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China Intelligence Brief: July 2018

Note: This map represents many of the areas covered by our intelligence briefs. For the purposes of the brief, we cover mainland China, Taiwan, Southeast Asia and disputed territories in the South China Sea. This does map/image not reflect our organization’s stance on any specific regional issue, nor does it infer one country or region is more prominent than others.  We maintain an apolitical stance towards regional disputes and only seek to convey facts and insight through our written assessments.


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This month’s assessments include:

One Belt One Road/ Belt and Road Initiative

  • BriefBelt and Road Initiative is making progress in Africa 
  • Brief: Thailand is seeking bids for high speed rail project as part of One Belt One Road Initiative 
  • Brief: China Nepal cooperation on Railway as a part of One Belt One Road  

China Economics

  • Brief: American Meat Export is Likely to Take a Big Hit Following Chinese Tariffs 
  • Brief: Amazon & Apple’s biggest contractor in Asia accused of violating labor laws  
  • Brief: Drones delivery is fast developing in China’s E-Commerce market  

China Policy

  • BriefBRICS Summit in Johannesburg, South Africa considered successful
  • Brief: Trump’s trade war with China has started
  • Brief: China-Based US Businesses May Already Be Suffering from Ongoing Tariffs Talks  
  • BriefAustralia passes new law targeting at foreign interference  

China Security

  • Brief: Huawei’s 5G network faces challenges in Australia 
  • Brief: China conducts 5-day military drill off Zhejiang Coast
  • Brief: Growing fear of Chinese Investment in the West

Executive Summary

The month of July saw the first shots of the US-China Trade War, there was progress in the Belt and Road Initiative (BRI) in Africa, and Australia grows weary of Chinese interference.  After after a successful BRICs conference which highlighted China’s BRI initiatives  as well as potential cooperation moving forward with rail lines in Thailand and Nepal. The US-China trade dispute is heating up with United States meat, automotive, and agriculture exporters starting to feel the blow. Additionally, negative press surrounding one of Apple & Amazon’s largest contractors was in the news due to possible labor law violations. Weariness of Chinese interference and telecom giant Huawei is gaining traction following recent moves by the United States to stop using Huawei for U.S. government purposes at the advice of U.S. intelligence agencies and advocates. This is affecting Huawei’s 5G goals in the country.  Western businesses will face increasing barriers to partner with Chinese firms and expand market share in China, especially in high-tech and manufacturing industries. For more detailed assessments on these and many more, read below to see how these broad political actions will affect various industries and businesses.


China’s One Belt One Road/Belt and Road Initiative

Belt and Road Initiative is making progress in Africa 

SUMMARY

On July 25th, Chinese President Xi Jinping visited Johannesburg, South Africa for the 10th BRICS (Brazil, Russia, India, China, and South Africa) summit. During his visit, Xi signed Rwanda and Senegal on to Belt and Road Initiative (BRI) projects, though additional details are still forthcoming. Additionally, some Chinese analysts predicted that a visit to Senegal will extend the Belt and Road to the Atlantic Coast. China has already been active in investing in Senegal, working on projects such as the Foundiougne Bridge and the Thies-Touba Highway, led by the China International Water & Electric Corp. The goal of such investment was to promote tourism, development, and improve trade infrastructure. Rwanda agreed to 15 BRI agreements which included projects focused on visa exemptions for diplomatic and service passport holders, cooperation on geological surveys, and concessional loans to fund key road projects. China’s lending to Africa rose from $100 million in 2000 to $12 billion in 2015. Moreover, China also plays a major role in building infrastructures in Africa. By 2013, there were a total 322 large-scale projects for infrastructural development began in Africa, 12% of these projects were taken by Chinese companies. 37% of said projects were shared by European and American companies.

FAO ASSESSMENT

In order to take advantage of the opportunities associated with the upcoming China-sponsored construction projects, American small and medium companies should consider entering joint-ventures with Chinese companies, especially construction companies. Additionally, the infrastructure projects planned for Senegal and Rwanda may make it easier for international trade and foreign investment to occur, potentially providing a window of opportunity for western firms to enter those markets. There are opportunities to get involved in the support services and downstream supply lines to many of these projects as Chinese ventures are often in need of Western expertise.

