Posts Tagged ‘unfair trade practices’

China Champion of Resolving Issues Through Mutual Respect

October 12, 2018

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Post flagship forum held in Kuala Lumpur in the shadow of the US-launched trade war stresses the importance of resolving issues through mutual respect

South China Morning Post

PUBLISHED : Friday, 12 October, 2018, 8:31pm
UPDATED : Friday, 12 October, 2018, 8:31pm

Any forum on China in the current climate can be expected to be defined by the escalating trade war being waged by the United States. Moving such a gathering out of its usual comfort zone in Hong Kong and relocating it in Southeast Asia at this time provides a window into the fears and insecurities of a region caught in the middle of the conflict. To be sure, uncertainty and anxiety about what the future holds was one prevailing mood this week at the Post’s flagship China Conference in Kuala Lumpur. The trade war dominated the two-day event. But downbeat sentiment about the prospect of Asia’s economies being derailed by collateral damage to economic growth was counterbalanced by a brighter vision of how participants saw China’s role in this part of the world and globally.

The choice of Malaysia courted disharmony, given the cancellation of China-backed infrastructure projects after the shock election of Prime Minister Mahathir Mohamad, and the potential for the South China Sea territorial dispute between Beijing and others to become a regional flashpoint. But the Malaysian side dispelled such underlying concerns at two levels. First, by officially endorsing the importance of healthy bilateral relations. Second, Economic Affairs Minister Azmin Ali, a top lieutenant of Mahathir, said Malaysia was looking to China to provide “global leadership”, not only economic but beyond – for example in exercising soft power by “advancing universal values such as freedom of conscience, mutual respect and justice”. His remarks resonated with those of former UN undersecretary general Noeleen Heyzer, who said cultural exchanges were important to ties between China and Southeast Asia.

The importance of technology and innovation to productive cooperation in the region was an abiding theme, providing platforms for Jack Ma, co-founder and executive chairman of Alibaba Group Holding, owner of the Post, and executive vice-chairman Joe Tsai. Ma said Asia and not the US or Europe, would be the focus of the current, internet-driven revolution of human society. Tsai said with governments keen to foster entrepreneurship and innovation, they should rethink how they tax workers in the technology industry on stock options that amount to foregone salary so as to encourage them to invest themselves “just like investors invest capital”. Former Hong Kong chief executive Leung Chun-ying pointed out the root of the trade war, saying the US needs to reduce its trade balance. The trade war took participants’ minds off the US-China South China Sea dispute, amid concerns it is resurfacing as a potential proxy platform for superpower rivalry. Azmin reaffirmed Malaysia’s support for freedom of navigation. The kind of open dialogue afforded by the conference does no harm to the prospect of a peaceful and mutually respectful resolution of navigational, trade and security issues.


Trump Is Right About China Trade

October 3, 2018

The conventional wisdom about manufacturing is wrong. It isn’t a lost cause, and the U.S. isn’t destined to become a pure “service economy.”

Small manufacturing can thrive on a level playing field.

A welder working in a Los Angeles manufacturing plant.
A welder working in a Los Angeles manufacturing plant. PHOTO: COURTESY OF BOBRICK WASHROOM EQUIPMENT, INC.

The conventional wisdom about manufacturing is wrong. It isn’t a lost cause, and the U.S. isn’t destined to become a pure “service economy.” In fact, new technologies including numerical controls, lasers and robotics have propelled a renaissance in American manufacturing. My Los Angeles-based bathroom-accessory and toilet-partition company has benefited from this, investing continually in our facilities, technology and best practices to remain globally competitive.

Nonetheless, our company is effectively shut out of China—a vast and growing market—due to its 25% tariffs on our exported products. In contrast, duties on competing goods from China to the U.S. range from 2.5% to zero. I love free trade, but fair trade is also important.

President Trump’s tariffs may harm major multinational manufacturing companies that have significant operations in China and companies that import products from China. But for many small and medium-size manufacturers such as ours, which create most of our products at home, the tariffs have minimal impact. There is no better time to level the playing field with China than now. The economy is growing quickly and it can absorb the short-term pain from reciprocal tariffs.

The U.S. is in a strong negotiating position because of its large trade imbalance. The U.S. exports about $130 billion worth of goods to China annually, while China exports $506 billion worth of goods to the U.S. That means a larger share of Chinese output can be hit with U.S. tariffs than vice versa.

Another advantage is that a large portion of U.S. exports to China is commodities, like agricultural goods, that have markets all around the world. In contrast, Chinese exports to the U.S. are largely manufactured products, which would be more difficult to sell elsewhere. China has more to lose in a trade war despite its bluster about not negotiating.

If America’s goals are to stop unfair competition from China, preserve our manufacturing base, and open China’s markets to our products, we need to look toward the long term. Over time, a level playing field with fair trade and protection of intellectual property will be a good thing for U.S. manufacturers—especially those that continue to invest in new technologies. It’s worth a bit of friction with China over the short term to get there.

