According to Reuters’ report titled “U.S. business group urges Washington to ‘use every arrow’ against China”, US business group is quite bellicose in dealing with China. I wonder whether they want to fight a trade war to shoot China with arrows. I am really sorry that I see few arrows in US quiver, especially those to be used for US business in China.
Anyway, it is ridiculous that in our era of stealth fighters and GPS guided missiles, some people still want to use arrows in war. However, that is really the sorry situation for US business in China as Chinese investment is insignificant in the US while US investment in China is very great, but China can easily drive away US investment as China has not only the financial but also the technology resources to drive away US business from China now though China may suffer some losses in a trade war with the US.
However, the losses will mainly be caused by US restriction on China’ exports to the US instead of by US business leaving China. Even if China lacks the financial and technology resources, Japanese and European businessmen will be happy to have the opportunities to replace US investment.
Comment by Chan Kai Yee on Reuters’ report, full text of which can be viewed at http://www.reuters.com/article/us-china-usa-business-idUSKBN17K0G8.
By Michael Martina and Diane Bartz | BEIJING/WASHINGTON Tue Apr 4, 2017 | 7:48am EDT
Although worried about the prospect of a trade war, American businesses operating in China nonetheless want President Donald Trump to wring some concessions on market access from China’s leader Xi Jingping when the two meet this week.
Trump warned in a tweet last week the meetings at his Mar-a-Lago resort on Thursday and Friday will be “very difficult” and “American companies must be prepared to look at other alternatives.”
Trump has said he wants U.S. companies to stop investing in China and instead create jobs at home. He has also accused China of manipulating its currency to boost exports.
Critics within U.S. industry have accused China of unfair government subsidies to its companies, and of flooding the U.S. market with cheap products from steel to solar panels, while restricting foreign investment over vast swathes of the world’s second-biggest economy.
But they also worry Trump’s policies on China are not entirely clear, with his trade team still not in place, and may be subject to a ‘grand bargain’ involving other issues such as North Korea.
Trump is set to enter the meeting without several key advisors, including his pick for trade negotiator, Robert Lighthizer who has yet to be confirmed by Congress. His nominee as ambassador to China, Iowa Governor Terry Branstad, has also yet to be confirmed, while several posts in the U.S. State Department that formulate Asia policy remain unfilled.
“With this in mind, it is hard to imagine that there will be much in the way of concrete accomplishments at this summit, or even that there has been any significant interagency discussion on strategy leading up to it,” said Randal Phillips, Mintz Group’s Beijing-based managing partner for Asia and the former chief CIA representative in China.
‘ACTIONS, NOT WORDS’
Some of the largest U.S. companies have contributed to the billions of dollars of foreign direct investment that have poured into China over the past two decades, creating hundreds of thousands of jobs. They include tech companies like Apple, which makes much of its iPhone in China, automakers such as General Motors and Ford, heavy machinery firms like Caterpillar, retailers like Starbucks and makers of shaving foam and detergent, like Procter & Gamble.
U.S. steel producers want Trump to press Xi on Chinese steel prices, according to a source who has been in discussions with the administration in advance of the summit.
U.S. automakers complain about a disparity in tariffs: The United States has a 2.5 percent tariff on auto imports, China’s is 25 percent.
But the stakes are perhaps highest for American technology firms, who worry that China’s new cyber-security law, which takes effect in June, sets potentially discriminatory standards for multinationals.
The Information Technology & Innovation Foundation (ITIF), a think-tank whose board includes representatives from Apple, IBM Google and other tech heavyweights, has urged the Trump administration to pressure China to “stop rigging markets”. It warned that possible retaliation from Beijing was not a reason for inaction.
Trump has staked out various positions on China as president in his tweets, phone calls and statements.
In a phone call with Xi after taking office, Trump gave ground on one of Beijing’s most sensitive issues – the status of Taiwan – after earlier suggesting he might not stick to Washington’s long-held “one China” policy.