Related Links

  1. South China Morning Post: China and Rwanda to seal belt and road deals on Xi Jinping’s strategic influence tour of Africa
  2. Bloomberg: Belt and Road Initiative Bolsters China’s Africa Ties
  3. Asia Times: With Senegal deals, China’s Belt and Road reaches across Africa
  4. Russian Times: ‘West wants only quick buck from Africa, while China invests for win-win cooperation’
  5. Global Times: China, Senegal sign Belt and Road cooperation document
  6. The Washington Post: Xi Jinping is visiting Africa this week. Here’s why China is such a popular development partner.

 

Thailand is seeking bids for high speed rail project as part of One Belt One Road Initiative 

SUMMARY

In an interview on June 24, Thailand Minister of Transport Arkhom Termpittayapaisith announced that Thailand would be seeking $5.5 billion-dollar bids for a high-speed rail project by end of 2018. The winning bidder would build the 157-mile route connecting central and northeastern Thailand with their neighbor to the east, Laos. It is the first project of a what will ultimately be a 220-mile track from Bangkok, Thailand, to Nong Khai, a city just inside Thailand’s border near Laos. Thailand is not expected rely solely on Chinese funds and is seeking out private investment on construction and operations. This project falls under the bigger China’s One Belt One Road Initiative (BRI), a program that aims to promote development between Eurasian countries. Over the last 4 years, Thailand’s military government has placed an emphasis on infrastructure projects in an effort to reduce transport costs and encourage trade.

FAO GLOBAL ASSESSMENT

As Thailand continues to upgrade its public transportation system, there will be a variety of investing opportunities for both domestic and foreign construction firms. American infrastructure and energy enterprises interested in investing in Thailand should consider cooperating with Thai companies like energy giant PTT Public Company Limited, urban railway operator BTS Group Holdings, and construction company CH. Karnchang Public Company Limited in-order-to avoid potential government red tape.

Related Links

  1. Belt and Road Portal- 中泰铁路建设将全面启动 
  2. Bloomberg- Bids Sought for $5.5 Billion Thailand to China High-Speed Rail 
  3. China Daily- Belt, Road enhances regional benefit of Beijing-Bangkok ties 
  4. Reuters- Thailand Eyes Private Investors’ Help for $40 Billion Rail Upgrade 
  5. Railway Technology- Thailand seeks bids for $40bn rail network upgrade 

 

China Nepal cooperation on Railway as a part of One Belt One Road  

SUMMARY

From June 19th to the 24th, Nepal’s Prime Minister K.P. Sharma Oli met with Chinese President Xi Jinping and Premier Li Keqiang during Oli’s visit in Beijing to discuss Belt and Road Initiatives (BRI). Both sides expressed a willingness to work together to build a railway network across the Himalayan Mountains and increase economic ties through BRI (previously known as the One Belt One Road (OBOR) Initiative) transportation and communication projects. The BRI is a Chinese initiative aimed at initiating economic and development programs between Eurasian, Asian, and European countries, but has expanded to include those in South America and Africa as well. Li stated he also hoped the two countries could begin free trade agreement negotiations soon. Nepal has proven itself an important trade partner to China and in 2017, trade between the two countries reached $9.9 billion. 

FAO Global Assessment

The projects lined up for Nepal could make it a promising destination for private investors. Nepal has a cheap labor force, increasing political stability, extensive tax benefits for foreign investors, and a series of policies that aim to attract foreign investments. As Nepal is eager to improve its infrastructure, opportunities are expected to spring up in for construction, energy, and infrastructure sectors in the coming months and years.  