Elite opinion is overwhelmingly opposed to Mr. Trump’s China strategy, based on the assumption that U.S. manufacturing is doomed no matter what. But leaders at manufacturing companies like mine know that pressing for fair competition can help ensure the continued vitality of our industry.

Mr. Louchheim is president of Bobrick Washroom Equipment Inc., a 112-year-old Los Angeles-based manufacturing company with plants in five U.S. states, Canada and the U.K.

Appeared in the October 3, 2018, print edition.

Will Tariffs Pave The Path To U.S.-China War?

September 28, 2018

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It’s a rather simple and perhaps prescient premise behind Harvard professor Graham Allison’s book, Destined for War: Can America and China Escape Thucydides’s Trap?

It is this: Over the last 500 years, there have been 16 instances where a rising power challenges a ruling power. In 12 cases, it has led to war.

Thucydides was a Greek historian and author who was writing about Athens, the rising power, and Sparta, the established power. Allison coined the phrase “Thucydides Trap” for his 2017 book.

By Ken Roberts
Forbes Contributor

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While the book and its premise are not without their critics, the question Allison posed was whether China and the United States can beat those odds.

Let’s consider this against the backdrop of the ongoing and rapidly escalating tariff war between President Trump, leader of the established power and the world’s largest economy, and President Xi Jinping, leader of the ascendant power and the world’s largest economy when considered by purchasing power parity.

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Let’s consider it also against the personalities of the two leaders. Both have strong nationalistic tendencies. Xi has rewritten his nation’s constitution to allow him to rule indefinitely, the first ruler to have such power since the revolution led by Mao Tse-tung in the 1940s. On this side of the world, Trump took the unusual step of establishing his 2020 re-election campaign on inauguration day, his first day as president. Ironically and unfortunately, his first significant act as president was to withdraw the United States from the Trans-Pacific Partnership, a 12-nation agreement that sought to box-in China’s global aspirations.

So, here we are.

President Trump has announced tariffs on about half of all U.S. imports from China and threatened to impose tariffs on the second half. Tariffs on the first half increase from 10% to 25% in January if, Trump has indicated, the Chinese do not accede to U.S. demands. At the moment, those demands relate to China’s requirement that U.S. firms turn over trade secrets to do business in China, that the Chinese steal intellectual property and that Chinese restrict U.S. imports.

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Trump’s gamble is that the Chinese will buckle, that our economy is stronger than theirs, that they need us more than we need them.

Xi undoubtedly believes that, given his iron grip on the nation and conviction that his people would suffer mightily to win against the United States, China will prevail. China will outlast the United States because the Chinese will be willing to suffer more, or will suffer more whether willingly or not.

If there’s a war, it will likely not be fought with battleships and bombs but perhaps subtly escalate to “cyber” warfare.

I don’t believe we will end up in a traditional war, certainly. I am less certain that we won’t find ourselves involved in some cyber war. And don’t think that’s not equally scary.

More likely, despite a stock market that continues to shrug off the escalating trade war, is that the U.S. economy, in its longest post-war expansion, will tumble into recession. Inflation is already upon us. Credit card debt has quietly crept up. Housing prices are high. Interest rates are moving up quickly. Gasoline prices are rising. U.S. multinationals are lamenting the impact of tariffs on their revenues and profits.

As we continue down the path of escalating tariffs, consider:

China is the United States’ top trade partner.

China is the United States’ third most important export market.

More than 60% of all U.S. cell phone imports come from China.

More than 55% of all U.S. computer imports come from China.

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Chinese employees working on micro and special motors for mobile phones at a factory in Huaibei, China. STR | AFP | Getty Images

Almost 50% of all U.S. furniture imports come from China.

More than a quarter of all sweaters entering the United States come from China.

Almost 40% of U.S. bra imports come from China.

More than 80% of children’s toys and bicycles come from China.

China buys 30% of all U.S. soybean exports.

China buys more U.S. aircraft and related parts than any other country, the top U.S. export, worth $8.3 billion this year.

China is the second most important market for U.S. motor vehicles, after Canada.

The list can go on and on.

I didn’t leave the womb thinking I would find my life’s work writing and speaking about trade data, trying to make it interesting and relevant. But this is where I find myself. Today, the company I founded in 1998, WorldCity, has published annual TradeNumbers publications ar…


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China Worries: Makes Direct Plea For Support To The American People as Trump Hangs Tough With Trade War, Tariffs

September 27, 2018

China supports millions of American jobs, makes big profits for US firms, Beijing says

Both sides have benefited from trade ties, white paper says in response to accusations that China is trying to undermine rival’s manufacturing base

South China Morning Post

PUBLISHED : Thursday, 27 September, 2018, 9:45pm
UPDATED : Thursday, 27 September, 2018, 9:46pm

China’s trade and investment with the United States supports millions of American jobs and creates huge profits for its companies, Beijing said this week in a bid to counter Donald Trump’s claims that the country is stealing jobs and eroding the US manufacturing base.