Trump signed two executive orders on trade on Friday, one to improve import tariff collection and another to study the causes of the U.S. trade deficit. Trump said at the White House signing ceremony he and Xi were “going to get down to some serious business” and vowed that “the theft of American prosperity” by foreign countries would end.
Chinese Vice Foreign Minister Zheng Zeguang said on Friday the U.S.-China trade imbalance was mostly the result of differences in the two countries’ economic structures and noted China had a trade deficit in services.
China tops the list of countries who have trade surpluses with the United States, with a $347 billion surplus last year.
Some in the U.S. business community worry about tit-for-tat retaliation in trade disputes with China.
Jacob Parker, vice president of China operations at the U.S.-China Business Council, said the two presidents need to take “positive actions that would lead to a more durable relationship, not retaliatory actions that would lead to a trade war”.
The list of commercial issues between the two countries was so long, it would be impossible to make a major dent in them with one meeting, he said.
China is the largest export market for U.S. soybean producers, accounting for 62 percent of U.S. soy exports in 2016 with a value of over $14 billion, leading some experts to suggest the sector could be particularly vulnerable to retaliation.
Steve Censky, chief executive of the American Soybean Association, told Reuters he hopes Trump will take a “prudent” approach to the trade relationship and address any issues in a “workman-like manner”, recognizing that both countries have a lot to lose if the relationship suffers.
William Zarit, chairman of the American Chamber of Commerce in China met senior Trump administration officials in February, and said “it was clear they were very familiar with the issues facing American companies in China, perhaps more so than previous administrations”.
But several corporate lobbyists, representing a range of companies expressed concern Trump’s lack of attention to detail could prove counterproductive when it comes to the intricacies of the massive trade and investment relationship.
“It’s not yet clear whether … this is a White House that wants to fundamentally reset the terms of the relationship or tinker at the edges and declare a public relations win,” said a China expert at a Washington business lobby who asked not to be named.
(Reporting by Michael Martina in Beijing; Diane Bartz, David Shepardson and Joel Schectman in Washington; Nichola Groom in Los Angeles; and Mark Weinraub in Chicago; Editing by Bill Tarrant)
Source: Reuters “U.S. business seeks action, not trade war, in Xi-Trump summit”
Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.
By David Lawder | WASHINGTON Fri Mar 31, 2017 | 9:26am EDT
The Trump administration on Friday slammed China on a range of trade issues from its chronic industrial overcapacity to forced technology transfers and longstanding bans on U.S. beef and electronic payment services.
The annual trade barriers list from the U.S. Trade Representative’s (USTR) office sets up more areas of potential irritation for the first face-to-face meeting between President Donald Trump and Chinese President Xi Jinping next week in Florida.
Commerce Secretary Wilbur Ross, asked about his expectations for the meeting, told Fox News on Friday: “What I would hope will come out would be a commitment to starting to abide by the rules and a commitment to working collaboratively to help reduce our deficit.“
USTR, controlled by the White House, said that Chinese government industrial policies and financial support for industries such as steel and aluminum have resulted in overproduction and a flood of exports that have distorted global markets and undermined competitors.
“While China has begun to take steps to address steel excess capacity, these steps have been inadequate to date and even fewer efforts have been taken by China in aluminum and other sectors,” USTR said in the report.
USTR released the list of trade irritants in 63 countries just after senior Trump trade officials announced an executive order to study the causes of U.S. trade deficits.
The report said China also is using a series of cybersecurity restrictions as part of an apparent long-term goal to replace foreign information and communications technology products and services with locally produced versions.
USTR also accused China of using a range of measures to engineer the transfer of foreign technology to Chinese firms. They include denying financial or regulatory approvals to companies using foreign-owned intellectual property (IP) or that do not conduct research or manufacture products in China.
“China also reportedly conditions foreign investment approvals on technology transfer to Chinese entities, mandates adverse licensing terms on foreign IP licensors, uses anti-monopoly laws to extract technology on unreasonable terms and subsidizes acquisition of foreign high technology firms to bring technology to the Chinese parent companies.”
