U.S.-China Trade News
China Pushes Foreign Investment Law Forward
Summary: On January 16, lawmakers in China announced an previously unscheduled session of the national legislature executive committee to take place January 29-30 in order to move forward a much sought after update to China’s foreign investment laws. This type of revision and update has long been sought by foreign businesses and has been one part of a multi-pronged complaint from the United States towards Chinese policy.
Why It Matters: The acceleration of this new law is likely tied to the slow-down of the Chinese economy to include rising unemployment, declining auto sales, and a slowing real estate market. Additionally, this may be a subtle concession to U.S. demands in hopes of achieving a trade compromise.
Opportunities & Risk for Business: If this law is not substantive in addressing western business concerns, primarily around intelligence property and alleged forced technology transfers, western businesses may still hold off long-term projects until details are sorted out. Additionally, this may not be enough to appease U.S. demands to end tariffs on Chinese made goods.
Sources: Wall Street Journal Xinhua
Beijing retaliates against Ottawa bid for international support against China’s telecom giant Huawei
Summary: On January 17, Chinese Ambassador to Canada Lu Shaye said there would be “repercussions” if Canada bans Chinese telecom giant Huawei from participating in the country’s 5G network. Tensions between Beijing and Ottowa have been at their highest following the arrest of Huawei CFO Meng Wanzhou and subsequent detentions of Canadian citizens in China.
Why it is important: Increased scrutiny and higher barriers to entry for Canadian firms is an indicator of Beijing’s attitude towards efforts in prohibiting Chinese companies’ international market expansion. Chinese experts believe Beijing may set higher market entry barriers to Canadian firms and increase scrutiny for existing businesses.
Opportunity & Risk for Business: U.S. companies need to be aware of the geopolitical influence on its market entry to China if similar situation happens between China and the U.S. If further bans against Huawei occur on pressure from the U.S., China is likely to retaliate against U.S. telecommunication companies operating in China.
Source: South China Morning Post, Sina
China Business News
Export-import jobs decrease as US-China trade war continues
Summary: On January 18, The China Institute for Employment Research released a survey that shows the labor demand for Chinese workers in the export-import area decreased by 40 percent in the last quarter of 2018. Before the 90-day trade war truce scheduled in the beginning of March, China is taking a toll on its employment because of the high tariffs during the trade.
Why is this important? RChina’s economy may also face low growth and more job lay-offs in export-import areas because of the current U.S. and Chinese tariffs.
Opportunity & Risk for Business: China has advantages in low-skilled cheap labor. During the economy slowdown and job cutoffs, with more people looking for smaller number of jobs, companies may find higher-skilled labor with relatively low cost. Companies with manufacturing operations in China may also consider other options in Southeast Asia during the trade war tension.
Source: Reuters, South China Morning Post, China Institute for Employment Research
China’s Belt & Road Initiative News
Nepal government Cuts Belt and Road Initiative Projects from 35 to 9 at Beijing’s Request
Summary: On January 18, Nepalese Prime Minister Khadga Prasad Oli has lowered the number of Belt and Road Initiative (BRI) projects from 35 to 9 because of slow progress in negotiation since last year. Oli submitted a list of 35 projects initially but the Chinese has advised Nepali officials to have some priorities. After negotiation, there are 9 projects to be funded, including 3 road projects, 2 hydroelectricity projects, 1 cross-border railway, and 1 cross-border transmission line.
Why is this important: Nepal has been struggling in balancing its relations with China and India. This event indicates that Nepal didn’t have a success in carrying out negotiation to fund all its BRI projects with Beijing.
Opportunity & Risk for Business: BRI is the signature foreign policy initiative under the leadership of Chinese President Xi Jingping. Emerging markets has a high volatility which mean more risk. Companies who hope to move to Nepal or Southeast Asia need to be aware of the country’s relations with China. Before making the investment, companies across all industries must be aware of the political and market condition of the target country.
Source: Kathmandupost, Chinadaily
Southeast Asia News
UK Seeks Military bases in Southeast Asia
Summary: As of December 30, 2018, Defense Secretary Gavin Williamson says the UK is crafting plans for new military base in Southeast Asia as part of an effort to increase Britain’s role as “a true global player” after Brexit.
Why is this important: It marks a strategy change from 1968 East of Suez strategy where the UK withdrew from military bases in Southeast Asia.
Opportunity & Risk for Business: There would be higher demand for suppliers to UK’s new military base and existing U.S. military bases in Southeast Asia. U.S. oil companies and defense companies can research on promising investment opportunities in Southeast Asia because of the increased demand and stronger partnerships with defense partners.
Analyst Bio’s
Tong Wu: Tong Wu is a volunteer contributor and Georgetown graduate student who writes on U.S.-China business issues. She has experience as a field study consultant with PwC, communications & marketing at Georgetown University, and has previously worked as a freelance writer.
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.
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