Apple CEO Tim Cook arrives at the China Development Forum in Beijing on Saturday.
Apple CEO Tim Cook arrives at the China Development Forum in Beijing last March. PHOTO: GIULIA MARCHI/BLOOMBERG NEWS

Citing figures from US sources, Beijing said in a white paper released on Monday that both countries had benefited from their trade links. Observers, however, said the document reflected only Beijing’s view of the trade war and failed to tackle issues of concern to American businesses.

According to figures from the US-China Business Council cited in the white paper, US exports to China and bilateral investment supported 2.6 million jobs in America in 2015, while Chinese investment in 46 US states created more than 140,000 jobs, mostly in the manufacturing sector.

“Trade and economic cooperation has created a large number of jobs in the US … huge business opportunities and significant profits for American business … [and] promoted industrial upgrading,” the document said.

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China was also one of the top five markets for US exports of manufactured goods in 2017, it said, while US farmers exported, on average, more than US$10,000 worth of agricultural products to China in the year, the paper said.

The document came as tensions continue to rise in the trade war between the world’s two largest economies. Washington last week extended its tariffs to almost half of all the goods it imports from China, while Beijing hit back by levying extra duties on more US goods and cancelling planned trade talks.

The document cited the US Consumer Choice Centre as saying that US President Donald Trump’s administration was punishing the American people with its punitive action, saying the tariffs would have a direct impact on 150,000 jobs in North Carolina and 6,500 in South Carolina, both of which are heavily reliant on exports.

William Zarit, chairman of American Chamber of Commerce in China, said that while both countries had benefited from their trade relationship, many US firms had other grievances.

“China says how much the US has benefited,” he said. “There is a lot of truth to that … and at the same time there is also a lot of truth to what the US is saying about protectionism, such as forced technology transfer and IPR violations.”

Zarit said he expected China to unveil “a comprehensive plan for reform and opening up across a number of industrial sectors on trade and investment”, not out of “tit-for-tat reciprocity, but a general equivalence”.

“It doesn’t need to be a response to US pressure,” he said. “But I hope it will change the momentum and break the current deadlock.”

Despite the spiralling trade war, some US states are continuing to attract Chinese investment.

Last week, Michigan signed a memorandum of understanding with Beijing to cooperate on the production of autonomous vehicles. The state said that since 2011 it had received US$1.2 billion in new investment from China that had helped to create more than 6,300 jobs.

Chen Long, an economist at Gavekal Dragonomics in Beijing, said China and the US had different perspectives on the disputed trade issues.

China looked more at economic growth and how interaction influenced job creation, while Trump focused on how to bring more jobs to the manufacturing sector, he said.

“China can say we are improving in many areas, such as intellectual property protection, but the US wants more,” he said.

“The trade conflict is continuing to escalate and a deal looks unlikely,” Long said. “China increasingly sees this trade conflict as part of an intensifying long-term rivalry with the US, rather than a short-term dispute.”

U.S. workers have jobs because of China. AFP photo

Iris Pang, an economist at ING in Hong Kong, said the Chinese document read like the US report that sparked the trade war.

“China’s white paper is doing the same as the US 301 paper, and China wants to stand up as neutral as possible, but the data is highly selective,” she said.


Both countries had laid out one-sided facts to support their respective positions, she said, adding that if China wanted to make its argument more convincing it should have highlighted the economic structure behind the trade imbalance.

The trade deficit “is not about who steals whose jobs, but it is about economic structure and economic behaviour of consumers and governments in the US”, she said.


How China Systematically Pries Technology From U.S. Companies

September 27, 2018

Beijing leans on an array of levers to extract intellectual property—sometimes coercively


Image result for China C919, photos, inside factory ZUMA Press

When China set out to build the C919 jet, it made clear it would buy components only from joint ventures whose foreign partners would share technology. DING TING/XINHUA/ZUMA PRESS



DuPont Co. suspected its onetime partner in China was getting hold of its prized chemical technology, and spent more than a year fighting in arbitration trying to make it stop.

Then, 20 investigators from China’s antitrust authority showed up.

For four days this past December, they fanned out through DuPont’s Shanghai offices, demanding passwords to the company’s world-wide research network, say people briefed on the raid. Investigators printed documents, seized computers and intimidated employees, accompanying some to the bathroom.

Beijing leans on an array of levers to pry technology from American companies—sometimes coercively so, say businesses and the U.S. government.

Interviews with dozens of corporate and government officials on both sides of the Pacific, and a review of regulatory and other documents, reveal how systemic and methodical Beijing’s extraction of technology has become—and how unfair Chinese officials consider the complaints.