Gaps in IP rights enforcement have allowed the misappropriation of foreign IP and trade secrets, both within and outside of China.
USTR’s criticisms are consistent with increasingly vocal concerns raised by international business groups about what they see as a worsening business climate for foreign firms in China, as well as China’s goal to boost domestic manufacturing content in 10 sectors from robotics to biopharmaceuticals.
Earlier this month, the European Union Chamber of Commerce said the “Made in China 2025” plan amounts to a “large-scale import substitution plan aimed at nationalizing key industries” or “severely curtailing the position of foreign business.”
USTR also brought up longstanding complaints about online piracy of movies, books, music, video games and software in China as well as a ban on U.S. beef that has been in place since 2003.
It said delays in China’s approval process for agricultural products derived from biotechnology also worsened in 2016, hurting U.S. corn exports.
Ross, the commerce secretary, also said Trump will sign two executive orders on Friday. The first calls for a 90-day study by the Commerce Department into the causes of U.S. trade deficits, the results of which would be used to formulate policy.
A second order would solve a problem involving collection of anti-dumping duties, he said.
“There’s some $3 billion worth of duties that have never been collected because they set up straw-man importers that don’t have any financial substance, so by the time the case ends, there’s nobody there against whom you can assess the fine. So what these orders will do is require letters of credit or insurance company bonds or cash so there will be somebody against whom we can levy the fine,” Ross said.
(Additional reporting by Eric Walsh; Editing by Michael Perry and Jeffrey Benkoe)
Source: Reuters “U.S. trade barriers report slams China on overcapacity, tech transfer”
Note: This is Reuters’ report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.
By Simon Denyer March 15 at 9:54 AM
BEIJING — China’s premier told the United States on Wednesday: We don’t want a trade war with you, but if one breaks out, your companies would bear the brunt.
Yet despite tensions over jobs, currency rates and “security matters,” Premier Li Keqiang told a news conference in Beijing ahead of the first visit by the new U.S. secretary of state that he remained optimistic about the future of China’s relationship with the United States.
“Our hope on the Chinese side is that, no matter what bumps this relationship may run into, it will continue to move forward in a positive direction,” he said.
The two countries share extensive common interests and should “sit down to talk to each other” to build trust and narrow differences, Li told journalists at the end of China’s annual parliamentary session. He added that diplomats were working toward a face-to-face meeting between President Xi Jinping and President Trump.
Experts say China has been pushing hard to arrange such a meeting, realizing how important personal chemistry between the two leaders could be in maintaining stable ties. U.S. news media have reported that a meeting has been tentatively scheduled for April 6-7 at Trump’s Mar-a-Lago resort in Florida.
Secretary of State Rex Tillerson arrived in Tokyo late Wednesday for his first Asia trip since taking office, and he will visit Beijing later in the week.
Li said China’s trade and investment ties with the United States created up to 1 million American jobs last year.
“Recently I came across an article from an authoritative international think tank. It says that should a trade war break out between China and the United States, it would be foreign-invested companies, in particular U.S. firms, that would bear the brunt of it,” he said.
“We don’t want to see any trade war breaking out between the two countries. That wouldn’t make our trade fairer,” he added.
While a trade war would have a disproportionate effect on American firms such as Apple that outsource manufacturing to China, economist Christopher Balding said it is not accurate to say that the U.S. economy as a whole is more vulnerable.
“China is much more dependent on trade with the U.S. as a percentage of GDP, and received most of its trade surplus from the U.S.,” said Balding, an associate professor at the HSBC Business School in Shenzhen. It would be easier for U.S. firms to move their supply chain than for China to change its industrial structure, he added.
“It remains advisable for China to match its rhetoric on open markets and free trade with action, by opening up its markets to competition in goods and investment,” Balding said.
