Dutch election and a German court ruling limiting government borrowing have hindered EU efforts to find a compromise.
The failure to secure approval for long-term funding, a separate €20bn facility for weapons purchases, and the initiation of accession negotiations would have severe consequences for Kyiv.
The EU's proposed €50bn is intended to sustain Kyiv financially until 2027.
The €50bn allocation for Ukraine, comprising €17bn in grants and €33bn in loans, is intertwined with requests for €15bn in new funding for migration, €10bn for investments in strategic technologies, and nearly €19bn to cover interest on the EU's joint borrowing.
The current situation underscores the delicate balance and intricate negotiations surrounding the financial and geopolitical landscape.
Manufacturing picking up pace & contributing to India’s GDP growth
India's economy outpaced analysts' predictions, experiencing robust growth at 7.6% in the three months ending September compared to the same period last year, according to recently released government data. This surpassed all estimates by economists & even exceeded the Reserve Bank of India's projection of 6.5%.
The unexpected surge can be attributed to a boost in manufacturing and increased government spending on infrastructure & production-linked-incentive schemes in targeted sectors.
Prime Minister Modi's administration is strategically investing billions in enhancing the country's infrastructure and offering subsidies to incentivize businesses to establish production units in India. This approach, coupled with a healthy level of consumption, has contributed to notable gains in private-sector investments.
Notably, gross fixed capital formation, a key indicator for investment, saw a substantial increase from 7.95% in the previous quarter to 11.04%.
The services sector, comprising over half of India's GDP, expanded at a slightly slower pace compared to the preceding quarter. This deceleration is attributed to a global moderation in demand for financial services.
Additionally, the agriculture sector faced challenges as below-normal rains led to a weaker summer crop harvest. India experienced its weakest monsoon rains in five years, prompting the government to extend restrictions on exports of key farm commodities such as sugar, rice, and wheat.
Breakthrough in sodium-ion battery making
Northvolt, the Swedish industrial start-up supported by key players like Volkswagen, BlackRock, and Goldman Sachs, has achieved a significant milestone in battery technology designed for energy storage.
The breakthrough involves a sodium-ion battery devoid of lithium, cobalt, or nickel – essential metals that have caused price fluctuations due to supply challenges.
The potential impact of this new technology is substantial, with the capability to unlock opportunities in regions such as the Middle East, Africa, and India for battery-powered energy storage, positioning Northvolt as a key player in the global energy transition.
Sodium-ion batteries emerge as an attractive option due to their cost-effectiveness and enhanced safety compared to the widely used lithium-based batteries. They demonstrate superior performance across a wide range of temperatures.
While sodium-ion batteries traditionally lag behind lithium batteries in energy production relative to size, Northvolt has successfully validated a sodium-ion battery at a critical energy density of 160 Wh per kg (ie. watt-hours per kilogram).
This places it in proximity to the energy density of lithium batteries commonly utilized in energy storage applications. To put this in perspective, lithium batteries in electric cars typically reach energy densities of 250-300Wh per kg, and those in energy storage hover around 180Wh per kg.
This breakthrough positions Northvolt at the forefront of innovation in the battery industry, with the potential to reshape the landscape of energy storage and contribute significantly to the global transition towards sustainable and green technologies.