China’s tactics, these interviews and documents show, include pressuring U.S. partners in joint ventures to relinquish technology, using local courts to invalidate American firms’ patents and licensing arrangements, dispatching antitrust and other investigators, and filling regulatory panels with experts who may pass trade secrets to Chinese competitors.

In DuPont’s case, the dispute concerned a process to produce supple textile fibers from corn, a $400 million business for the company in 2017. The antitrust investigators, say the people briefed on the raid, told DuPont to drop the case against its former Chinese partner.

U.S. companies have long complained that Beijing pressures them to hand over intellectual property. More recently, their concerns have escalated as China turns into an advanced rival in industries ranging from chemicals to computer chips to electric vehicles.

Coerced technology transfer is now a central part of the spiraling U.S.-China trade fight, a standoff that appears to be only more entrenched. The White House estimates China inflicts $50 billion yearly in damages on U.S. companies. That transfer, U.S. executives regularly complain, weakens American businesses’ competitiveness and undermines the incentive to innovate.

Coerced technology transfer is part of the spiraling U.S.-China trade fight. President Trump with President Xi Jinping in 2017.
Coerced technology transfer is part of the spiraling U.S.-China trade fight. President Trump with President Xi Jinping in 2017. PHOTO: QILAI SHEN/BLOOMBERG NEWS

Chinese authorities referred questions to a paper issued on Monday by the State Council, China’s cabinet, that says: “American companies in China have received huge returns through technology transfer and licensing, and are the biggest beneficiaries of technical cooperation” and that U.S. companies enter partnerships voluntarily.

“China’s offer to the world has been straightforward,” says a policy maker in Beijing. “Foreign companies are allowed to access China’s markets but they would need to contribute something in return: their technology.”

U.S. companies have gone into China with eyes wide open, for the most part, and many are wary of going public with complaints. American companies initially brought the idea of joint ventures to China as a way to get access to a market of 1.4 billion people and tap a low-cost workforce. The bargain included helping Chinese firms become more technologically advanced.

At a January U.S. Chamber of Commerce dinner in Washington, executives pressed U.S. Ambassador to China Terry Branstad not to hit Beijing too hard on technology issues,according to dinner attendees. China has many ways to get even, warned Christopher Padilla, a vice president of International Business Machines Corp. , which licenses technology to Chinese firms.

“If someone gets knifed in a dark alley, you don’t know who did it until the next morning,” Mr. Padilla said at the dinner. “But there has been a murder.”

DuPont briefed U.S. officials on its problems but didn’t want its case raised in trade talks, say some of the people familiar with the case. Its former Chinese partner, Zhangjiagang Glory Chemical Industry Co., continues to sell chemicals used to make fibers that DuPont believes are knockoffs of its technology. DuPont and Glory declined to make executives available for comment.

China’s antitrust regulator said “the investigation is still ongoing,” declining to elaborate.

‘Notable pressure’

About one in five members of the American Chamber of Commerce in Shanghai say they have been pressured to transfer technology, according to a survey conducted in the spring. Of those companies, 44% in aerospace and 41% in chemicals report “notable pressure.” China considers both industries strategically important.

Trading market access for technology dates to Chinese leader Deng Xiaoping’s effort to launch the pro-market policies that propelled China’s rise. General Motors Co. executives on an exploratory 1978 visit proposed a joint venture with a local company to boost a then-antiquated Chinese industry, say Chinese government advisers, historians and auto-industry executives.

The idea fit with Deng’s desire to obtain Western technology but limit Western influence. China “needs to give up portions of the domestic market in exchange for advanced technologies we need,” he pronounced in 1984. The policy was a success, according to a March 2018 paper by economists at the universities of Colorado, Hong Kong and Nottingham, who found that foreign technology “diffuses beyond the confines of the joint venture” and boosts competitors’ technology.





*Purchasing Power parity. Figures for 2017 are estimated, and forecasted for 2018

Source: R&D Magazine (expenditure); Center for Strategic and International Studies; Global Innovation Index (innovation); SAFE Balance of Payment via. Peterson Institute for International Economics (intellectual property payments)

Foreigners bring cash, technology, management know-how and other intellectual property while the Chinese partner usually contributes some land-use rights, financing, political connections and market know-how. As the practice increased, one U.S. administration after another, with only modest success, pressed Beijing to ease requirements that U.S. companies fork over technology. The Trump administration says it wants to “change the paradigm” by hitting Beijing with tariffs.

China mandates that foreign companies wanting to open or expand in 35 sectors do it through joint ventures, though it announced a plan in April to phase out rules requiring foreign auto makers to share factory ownership and profits with Chinese companies by 2022.

The arrangement has worked for some. When China set out to build its first large commercial passenger jet in 2008, state-owned Commercial Aircraft Corp. of China made clear it would buy components only from joint ventures whose foreign partners would share technology. General Electric Co. agreed.