Related Links

  1. Belt & Road Portal- 中尼构建跨喜马拉雅立体化网络 跨境铁路迈出实质性步伐 
  2. Xinhua – China, Nepal pledge to enhance cooperation 
  3. The Japan Times- China plans to build railway into Nepal 
  4. Money Control- China, Nepal to build Tibet-Kathmandu railway link 


China Economics

American Meat Export is Likely to Take a Big Hit Following Chinese Tariffs 

SUMMARY 

Following the latest round of American tariffs on Chinese goods July 5, Beijing responded with retaliatory tariffs imposed on July 6, adding a 25% duty targeting American soybeans, meat, and vehicles. US farm produce, especially beef and high-end steaks, is expected to take a significant hit as exports to China becomes increasingly more expensive. The duty rate on US beef to China is being tripled from 12% to 37%, just as US beef was beginning to reemerge as a strong player in Chinese markets. The impact of this move has one of China’s biggest meat importers, Suzhou Huadong Foods, stating it will dramatically reduce purchases of US meat due to the added costs from the tariffs – equaling roughly US $75,000 per dozen crates of product. Suzhou Huadong general manager, Gong Peng, said they cannot afford to forward to costs to restaurants or supermarkets, and will just have to seek cheaper suppliers. Additionally, details have emerged that China also plans to reduce the 7.2% duty on Australian and New Zealand beef to zero in the next four to 11 years. 

FAO GLOBAL ASSESSMENT 

Assuming Chinese meat importers are not willing to transfer the new additional costs onto their consumers, American beef exporting volume is likely to decline, especially in states like Montana in which beef serves as a primary export. As a result, the US’s growth in the fastest growing beef markets may subside and beef exporters may lose business. This likely loss can be cushioned by investing in beef processing centers outside of the US for firms with the necessary resources to do so as this would be less costly than facing Chinese tariffs. Many American farmers have been considering changing what crops they grow and animals they raise because of the ongoing trade dispute. Rural areas in America’s bread basket have already taken major economic hits and investment is suffering, which, while unfortunate, may provide real estate investors on a budget a variety of interesting opportunities. 

Related Links 

  1. Bloomberg – German Cars and American Steak: Early Trade War Victims Emerge 
  2. South China Morning Post – High steaks: Chinese importers stuck with Californian meat typifies firms in tariffs crossfire 
  3. Beef Magazine – With import duty rate tripled, U.S. beef faces even tougher challenge in China 
  4. CNBC – Here are the products China and the US are targeting in their trade war 

 

Amazon & Apple’s biggest contractor in Asia accused of violating labor laws  

SUMMARY 

In a report released on June 10, labor rights NGO China Labor Watch and British newspaper, The Observer, criticized Foxconn, the world’s largest electronics manufacturer, for mistreating workers in a factory located in Hengyang, China. Headquartered in Taiwan, Foxconn owns thousands of factories and manufactures products for American tech giants like Apple and Amazon. An investigation alleged that Foxconn illegally hired and underpaid more than 40% of workers, who receive no regular sick leave, holiday pay, and have no job security. Foxconn has struggled with similar labor rights scandals for years. In 2010, a number of workers committed suicide as a result of long working hours and high pressure to perform from management. Two years ago, Foxconn was accused of illegally hiring underage workers. Following the scandal in 2016, Apple CEO Tim Cook brought a team to Shenzhen to investigate and conduct report on suicide issues within Foxconn. Foxconn adjusted its working schedule and now provides counseling services for its employees.  

FAO GLOBAL ASSESSMENT 

Companies with overseas production should learn from Foxconn’s mistakes and reduce the potential for legal and reputation scandals by strengthening their labor audits and, when considering employing a local management firm, conduct extensive research into the company’s history and reputation. They can also ensure that their factories provide sufficient services for workers’ mental and physical health. 

Related Links 

  1. The New York Times- Foxconn Is Under Scrutiny for Worker Conditions. It’s Not the First Time. 
  2. The New York Times- Electronics Maker Promises Review After Suicides 
  3. The Guardian- Workers not paid legally by Amazon contractor in China 
  4. China Labor Watch- Amazon Profits from Secretly Oppressing its Supplier’s Workers: An Investigative Report on Hengyang Foxconn 

 

Drones delivery is fast developing in China’s E-Commerce market  

SUMMARY 

On June 18, Jingdong, or JD.com, a Chinese e-commerce company, began testing their prototype drone delivery service, an initiative to reduce transportation costs and delivery times for more remote areas. On the same day, Google announced that it would be investing $550 million to develop new retail solutions using cutting edge AI and logistics technology in partnership with JD.com. In the United States, the Department of Transportation announced plans to partner with American companies such as Intel, a semiconductor manufacturer, and Uber, a ride sharing company, to test commercial drones. Drone delivery enables e-commerce businesses to largely reduce delivery time and reach for customers in remote places. It also helps to narrow the gap between urban and rural grounds in China. Although it is but a small portion of most of e-commerce business, there is a growing interest and potential for technology and courier companies to upgrade the way delivery logistics are conducted. 