Li’s comments came a day after Trump’s nominee for U.S. trade representative said that China is one of the top trade problems the United States faces and that it is not clear whether Beijing is still manipulating its currency.
“If you look at our problems, China is right up there,” Robert E. Lighthizer told the Senate Finance Committee at a confirmation hearing Tuesday.
Trump repeatedly complained about China on the campaign trail, accusing it of stealing American jobs, manipulating its currency, militarizing the South China Sea and not doing enough to rein in North Korea’s nuclear program.
He then upset Beijing by accepting a phone call from Taiwanese President Tsai Ing-wen after his election and publicly questioning whether Washington should maintain its one-China policy.
But he eventually backed off, agreeing to honor the policy during what he called a “very warm” phone call with Xi in February. Since then, he has also refrained from any criticism of China on his Twitter feed.
Li reiterated that the one-China policy is the “political foundation” of relations and must not be undermined.
“With that foundation in place, we believe there are bright prospects for China-U.S. cooperation,” he said.
While relations with China will be discussed during Tillerson’s visit, North Korea’s nuclear program is expected to top the secretary of state’s agenda.
Li repeated his country’s call for dialogue to lower tensions on the Korean Peninsula.
“Tensions may lead to conflict which would only bring harm to all the parties involved,” he said. “It’s just common sense that no one wants to see chaos on his doorstep.”
Source: Washington Post “China to Trump: We don’t want a trade war — but if there is one, you’d lose”
Note: This is Washington Post’s report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.
A trade war between China and the United States would only cause pain, China’s commerce minister said on Saturday, as analysts say the spectre of deteriorating U.S.-China ties is likely to weigh on confidence of exporters and investors worldwide.
“A trade war would not benefit either country or either country’s people, you could say it would have no advantage whatsoever,” Chinese Commerce Minister Zhong Shan told reporters on the sidelines of the annual parliament session in Beijing.
“Many American and western friends think that China can’t live without the United States but that’s only half true.”
“At the same time, the United States can’t live without China,” Zhong said, adding that in the past ten years, the growth of U.S. exports to China has outpaced the growth of Chinese exports to the United States.
Zhong said that he looked forward to meeting his U.S. counterpart Wilbur Ross.
Billionaire investor Ross was sworn in as U.S. commerce secretary in February after helping shape President Donald Trump’s opposition to multilateral trade deals.
He is expected to start work on renegotiating trade relationships with China and Mexico.
“I am aware that Mr. Ross is an outstanding businessman and an experienced negotiator, an excellent person” Zhong told reporters on the sidelines of the annual meeting of the country’s parliament.
“I am willing to deal with excellent people because excellent people play the long game and think strategically.”
China’s foreign trade outlook faces lots of risk and uncertainty, Zhong added.
China’s exports for January and February combined rose 4.0 percent from the same period last year, while imports surged 26.4 percent, suggesting solid improvement in demand domestically and abroad.
But the export outlook for China and other trade-reliant economists is being clouded by fears of growing U.S. protectionism.
Zhong also spoke about China’s growing outbound investment, noting that a small number of Chinese companies had invested overseas “blindly and irrationally” in ways China did not encourage. He said the government would step up regulation around such investments.
(Reporting by Sue-Lin Wong; Writing by Ben Blanchard; Editing by Sam Holmes and Toby Chopra)
Source: Reuters “China-U.S. trade war would only cause pain: commerce minister”
Note: This is Reuters report I post here for readers’ information. It does not mean that I agree or disagree with the report’ views.
Clay Chandler Feb 06, 2017
In first two weeks as president, Donald Trump locked horns with so many U.S. trade partners—denouncing Japan’s biggest car maker for building factories in Mexico, hectoring Mexico’s president for failing to stand up to “bad hombres,” browbeating Australian prime minister and allowing his top trade advisor to slam Germany as a currency manipulator—that pundits the world over are calling him a “bull in the china shop.” But the cliché is inapt. So far, the one country President Trump has avoided charging at is China.