GE’s venture with state-owned Aviation Industry Corp. of China now is a main supplier of avionics for the domestic C919 aircraft. The joint venture helped GE avoid writing down a struggling avionics unit, according to former and current GE employees.

GE says “there was never a write down at our avionics business, nor was there risk of one.” It says, referring to intellectual property, that GE is “highly sensitive to the protection of our IP whether in our wholly-owned operations or in our” joint ventures.

Advanced Micro Devices Inc., a Silicon Valley chip company, entered a joint venture in 2016 with Chinese private and state-owned entities, including the government’s Chinese Academy of Sciences. AMD licenses microprocessor technology to the venture and is developing new computer chips with it.

Source: Wolfgang Keller, University of Colorado

AMD has received about $140 million in licensing through 2017, enough to help boost it into the black last year for the first time since 2011. “We created a joint venture that was very much a win-win,” AMD Chief Executive Lisa Su said at a 2016 conference. An AMD spokesman says the joint venture is “part of our strategy to create a complementary product offering.”

Chinese leaders see innovative technologies as forces to propel its industries up the value chain into more sophisticated sectors and the country into rich-nation ranks. To ensure foreigners bring their best, phalanxes of regulatory panels scrutinize foreign investments to make sure they meet government goals.

Huntsman Corp. has singled out these review panels as a conduit for siphoning trade secrets. The Woodlands, Texas, chemicals maker is thriving in China, which accounted for about 14% of its 2017 revenues.

Still, “our competition isn’t going to be standing on the sidelines cheering a song,” CEO Peter Huntsman told analysts in June. They could be “trying to either steal the technology or develop the technology themselves.” Mr. Huntsman declined to be interviewed.

Regulatory panels, packed with industry experts, must approve many chemicals before they can be produced in China and require detailed information on formulas and production processes, say U.S. trade groups and chemical firms. “Enough information to duplicate the product,” is how the American Chemical Council trade group put it in a filing to the U.S. government.

For Huntsman, these panels have drilled down on specialized knowledge, such as how it makes plastics with high transparency and elasticity—the kind of material often used for making sports shoes—people close to Huntsman say. Soon after those experts conducted their evaluations, local competitors used the same kind of technology in their own products, they say.

Huntsman is battling over a crown jewel of its business, a black dye used in textiles that is less polluting to make. It filed a lawsuit in Shanghai against a Chinese company for infringing a patent on the dye in 2007. Huntsman then found a court-appointed review panel stacked against it, it said in a 2011 complaint it filed with the U.S. Commerce Department.

The three-panel members included an engineer from the company Huntsman was suing, another from a local dye-research group and a third who once worked at a local dye firm, according to the complaint and people with knowledge of the matter. The experts’ work “effectively turned them into allies and ‘spokespersons’ ” for the Chinese competitor, the complaint said.

Litigation of the patent-infringement case has dragged on. Huntsman has asked the Trump administration to consider blocking Chinese firms if they set up operations in the U.S. using disputed Huntsman technology.

For foreign auto makers, the review panels have become a battleground over electric-vehicle technology. New vehicles must get government approval before mass production, undergoing a mandatory technology audit that usually lasts several days, foreign makers say.

An electric-vehicle manufacturing line in China.
An electric-vehicle manufacturing line in China. PHOTO: WANG ZIRUI/SIPA ASIA/ZUMA PRESS

An audit this year convinced an employee at one foreign auto maker there was “clear evidence of collusion” between the audit team and Chinese auto makers. When the audit began, the person says, inspectors asked for only the blueprints of the electric-vehicle components the foreign company was striving to protect from its Chinese joint-venture partner.

“Somehow they knew exactly the areas to look at,” the person says. “There wasn’t a single question about any of the other very complex systems on the vehicle.”

The DuPont raid

DuPont also shared information with its Chinese partner, Zhangjiagang Glory, when it licensed the Chinese firm in 2006 to produce and distribute Sorona, the textile polymers made from corn. Within DuPont, the Glory deal was called a “tolling” partnership—a relationship that serves as a kind of toll to enter the market. DuPont trained Glory to set up a factory to produce Sorona polymers and to spin them into fibers.

Around 2013, say the people familiar with the case, DuPont didn’t renew Glory’s license amid suspicions the Chinese firm was ripping off its intellectual property to sell products similar to Sorona, which has grown to a $70 million business in China. DuPont filed two arbitration cases in China, alleging patent infringement, with hearings stretching through 2017.

Around that time, officials with the National Development and Reform Commission’s antitrust division in Beijing took an interest in the matter and started holding meetings with DuPont. The commission showed little interest in DuPont’s planned merger with Dow Chemical Co., completed late last year, even though it launched an antitrust investigation into the combined entity in December.

