Photographs by AP/ANDY WONG
Bottles of Coke featuring images of Berkshire Hathaway Chairman and CEO Warren Buffett sit near a dispatch rider’s bike Tuesday in Beijing. China is delaying license applications from some American companies until progress is made in negotiations with U.S. trade officials, a business group said Tuesday.
Wednesday, September 12, 2018
BEIJING -- China is delaying license applications from American companies in financial services and other industries until progress is made in negotiations with U.S. trade officials, a business group said Tuesday.
The disclosure is the first public confirmation of U.S. companies' fears that their operations in China or access to its markets might be disrupted by the dispute over China's technology policy. China is running out of American imports to penalize in response to President Donald Trump's tariff increases, which has prompted worries that Chinese regulators might target operations of U.S. companies.
The license delay applies to industries that China has promised to open to foreign competitors, according to Jacob Parker, vice president of China operations for the U.S.-China Business Council. The group represents about 200 American companies that do business with China.
In meetings over the past three weeks, Cabinet-level Chinese officials have told U.S.-China Business Council representatives that they are putting off accepting applications "until the trajectory of the U.S.-China relationship improves and stabilizes," Parker said.
Chinese authorities have promised to increase foreign access to areas including banking, securities, insurance and asset management.
"There seem to be domestic political pressures that are working against the perception of U.S. companies receiving benefits" during the dispute, Parker said.
As for what an improvement in the countries' relationship might entail, Parker said Chinese officials want the Unites States to drop its tariff increases and reach a negotiated settlement.
Parker declined to identify the officials the U.S.-China Business Council spoke to. But, in a sign China wants American companies to help lobby the U.S., he said the meetings represented "unprecedented access" for his group.
China matched Trump's earlier tariff increase on $50 billion of imports but is running out of American goods for retaliation because of the lopsided trade balance. In 2017, China bought about $1 worth of American goods for every $3 of goods it exported to the United States.
Trump is poised to decide whether to raise duties on $200 billion of Chinese goods. China has issued a $60 billion list of goods for retaliation if those tariff increases are implemented.
Last week, Trump said he's willing to add tariffs on an additional $267 billion in Chinese goods if progress is not made in trade negotiations.
A Foreign Ministry spokesman, Geng Shuang, said Monday that China will "definitely take countermeasures" if the threatened U.S. tariff increases are enacted.
Economists have warned that the Chinese government might target service industries such as engineering or logistics, in which the United States runs a trade surplus with China.
Chinese commentators have suggested the government might use its multitrillion-dollar holdings of U.S. government debt as a weapon, though that would impose costs on China. State-controlled media in the past have encouraged boycotts of Japanese and South Korean products in disputes with those governments.
The government said in June that it would impose unspecified "comprehensive measures" if necessary. That left U.S. companies on edge about whether China would use its heavily regulated economy to disrupt their operations by withholding licenses or initiating tax, anti-monopoly or other investigations.
Chinese leaders reject Trump's demand to roll back official industry plans such as "Made in China 2025," which calls for state-led creation of global champions in robotics, artificial intelligence and other technologies.
The U.S., Europe and other trading partners say those plans violate China's market-opening commitments. But China's Communist Party leaders see such plans as a path to prosperity and global influence.
Chinese negotiators agreed in May to narrow their multibillion-dollar trade surplus with the United States by purchasing more American soybeans and other products. China scrapped that deal after Trump's first tariff increase was implemented July 6.
In addition to rolling back industry plans, the Trump administration wants China to reduce the privileges of state-owned companies and eliminate requirements for foreign companies to hand over technology to Chinese partners.
In their meetings with the U.S.-China Business Council, Chinese officials expressed a willingness to buy more American exports but "showed no appetite at all" to talk about industry changes, technology policy or other U.S. priorities, Parker said.
"I don't consider that to be very positive for any kind of negotiated outcome in the short term or medium term," he said.
Chinese regulators have shown their willingness to attack foreign companies in disputes with other governments.
Last year, China destroyed South Korean retailer Lotte's business in China after the company sold a golf course in South Korea to that country's government for construction of a missile-defense system opposed by Chinese leaders.
China closed most of Lotte's 99 supermarkets and other outlets in China. South Korea and China later mended relations, but Lotte gave up and sold its China operations.
EFFECT ON CHINA
Further escalation in the trade war with the U.S. could cost China 700,000 jobs, according to a report Tuesday from economists led by Haibin Zhu at JPMorgan Chase & Co.
The job losses would come if the U.S. imposed 25 percent tariffs on $200 billion in Chinese exports and China retaliated by devaluing its currency by 5 percent and adding to levies on U.S. goods. If China didn't retaliate at all, 3 million people could lose their jobs, they wrote in a research note.
The study highlights the effects of the tariff battle on the world's second-largest economy, which is grappling with a slowing pace of growth and a huge debt pile. Things may get even worse, the research note said: If the U.S. imposed 25 percent tariffs on all Chinese imports and China retaliated with the levies already announced, the measures would mean 5.5 million lost jobs and 1.3 percentage points cut off gross domestic product growth.
"If the U.S. further escalates the tariff war, the impact on China will be larger," they wrote in the note. While the overall effect remains manageable, the rising unemployment could become a policy concern, they wrote.
Apple last week filed an objection to additional tariffs the Trump administration is proposing, saying they would raise the costs of Apple Watches, AirPods and other products. That prompted Trump over the weekend to renew his call for the company to make its products in the United States.
Other Silicon Valley tech companies are raising concerns about the planned $200 billion tariffs, which they say would raise the prices of most consumer electronics.
One of those companies is Intel, which called the trade war "a game changer for the American consumer."
The Santa Clara, Calif.-based chipmaker said proposed tariffs "would result in widespread harm to the U.S. economy as they target both consumer products ... and components that are incorporated into consumer products."
In a letter to U.S. Trade Representative Robert Lighthizer last week, Intel identified examples: consumer products such as digital-processing units and transmission devices, and components such as printed circuit boards, network equipment and optical fiber cables. A 10 percent to 25 percent tariff on those products and components could cause prices of many consumer electronics to rise, Intel said.
Most of the telecommunications infrastructure that powers the Internet would also be affected, Intel said. The company warned that the tariffs would raise the costs of that equipment and affect upgrades to 5G wireless technology, which it called critical to maintaining "U.S. industrial competitiveness."
Information for this article was contributed by Joe McDonald of The Associated Press, Bryce Baschuk of Bloomberg News and Levi Sumagaysay of The Mercury News.
A Section on 09/12/2018
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