Such forbearance, whether by accident or design, seems unlikely to last. Trump’s screeds against China—for cheapening its currency, stoking its export machine and “stealing” American jobs—were a centerpiece of his campaign. And yet, as Trump himself probably knows, China won’t be easy to bully.
That is so partly because China is a strategic rival, not an ally, and thus less willing forgive a rude phone call or testy Tweet, and because China’s leaders, like Trump himself, are unpredictable, thin-skinned and obsessed with matters of “face.” But the real difficulty in taking on China lies in the fact that China’s economic relationship with the U.S. is at once more important and more complicated than that of any other nation.
It’s hard to overstate how tangled the U.S.–China partnership has become. Historian Niall Ferguson has famously suggested the two countries are so inter-dependent that they should be thought of as a single creature; he calls it “Chimerica.” China owns $1.1 trillion of U.S. government debt, ranking just behind Japan as America’s largest foreign creditor. China is America’s largest trading partner, with annual trade in goods and services worth $663 billion, and its third-largest export market. By one estimate, if sales by U.S. foreign affiliates in China and re-exports of U.S. products through Hong Kong to China are factored in, U.S. exports to China total $400 billion. Last year General Motors sold 3.9 million vehicles in China, more than 25% more than it sold in the U.S. China now has more than 130 million iPhone users, making it larger market for Apple than the United States.
The U.S. far outweighs China in military firepower and economic output, of course. But trade wars, once begun, aren’t easily controlled and if the world’s two largest economies get into a mutually destructive economic confrontation, the real question won’t be who has the biggest GDP, but which country has the highest threshold for pain. In theory, Trump could slap high taxes on Chinese imports. Beijing’s countermoves could include shutting out Boeing, which is hoping to claim at least half of China’s estimated $1 trillion market for airplanes over the next 20 years. China could put the squeeze on host of other U.S. companies including Ford, Qualcomm, Walmart, Starbucks. The risk for Trump is that, with China, his get-tough approach could start to look less like The Art of the Deal and more like “The Art of the Squeal.”
As we wait for Trump’s China policy to take shape, you can get a good idea of the complexities of the U.S.–China economic relationship by reading this fascinating article by veteran China correspondent Brook Larmar, who takes a detailed look at what may be China’s most important U.S. export: students. Chinese students now account for about 300,000 of the roughly 1 million foreign students enrolled in American colleges, making them by far the biggest foreign group. Brook’s latest piece tries to understand why the number of Chinese high school students, part of what some call the “parachute generation,” has also grown so rapidly. Interdependence is one of the article’s main themes. The Chinese students benefit from coming to America, learning English and preparing for U.S. universities. But the communities into which these kids parachute benefit too, from Chinese money that funds schools and has many trickle-down benefits.
But Brook captures the many human dynamics of the surge: the yearning of Chinese students to escape the rigors of their own brutal examination system; the Chinese brokers who exploit the desires of their countrymen for hefty profit; and the sense of alienation students feel after coming to America. The piece notes that ultimately, rather than gaining a new understanding and appreciation for the United States, many students who come to America to study return with a new wariness of America, and stronger sense of identity as Chinese. It’s a classic study in the paradox in globalization, and how sweeping forces that should be bring us countries and cultures together often wind up just pushing us all apart.
Source: Fortune “It Won’t Be Easy for Donald Trump to Bully China”
Note: This is Fortune’s article I post here for readers’ information. It does not mean that I agree or disagree with the article’s views.
According to Reuters’ report McDonald’s has sold most of its business in China to CITIC, Carlyle for $2.1 billion” on January 9, it did so in order to expand instead of leaves China. By the sale, it draws in Chinese giant CITIC to set up 1,500 more restaurants in China in five years in addition to its existing 2,400 in China.
The new restaurants will create lots of jobs in China. Will that upset US new president Donald Trump? Perhaps! Better shifting the blame on CITIC a Chinese firm that now holds majority interest of McDonald’s in China.