FAO GLOBAL ASSESSMENT 

Varying government regulations, data management issues, network infrastructure integrity, and the ever-changing nature of the e-commerce market will continue to poise challenges for firms looking to master aerial deliveries. Due to the evolving nature of the United States’ drone legislation, firms pursuing this new tech should consider forming partnerships with government agencies, like Intel and Uber have, in order to gain advanced insight into what regulations are on the horizon.  

Related Links 

  1. Bloomberg- China Is on the Fast Track to Drone Deliveries 
  2. SF Gate- Google to invest $550 million in China e-commerce site JD 
  3. Asian Times- China’s Alibaba and JD.com invest billions in drones and robots to upgrade logistics backbone of e-commerce empires 
  4. Tech Church- Google makes $550M strategic investment in Chinese e-commerce firm JD.com 


China Policy

BRICS Summit in Johannesburg, South Africa considered successful

SUMMARY

On Wednesday, July 25, 2018, South African President Cyril Ramaphosa opened the 10th BRICS (Brazil, Russia, Indian, China, and South Africa) summit in Johannesburg, South Africa. A number of major agreements concluded the summit, including:

  1. BRICS countries will together embark upon the “Fourth Industrial Revolution,” an inter-country initiative aimed at promoting technological advances, such as nanotechnology, biotechnology, robotics, and artificial intelligence.
  2. BRICS countries adopted the Johannesburg Declaration, confirming the principles of democracy, inclusiveness, and fights against unilateralism and protectionism.

As for bilateral agreements, Chinese president Xi Jinping promised to invest $14.7 billion in South Africa, with $2.8 directed to support Eskom, a state utility company recently struggling with financial issues.

FAO GLOBAL ASSESSMENTS

For U.S. firms already involved or wanting to get involved in BRICS countries, consideration needs to be taken for how the relations between these five countries may evolve and how those changes might impact their business needs. While the impact of the Fourth Industrial Revolution has yet to be felt, tech companies should be ready to jump on opportunities as they come. Most large projects will see heavy involvement by Chinese state owned companies, but many smaller and lateral projects will hold more opportunities for US businesses to be directly involved.

SOURCES

  1. Xinhua: Int’l community eyes outcomes of BRICS Summit in Johannesburg
  2. CNBC: The world’s major emerging economies could end up benefiting from global trade tensions
  3. The BRICS Post: BRICS agree to joint work on ‘Fourth Revolution’, cryptocurrencies
  4. Brookings Institute: Africa in the news: BRICS summit aftermath, South Sudan power-sharing agreement, and Zimbabwe election prep
  5. Southcn.com: BRICS countries cooperation and three outcomes (‘金砖国家合作再添三大成果’)

 

Trump’s trade war with China has started

SUMMARY

United States President Donald Trump’s first round of tariff on $34 billion worth of Chinese imports will take effect on Friday, July 6, 2018. The first 25% tariff will impact a variety of products including farm machinery, industrial products, medical devices, automobiles, and aircraft parts. Chinese Commerce Ministry spokesman Gao Feng said that 59% of the $34 billion worth of Chinese exports to the US would be subject to the Friday tariffs. Chinese government leaders said China will fight back with tariffs on an equal amount of goods including pork, poultry, soybeans and corn as soon as the US duties on Chinese goods are active. American farmers will likely be the biggest victims of this trade war and risk losing access to a huge market in China. Ford has not yet announced any plans to raise its prices for Ford or Lincoln automobiles imported to China. Moreover, a Chinese court this week temporarily banded Micron Technology Inc from selling its main semiconductor products in China. There is no specific date announced when the court will lift the ban.

FAO GLOBAL ASSESSMENT

There are no signs that US administration will lift the tariffs on Chinese goods. One observation was that despite the disputes, the US stocks gained while Chinese stocks lost. Some American companies are pulling back investment in equipment and new jobs due to the uncertainties surrounding the trade policy with China. The list avoids direct tariffs on final goods, such as cellphones and shoes. If an American clothing company wanted to avoid the major effects of the proposed tariffs on their exports to China, one option, should they have the resources, is to move production to China. Moreover, business base on importing Chinese high-end cellphones (such as Xiaomi and Huawei) still can make profits.

