Original Analysis on Current Events

FAO Global conducts analysis on hundreds of significant events a week that impact the business environment between the U.S., China, and emerging economies in Asia. While most of these assessments are for client and internal use we like to share events that may have been overlooked if you only follow the major media outlets. We send these assessments out via our newsletter.

Highlights you may have missed for the week of June 3-7, 2019.

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Beijing to blacklist ‘unreliable’ foreign entities that ‘hurt interests of Chinese firms’ – South China Morning Post 

Analysts Note: Beijing’s decision to create a public blacklist of companies is likely in direct response to the naming of Huawei on the United States’ own blacklist. The concern of using a blacklist for either country is that the methodology and due-process for choosing such action is unclear for private parties, and likely for the government administrators as well.

Being put on a “blacklist,” even notionally, could lead to economic death in that market. For any horizontal or vertical partners of the “blacklisted” firms, this could squeeze out vital business channels. Using harmfully subjective standards creates concern and instability and impacts the strategic planning process. 

If you plan to do business in China, make sure to verify your employees and assure that the processes follow current regulations. 

#regulation #China #Huawei #blacklist #usa #foreign #Chinese 

Chinese Electric Vehicle Developer Bordrin Motor Gets $361M In New Round – China Money Network 

Our Analysis: The company, founded by former Ford Engineer Huang Ximing, is entering an already oversaturated market with hundreds of electric vehicle (EV) manufacturers competing for market share. The raise of USD $361 million (RMB 2.5 billion) signifies the lack of a clear dominant leader in the field as well as belief in the sector’s growth potential.

Despite relatively high barriers to entry, Chinese companies have adopted EV solutions and government subsidized have driven the demand. The large investment into this untested company signifies an active investment and long-term belief in the viability of the sector.

Given the infancy of the company, there are significant areas to develop partnerships and supply chains with Bordrin. Additionally, U.S. companies can still find significant support in the EV sector and firms will no doubt seek to gain competitiveness and vital market share. 

#EV #China #Ford #Bordrin #ElectricVehicle #NEV 

China or the US: Here are the trade war’s winners — so far – CNBC 

Our Analysis: Periphery countries that offer similar goods and services offer attractive options for both U.S. and Chinese firms that are impacted by tariffs or retaliatory measures. Chinese companies are seeking new markets in Europe and Latin America. U.S. companies are starting to seriously consider ditching reliance on their Chinese supply chain and instead source customers and partners in Southeast and South Asia.

Countries like Vietnam, Thailand, and Indonesia offer competitive options for both high- and low-end manufacturing. They also host their own investors and growing economies. Taiwan also provides both Chinese and foreign companies options on the higher value chain that could mitigate direct tariff impacts. FAO Global has been contacted by companies from both regions seeking guidance and solutions to explore new markets as a direct result of the U.S.-China Trade war. We expect this trend to continue as political and trade disputes filter down into the broader business environment. 

However, we would caution firms from shifting all resources from China immediately due to capacity issues, market restrictions, and risk factors that are unique to each industry in these other regions and should be thoroughly assessed before any decisions are made. 

#Tradewar #US #USA #China #Chinese #Tariffs #Consulting #Europe #LatinAmerican #SupplyChain 

First FedEx, Now Ford. China Clamps Down on U.S. Companies – Bloomberg 

Analyst Note: It is no surprise Beijing is choosing to fine a high-profile U.S. company during heightened trade tensions. Although the fine was against Changan Ford Automobile Co., it is a clear blast at Ford, and more importantly, at the United States. Beijing cited no relation to the trade disputes, but this is likely in direct response to the U.S. targeting Huawei. The upcoming G20 summit in Osaka on June 28 & 29 will potentially serve as a bridge for both countries to have more casual conversations that will lead to reduced tensions. Both sides cannot afford to appear weak on trade, yet business from both the U.S. and China are hurting. We are seeing some positive movements by the Trump administration towards Huawei’s involvement in overseas ventures which may indicate a more relaxed belief than before. A trade deal is one the horizon but don’t expect sweeping change. 

#China #Business #Tariffs #tradewar #Ford #changan #jointventure #investment #automotive 

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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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