Moreover, even if Trump will not punish McDonald, McDonald still may be in serious trouble as a trade war is looming between the US and China. Making things difficult for US business interests in China is China’s powerful weapon of retaliation at US attacks such as tariff increase and restriction of Chinese investment in the US.
The sale has turned McDonald’s’ interest in China into a Chinese one to ensure it will not be in any trouble in the trade war.
McDonald’s does have vision.
Reuters says in its another report titled “U.S. companies have new business risk – being labeled ‘anti-American’ by Trump” on January 10, “Some U.S. companies are reviewing potential mergers while others are rethinking job cuts or looking at their manufacturing operations in China for fear of being cast as “anti-American” by President-elect Donald Trump, according to Wall Street bankers, company executives and crisis management consultants.”
McDonald’s has set a wise example for the US companies that have interests in China to avoid trouble.
Comments by Chan Kai Yee on Reuters’ report, full text of which is reblogged below:
McDonald’s sells most of China, HK business to CITIC, Carlyle for $2.1 billion
By Elzio Barreto | HONG KONG Mon Jan 9, 2017 | 11:44am EST
McDonald’s Corp (MCD.N) has agreed to sell the bulk of its China and Hong Kong business to state-backed conglomerate CITIC Ltd (0267.HK) and Carlyle Group LP (CG.O) for up to $2.1 billion, seeking to expand rapidly without using much of its own capital.
The 20-year deal caps months of negotiations between the fast-food chain, private equity firms including Carlyle and TPG Capital Management LP [TPG.UL] as well as several Chinese suitors.
The U.S. fast food chain said local partners will help speed up growth in the world’s No. 2 economy through new restaurant openings, particularly in smaller cities that are expected to benefit from increased urbanization and income growth.
“McDonald’s globally overall is struggling and didn’t have the money or intellectual resources to focus on China,” said Shaun Rein, managing director at China Market Research Group.
The company has more than 2,400 restaurants in mainland China and roughly 240 in Hong Kong. The new partnership plans to add 1,500 in the two areas over the next five years.
Under the deal, Hong Kong-listed CITIC Ltd will own about 32 percent of the business, with CITIC Capital, an affiliate company that manages private equity funds and other alternative assets, holding another 20 percent.
Carlyle will control 28 percent of the business, while McDonald’s will retain a 20 percent stake, the companies said in a statement. The deal will be settled in cash and in shares in the new company that will act as the master franchisee for the 20-year period.
McDonald’s originally wanted to raise up to $3 billion from the sale of the business, but later decided to keep a minority stake to benefit from exposure to future growth in China, a person with direct knowledge of the plans previously told Reuters.
The partnership will also aim to boost sales at existing restaurants, with menu innovation a key focus. Fast-food firms including McDonald’s and Yum Brands Inc (YUM.N) are recovering from a series of food-supply scandals in China that have undermined their performance.
“I’m not sure how much more you can do with McDonald’s in China. They’re a well-run company, so I’m not sure that CITIC and Carlyle are able to add that much more aside from capital,” Rein said.
McDonald’s said in March it was reorganizing operations in the region, looking for strategic partners in China, Hong Kong and South Korea. The company later decided to keep its South Korea business.
Other companies that had bid for the China and Hong Kong assets included TPG, which teamed up with mini-market operator Wumart Stores Inc, and real estate firm Sanpower Group Co Ltd [SPGCL.UL], which owns British department store House of Fraser Ltd [HFPLC.UL], sources have said.
JPMorgan Securities is advising the buyer group, while CITIC Ltd also said it hired CITIC CLSA Capital Markets as its financial adviser and CITIC Securities as financial adviser in China. McDonald’s hired Morgan Stanley (MS.N) to run the sale.
(Reporting by Elzio Barreto; Additional reporting by Jessica Yu and Donny Kwok in Hong Kong and Rushil Dutta in Bengaluru; Editing by Edwina Gibbs)