Related Links

  1. The Washington Post: Trump’s trade war with China is finally here — and it won’t be pretty, analysts say
  2. The Washington Post: A trade war with China could hit these communities hardest
  3. Reuters: China says U.S. ‘opening fire’ on world with tariffs, vows to respond
  4. The Street: China Tariffs, Oil Prices, ZTE, Praxair and Starbucks – 5 Things You Must Know
  5. Bloomberg: China’s Trade Weapons of Mass Destruction Are Missing
  6. Reuters: Ford says not planning China price hikes despite new tariffs
  7. Reuters: Trade war could hurt these economies far more than U.S., China

 

China-Based US Businesses May Already Be Suffering from Ongoing Tariffs Talks  

SUMMARY 

The Friday, July 5 deadline of US president Donald Trump’s $34 billion USD tariffs on Chinese goods already started causing trouble for American businesses in China. Smaller firms have been struggling with new obstacles in customs, regulations, inspections, and licensing applications. The increased hurdles at the border are causing shipping delays and, as a result, are hurting sales. Jake Parker, Vice President of Chinese operations at the US-China Business Council, has pointed to tariffs as a potential cause for increasing regulations and difficulties from China on US companies. No actual regulatory issuance have been implemented for Chinese inspectors, but officials say that the recent ramp up of trouble can be related to the US $34 billion in tariffs soon to take effect. 

FAO Global Assessment

Such stoppages in shipping can be very costly to food or other expiration-prone businesses, as timely export is crucial for foodstuffs, and ultimately sales. Smaller businesses may need to increase the prices of its goods or, should they have the resources, can move some of its operation to China to avoid potential tariffs. Additionally, American firms can consider entering joint ventures with Chinese companies, as that can help soften some of the scrutiny from Chinese customs agents. For many firms, it would be prudent to start seeking new markets in South America, Southeast Asia, or even South Asia in order to avoid being in the direct line of fire of US-China tariffs.

Related Links 

  1. Bloomberg – Trade War Threat Gets Real as Trump Confirms China Tariffs 
  2. Business Insider – China may be disrupting US companies because of Trump’s tariffs threats 
  3. Washington Post – U.S. companies in China thinkg the government is already messing with them 
  4. South China Morning Post – Trump may pull the trigger on tariffs but China will pick its battles, sources say 

 

Australia passes new law targeting at foreign interference  

Summary 

On June 28, in the middle of disputes with Chinese telecom giant Huawei on a 5G network, Australia passed a law to prevent foreign interference in the country’s politics and domestic affairs. The new legislation adds 38 new crimes related to foreign interference to the register, including stealing state secrets on behalf of a foreign government, and expands the definition of what can be considered espionage. It also requires lobbyists for foreign governments to register on a public list. The punishment for some of the offenses outline in the regulations is up to 20 years in prison. A separate law is currently being considered outlawing political donations from foreign governments. Some experts believe this may aggravate Australia’s already strained relations with their biggest trading partner, China, one already under considerable stress due to amassing accusations of spying via Chinese companies. Huawei has been the largest corporate sponsor of overseas travel for Australian federal government officials since 2010. China’s investment in Australian government officials raises concerns about Beijing’s influence on Australian political decisions. China has already retaliated by cancelling travel visas for Australian business leaders.  

FAO Global Assessment 

Beijing’s reputation for taking advantage of Chinese business presence abroad is creating a window of opportunity for competing western firms. Tech companies from North American countries, where operating costs are typically higher than their counterparts in China, now have a secure advantage when bidding on projects overseas. Partnering with a firm originating from an ally country poses a far less significant threat of illicit infiltration. Western companies may consider refocusing on markets where Chinese companies have been accused of being security risks in high-tech fields.