Rather, investigators focused on the DuPont-Glory standoff, say the people briefed on the case. During three days of meetings in December, DuPont became worried about a raid on its office. It planned an employee-training session on how to deal with one, but the investigators showed up first.

An investigator told DuPont officials they were looking at antitrust behavior, specifically their unwillingness to license technology to Chinese firms and their pursuit of the Glory case, say these people. DuPont officials, they say, now fear that even dropping the case won’t be sufficient to satisfy Beijing, which may want a hostage in the trade fight with Washington.

Trump administration officials see cases like this as evidence of China’s economic aggression. “The combination of naiveté and hubris on the part of U.S. companies seeking to enter the Chinese market, coupled with a sophisticated Chinese effort to extract technology has been a lethal combination,” says White House trade adviser Peter Navarro, a China hawk.

Micron Technology chips.

During August trade talks, U.S. negotiators pressed Beijing about coerced technology transfer. They cited memory-chip maker Micron Technology Inc., which filed a lawsuit in U.S. District Court in California in December alleging technology theft by Fujian Jinhua Integrated Circuit Co. Jinhua sued Micron in January in a court in Fujian province—whose government partly controls Jinhua—and won a temporary order blocking some Micron subsidiaries from selling products in China that each company claims patents to.

Jinhua declined to comment. In a July statement, it said Micron has “recklessly” infringed on its patents. Micron says it intends “to vigorously protect our intellectual property and business interests through all available means.”

Chinese negotiator Commerce Vice Minister Wang Shouwen dismissed the concerns in August trade talks, say officials familiar with the talks. Micron and Jinhua “are like brothers,” Mr. Wang said, according to the officials, “and brothers fight.”

Write to Lingling Wei at and Bob Davis at

Appeared in the September 27, 2018, print edition as ‘Beijing Grabs Tech With New Tenacity.’

WTO downgrades global trade forecast in 2018 and 2019

September 27, 2018

The World Trade Organization on Thursday downgraded its global trade forecast for this year and next, pointing to escalating trade tensions around the world.

“Escalating trade tensions and tighter credit market conditions in important markets will slow trade growth for the rest of this year and in 2019,” the WTO warned in a statement. “Trade will continue to expand but at a more moderate pace than previously forecast.”

The WTO now expects merchandise trade volumes to expand 3.9 percent this year and 3.7 percent in 2019. (AFP)

The organization now expects merchandise trade volumes to expand 3.9 percent this year and 3.7 percent in 2019, down from an April forecast of 4.4 percent and 4.0 percent growth, respectively.

The WTO’s downgrade comes only days after US President Donald Trump’s tariffs on another $200 billion of Chinese imports took effect, with Beijing accusing Washington of “economic intimidation.”

The latest volley against Beijing brings the amount of goods hit by duties to more than $250 billion, roughly half of China’s exports to the US.

The WTO said trade measures and threats since its last report in April were only having a “modest” economic effect for now, “but the uncertainty they generate may already be having an impact through reduced investment spending.”


Next Trump tariffs could mean ‘economic shock waves’ and unemployment in China

September 27, 2018

  • The next round of tariffs from U.S. President Donald Trump’s administration would likely hit both large multinational companies producing goods in China for export, as well as Chinese small and medium-sized enterprises that are part of the global supply chain.
  • While the economic impact on China could still be manageable if the U.S. imposes tariffs on all Chinese imports, rising unemployment could be a result, according a recent report from J.P. Morgan.

Image may contain: 2 people

Chinese employees working on micro and special motors for mobile phones at a factory in Huaibei, China. STR | AFP | Getty Images

Key consumer tech products have so far mostly escaped the heat of the ongoing trade war. But if U.S. President Donald Trump makes good on his threat to impose tariffs on the full range of Chinese imports into his country, it could hit that sector hard, experts said.

Rajiv Biswas, Asia Pacific chief economist at IHS Markit, said that products such as mobile phones and smart watches and other wearable devices could be targeted in the next round, while ANZ Greater China Chief Economist Raymond Yeung pointed to mobile phones as well as other consumer goods.

“If the US Administration imposes a third tranche of tariff measures on a further USD267 billion of Chinese exports, this will significantly ramp up the economic shock waves to Chinese exporters,” Biswas told CNBC in an email.

Apple said earlier this month that the tariffs could affect the Apple Watch and AirPods as well as adapters and chargers for a host of products. But according to the latest list of tariffs that kicked in this week, they have been spared so far.

Autos is another sector that could continue to be targeted, said Carol Liao, a senior China economist at J.P. Morgan.

According to ANZ, key items at stake include consumer goods, which form 45 percent of China’s exports to the U.S., and autos, which is at 4 percent.

The next round of tariffs, according to Biswas, would likely hit large multinational companies producing goods in China for export, as well as Chinese small and medium-sized enterprises that are part of the global supply chain.

