FAO Global publishes “The Weekend Brief,” a weekly newsletter highlighting the latest current events impacting the business climate between the United States, China, and Emerging Markets around the world. FAO Global promotes global strategy development through market intelligence and expert political assessments.

“The Weekend Brief” covers trends in geopolitics, aviation, AI/Blockchain, automotive, and investment opportunities & risks in the above markets.

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Smart money pulls out of China’s equity market via Hong Kong as hopes of trade war’s resolution fade to gloom – South China Morning Post 

Analyst’s Take: Over the last year, Chinese investors have significantly reduced their ventures in the United States. Part of this is due to capital outflow restrictions, but a much larger part is likely due to the declining investment climate. U.S. officials have indicated that Chinese investment activity is more heavily scrutinized due to increasing national security concerns. The increasing use of the Committee on Foreign Investment in the United States (CFIUS) and the passing of the Foreign Investment Risk Review Modernization Act (FIRRMA) to intervene in Chinese investments is a further indicator of a declining environment. Chinese investors, even in benign industries, have indicated concern of being swept up by seemingly anti-China sentiment from U.S. authorities. While this may or may not be the case for each instance, there is a growing perception in China that smaller companies and investments will be targeted if they attempt to enter the U.S. market. 

U.S. Readies New Tariffs as Trump Says He’ll Meet China’s Xi – Bloomberg 

Analyst’s Take: It appears as if though we are in the end-game of the U.S.-China trade war. Monday’s announcement essentially adds tariffs to the rest of China’s exports to the United States. While many assume this is a last-minute tactic for positioning in trade negotiations (the tariffs wouldn’t take effect until June), this may have unintended consequences for both China and the United States. FAO Global has spoken with business owners who are already sourcing new manufacturing supply chains outside of China who are concerned about long term impacts and the diversifying their risk. Even if a deal is signed, it may take a few months to assess how the U.S.-China relationship plays out. 

Chinese companies moving to Vietnam keep quiet on trade war to avoid wrath of authorities and staff – South China Morning Post 

Analyst’s Take: Chinese companies have begun to move their supply chains and business models outside of mainland China even before the U.S.-China trade war. Manufacturers have move operations to Southeast Asia to take advantage of lower labor costs and using different countries to export products to the United States can eliminate some tariff concerns. However, businesses that move to specifically avoid authorities risk public and political pressure to return jobs China. This includes vocalizing concerns over the trade war. Likewise, U.S. businesses in China are mum on criticizing specific Chinese policy that risk exposing their firms to additional scrutiny. 

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Analyst Bio’s

Brandon Hughes: Brandon is the Senior Analyst and Founder of FAO Global. He served as a government adviser and led military teams in Afghanistan, supported peace keeping operations in Europe, led corporate security teams in Las Vegas, and conducted strategic U.S.-China focused research for the prestigious Carnegie Endowment & Asia Society. Brandon leads FAO Global to conduct cross-border international business ventures between the U.S., China, and emerging markets in Asia.

Edits by Kelli Sullivan.

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