Related Links

  1. New York Times- Australian Law Targets Foreign Interference. China Is Not Pleased. 
  2. New York Times- China’s Huawei Leads as Corporate Sponsor of Australian Politicians’ Travel 
  3. Business Insider- Australia passed sweeping foreign interference laws not-so-subtly targeted at China 
  4. South China Morning Post- Australia to pass foreign interference laws with an eye on China 
  5. Xinhua net- Australia rushes through stricter foreign interference legislation 
  6. BBC News- Australia passes foreign interference laws amid China tension 

China Security

Huawei’s 5G network faces challenges in Australia 

Summary 

As of early July 2018, the Australian government is preparing to officially prohibit Chinese telecommunication giant Huawei from participating in its 5G mobile broadband project, citing national security concerns. For years, Western intelligence agencies have brought up concerns that Huawei could use their tech for espionage on behalf of Beijing, although there is no publicly available evidence to back up this claim. Huawei-Australia chairman John Lord stated that the decision was “ill-informed and not based on facts.” China Daily, a Chinese newspaper, criticized Australia’s action, claiming it was negatively affecting the Sino-Canberra relations. Huawei is currently suffering from a serious reputation crisis due to growing national security fears across the globe. The United States government has recently made efforts to lock Huawei out of the American market, appealing to Google’s parent company, Alphabet Inc., to cut ties with the Chinese tech giant.  

FAO Global Assessment

The negative reputation that proceeds Chinese telecommunications firms as they look to sign deals with foreign governments, especially in the West, provides American-headquartered tech firms a unique opportunity. Without the competition from their Chinese counterparts, US firms will have a smaller pool of rivals for public and private contracts in western countries. However, one area to be concerned about is the potential for reprisal against western firms who are attempting to enter the Chinese market.

Related Links 

  1. BBC China- 澳洲封杀华为:国家安全与一带一路的考量 
  2. New York Times- Huawei’s New Front in the Global Technology Cold War: Australia 
  3. Reuters- China’s Huawei rebuts Australian security concerns amid Sino-Canberra tensions 
  4. The Wall Street Journal- Why 5G Leader Huawei Could Get Shut Out of a Major Rollout 
  5. China Daily- Australia’s arrogance puts bilateral ties at risk 

 

China conducts 5-day military drill off Zhejiang Coast 

SUMMARY 

On July 18, China launched a 5-day military drill in the East China Sea expected to continue through July 23 showcasing capabilities that reinforce the military’s ability to retake Taiwan. The Zhejiang Maritime Safety Administration cautioned merchant and civilian vessels transiting between Zhoushan to Wenzhou along the east coast of Zhejiang Province on July 16 to avoid the area, which is roughly the size of Taiwan.  In mid-December 2017, the Chinese military sent a flurry of ‘encirclement’ patrols around Taiwan. A month later, Taiwan’s Defense Ministry responded to military movements involving China’s first aircraft carrier passing through the Taiwan strait. Historically, Beijing has used large scale military operations to send a message that Taiwan is still very much a part of China. The drills primarily speak to a growing separatist movement in Taiwan that seek to move toward independence, a situation Chinese leadership have vowed to stop at all costs. In conspicuous timing, Taiwan activated 15 new Apache attack helicopters as part of the 601st Brigade based out of Longtan Airbase in Northern Taiwan. It was not clear if this announcement was in direct response to the announced China drills a day earlier. 

FAO GLOBAL ASSESSMENT 

Military maneuvers targeting Taiwan are not new or unique and it is unlikely these exercises signal and immediate prelude to war. However, merchant vessels with pre-planned routes transiting along the coast will have to delay shipments or spend thousands of dollars more in personnel costs, fuel, maintenance, delayed offloading, and port late fees. Geo politically, the Taiwan response is expected to be vocal but not substantive militarily. The cost of combat runs too high economically and politically for both countries, but one can expect to see light posturing from Taiwan, and potentially the United States. 