Automakers are already feeling the heat, with Trump slapping a 25 percent levy on China-made autos, in July. Ford scrapped a plan to sell its new Chinese-made Focus Active crossover model in the U.S., while Volvo moved the production of its XC60 crossover from China to Sweden. General Motors, meanwhile, sought an exemption for its Buick Envision model, also made in China.

How do tariffs work?

How do tariffs work?  

Trump’s administration levied tariffs of 10 percent on $200 billion of Chinese products this week, and that’s set to increase to 25 percent on Jan. 1 2019. In response, China said it would impose taxes on U.S. imports worth about $60 billion.

Trump had said any retaliatory action from China would prompt Washington to “immediately pursue phase three, which is tariffs on approximately $267 billion of additional imports.”

China is limited in the amount of retaliatory tariffs it can apply simply because it doesn’t import as much in American goods compared with the amount the U.S. imports in Chinese products. Asia’s largest economy imported just $129.9 billion from the U.S. in 2017, compared with $505.5 billion in exports.

Before this week’s moves, the U.S. and China had already applied tariffs to $50 billion of each other’s goods.

Jobs will be lost

While the economic impact on China could still be manageable if the U.S. imposes tariffs on all Chinese imports, rising unemployment could be a result, according to a recent report from J.P. Morgan.

The bank estimated that China could lose as many as 3 million jobs if it does not have any countermeasures to the next round of tariffs. J.P. Morgan said the loss in employment could be reduced to 700,000 jobs if the country imposes retaliatory tariffs — and assuming that the yuan depreciates 5 percent.

Biswas added: “As (multinational corporations) readjust their supply chains for exports to the US market to production hubs outside of China, Chinese (small and medium-sized enterprises) are facing weakening new manufacturing orders and job losses.”

Trade war weighs on China industrial profits

September 27, 2018
Trade war has started to sting China’s manufacturers, ING economist and Goldman Sachs say
Image may contain: 1 person, suit
By Edward White in Taipei

Profit growth at China’s large industrial companies slowed to a five-month low last month in what analysts say is a sign the US-China trade dispute is hurting the world’s second-largest economy.
Industrial profits rose 9.2 per cent year on year in August, according to the National Bureau of Statistics, down sharply from growth of 16.2 per cent in July. That was the slowest pace since March and marked the fourth straight month of slowing growth.

Iris Pang, ING economist, said the latest data showed that the trade war between the world’s two largest economies – which escalated this week with the imposition on Monday of a new US 10 per cent tariff on about $200bn of Chinese imports – has started to sting China’s manufacturers.“It is difficult to find an excuse not to blame the trade war,” she said, adding factories with foreign investment appeared to be among the worst hit.

Ms Pang added:


Foreign-owned factories have faced slower profit growth (+7.6% YoY) than Chinese-owned private enterprises (+10.0% YoY), and of course more so compared to state-owned enterprises (SOEs) at 26.7% YoY.
We believe that the higher profit growth of SOEs come from some projects that could be related to fiscal stimulus, eg, railway infrastructure projects.And those no so profitable infrastructure projects, eg, anti-pollution, could be under local government financial vehicles, which are not considered as local government entities but corporate entities.


Analysts at Goldman Sachs said the drop in industrial profit growth also reflected a “high base” from August 2017. While profit growth was slower in some metal manufacturing sectors and chemical and carmaking, earnings from electrical machinery manufacturing accelerated.

“Looking ahead, we continue to see headwinds to industrial profit growth in the rest of the year, based on our expectation of gradual moderation in industrial production growth, as well as potentially slower [producer price] inflation,” Goldman Sachs analysts said.

China says forces in the US smearing China and creating antagonistic sentiment — Wang Yi urges return to “proper track”

September 26, 2018

Four decades of gains at risk of ‘total destruction’ if tensions continue to rise

South China Morning Post

PUBLISHED : Wednesday, 26 September, 2018, 12:41pm
UPDATED : Wednesday, 26 September, 2018, 1:21pm

China’s senior diplomat has demanded the US stop viewing China with a cold war mentality to keep the Sino-US bilateral ties on a healthy track as tensions between the two sides continue to rise.

Foreign Minister Wang Yi made the comments to former US Secretary of State Henry Kissinger during a meeting on the sidelines of the United Nations General Assembly in New York on Tuesday.

The meeting came a day after Wang warned US business representatives that Washington was putting four decades of gains in the Sino-US relationship at risk of “total destruction”.

“China and the US can have competition, but they should not view others with a cold war mentality,” Wang said in a foreign ministry statement, using the term describing the rivalry between the US and former Soviet Union.

“There are some forces in the US recently frequently smearing China and creating antagonistic sentiment, which has caused serious damage to China-US relations.”

Relations between the two countries would go downward if the trend continued, and the US should take steps to ensure bilateral ties remained on a proper track, he said.

In the meeting, Wang said he appreciated Kissinger’s contribution to the development of China-US relations, and hoped he would continue to yield a positive influence.