Related Links 

  1. Newsweek – China Trains for Taiwan Invasion 
  2. Focus Taiwan – China’s latest military drill aimed at rattling U.S., Japan: expert 
  3. Global Times – PLA drill in East China Sea ‘tailored for Taiwan separatists’ 
  4. Taiwan News – Taiwan’s defense ministry responds to threat from China’s aircraft carrier 
  5. Newsweek – Taiwan Deploys 15 more Helicopters Amid Tensions with China 

 

Growing fear of Chinese Investment in the West

Summary

Following increasing trade tensions between China and the United States, more countries have raised national security concerns surrounding Chinese foreign investment. After the U.S. blocked several deals with China, Germany, Canada, and the U.K. all raised concerns on proposed Chinese investment in their own countries. On June 20, the British government delayed a merger of an aircraft manufacturers, Northern Aerospace, by its Chinese owned competitor, Gardner Aerospace Holdings. Similarly, an offer of €772 million by Chinese auto part maker, Ningbo Jifeng, to purchase German automotive supplier Grammer in late June 2018 has received widespread criticisms with an agreement yet to be reached. In late May, Canada blocked another acquisition, this time worth $1 billion, of the Aecon Group, a Canadian construction company, by China Communications Construction Company, citing national security concerns. Officials are fearing that China is acquiring companies purely to obtain access to advanced technology critical to national security.

FAO Global Assessment

Western countries have become increasingly cautious of China’s ambitions to lead in the tech and manufacturing sectors in recent years. Regulators in Europe and the U.S. are restricting their foreign investment laws and oversights on Chinese merger & acquisitions. They might pass new laws and put higher scrutiny on Chinese purchases. However, joint ventures are an important way for American and European companies to expand their businesses in Chinese market. Those businesses will face increasing barriers to partner with Chinese firms and expand market share in China, especially in high-tech and manufacturing industries.

Related Links

  1. New York Times- Britain Holds Up China Aerospace Deal Over National Security
  2. New York Times- Canada Blocks Chinese Takeover on Security Concerns
  3. SPIEGEL- Chinese Expansion Has Germany on the Defensive
  4. Financial Times- Chinese auto supplier in €772m takeover bid for German rival

Primary Contributors

These briefs were put together through open-source analysis, insight from interviews, conference attendance in the US and China, and on-ground experience in the US Government, International Think-Tanks, and Conducting business in China and the United States.

Senior Analyst – Brandon Hughes

Brandon Hughes is the founder of FAO Global, a former Senior Regional Analyst-Asia for Planet Risk. He has previously worked with the U.S. Army, the Carnegie-Tsinghua Center for Global Policy, and Asia Society. He is a combat veteran and has conducted research on a wide variety of regional conflicts and foreign affairs in countries as diverse as China, Myanmar, Afghanistan, and Kosovo. Brandon holds a L.L.M in International Relations from Tsinghua University, Beijing and a Bachelors in International Business and has studied at Johns Hopkins University, Beijing Language & Culture University, and Rangsit University, Thailand. He has extensive overseas experience focused on international business, international security and U.S.- China relations.

Asia Policy Analyst – Adriana Ray

Adriana Ray is an Asia Policy Analyst at FAO Global where she researches and writes on Economic, Security, and Political issues in the region. Adriana speaks Mandarin Chinese and is very active in policy research and analysis. Adriana is currently a graduate student at Georgetown University’s School of Foreign Service where she is pursuing a Masters in International Security. She is also an alum of Tsinghua University and Furman University.

International Business Associate- Dillon Billingham

Dillon Billingham is currently studying at University of South Carolina’s Darla Moore School of Business, majoring in international business and finance while minoring in Chinese studies with a data analytics concentration. His focus is on the promotion of US-China business through mutually beneficial relationships.

International Policy Associate- Ziqing Zhang

Ziqing “Sunny” Zhang is an international policy intern and a Masters student in the Elliott School of International Affairs at George Washington where she is majoring in Asian Studies with a concentration in international development and focusing on East Asia and development in Southeast Asia. A native Chinese speaker, Ziqing is fluent in both Mandarin and Cantonese as well as English. She has previously interned at the U.S.-China Education Trust, the Japan-American Society of Washington, DC, and is an alum of American University in Washington, DC.

International Policy Associate- Weiting Li

Weiting Li is an international policy intern at FAO Global, where she focuses on international trade, technology, and environmental policies. Weiting is currently a second year graduate student pursuing dual master’s degrees in public policy at Georgetown University and Business Administration at University of Geneva. Prior to Georgetown, she was the assistant for government relations and working groups at European Chamber of Commerce in China. She graduated from Gettysburg College with a major in Sociology and a minor in Business. 


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