The elder US statesman had earlier denied an American media report that he had suggested to President Donald Trump that Washington should “box in” China by working with Russia in a series of private meetings.

A transcript of an event on September 13 commemorating the 50th anniversary of the Wilson Centre’s Kissinger Institute on China and the United States, showed Kissinger had described the media report as a piece of “fiction.”

“I visualise China as a potential partner in the construction of a world order,” Kissinger is quoted.

“Of course, if that does not succeed, we will be in a position of conflict, but my thinking is based on the need to avoid that situation. So, our problem is not to find allies around the world with which to confront China.”

Tensions between China and the US are running high.

Trump used his second address to the UN General Assembly on Tuesday to accuse Beijing of “relentless product dumping” and other unfair practices, such as forcing foreign companies to transfer proprietary technology to local Chinese joint venture partners.

Beijing has been angered by the imposition of US tariffs on Chinese imports and Washington’s proposal to sell US$330 million worth of arms to Taiwan.

Washington also decided last week to impose sanctions on a unit of the Chinese defence ministry and its director for buying advanced weapons from Russia.

In a move seen as retaliation, China rejected a request for US warship USS Wasp to make a port call in Hong Kong next month. The vessel is part of a group based in Sasebo in Japan and operating in the Indo-Pacific region.

China also recalled a navy commander from a visit to the US and has postponed a military dialogue between the two countries.


China says can’t hold US trade talks with ‘knife to the throat’ — Likely propaganda means they refuse to change trade practices

September 25, 2018

China is using all its propaganda prowess to push world media and liberal U.S outlets like The New York Times toward an even more anti-Trump stance. By stopping all negotiations until after the U.S. midterm elections in November, China is telling us they are in a public opinion war and have no interest as yet to change their unfair trade practices. They are hoping the “John Kerry Strategy” Iran is using to “wait Trump out” will work for China. But more and more we see signs of European discontent with China’s trade methods so it is impossible to say how this will end. China’s commerce minister is only a puppet in all of this. We have yet to hear from Xi Jinping himself and his appointed representative Vice Premier Liu He they been mostly aloof and silent.

— Peace and Freedom Editor’s Note


Related image
An A.P. Moller-Maersk container ship and a Hapag-Lloyd container ship at the Yangshan Deep Water Port in Shanghai. Bloomberg photo by Qilai Shen.

Below from AFP:

China said on Tuesday it was impossible to hold trade talks with the United States while Washington is imposing tariffs that are like “holding a knife to someone’s throat”.

Speaking a day after Washington activated tariffs on $200 billion in Chinese goods, vice commerce minister Wang Shouwen said China is open to negotiations but that the two sides must treat each other “equally and with respect”.

“Now that the US has adopted this type of large-scale trade restrictions, they’re holding a knife to someone’s throat. Under these circumstances, how can negotiations proceed?” Wang told a news conference.

US Treasury Secretary Steven Mnuchin had invited Chinese officials to hold new talks, but President Donald Trump’s latest salvo — and warnings that another $267 billion of goods being lined up — appear to have scuttled that effort.

Wang met US officials in Washington in August but there have been no high-level meetings between the world’s top two economies for months.

He said Tuesday the US measures “have made it impossible for the negotiations to proceed” and blamed the US for abandoning a consensus on trade that was struck in May, but was quickly followed by new US tariffs.

– Support for exporters –

The trade fight between the top two economic giants has steadily escalated through the summer, as the US levied two waves of new tariffs that have now hit about $250 billion worth of goods, roughly half of China’s exports to the United States.

Beijing has hit back with each step, hitting $110 billion worth of US goods, or nearly everything China buys from the United States.

Experts have warned the snowballing trade spat will harm both economies and even global growth, with Fitch Ratings cutting its growth estimates for China and the world for 2019.

China’s exports to the US accounted for 19 percent of all its overseas shipments last year, according to a white paper published by China’s cabinet, the State Council, on Monday.

Officials in Beijing said they planned to step up support for harmed industries and companies as they seek to offset the trade war’s effects.

Beijing’s plans to cut costs for exporters and recently announced a plan to reduce taxes exporters have to pay.

“We will actively take all types of measures to help companies resolve their difficulties,” Luo Wen, Vice Minister of Industry and Information Technology, said when asked about how companies would fare in the trade war.

China will “earnestly reduce taxes and burdens for companies and strive to optimise the business environment”, he added.

Monday’s US tariffs hit a wide swathe of products including Chinese-made voice data receivers, computer memory modules, automatic data processors, and accessories for office equipment such as copiers and banknote dispensers — instantly making widely used goods more expensive.

China’s retaliatory levies target 5,200 US goods worth $60 billion with new five to 10 percent tariffs, including big ticket items such as liquefied natural gas, lumber and electronics, as well as peppermint oil, pig hides and condoms.