China faces Trump 2.0, Plus new US outbound investment curbs set for January 2025 -- China Boss News 11.08.24
Newsletter -- This post is free to read, please share!
What happened
Chinese strategists told Reuters after Trump's electoral victory last week that another Trump presidency would mean more confrontation with China, particularly on trade.
They said China worries about the high tariffs on Chinese imports Trump proposed during campaign speeches and anticipates more decoupling in technologies and supply chains, which may worsen China's economy.
But, the analysts said, not all was doom and gloom.
While Trump’s stance on Taiwan remains unclear, they were optimistic that his tendency towards isolationism would bring new opportunities in a "global power vacuum."
The Taiwan question might even become a bargaining chip in trade negotiations, they said.
Meanwhile, foreign businesses immediately got to work on reducing their China sourcing.
Steve Madden, the famous shoe brand, announced plans to reduce its imports from China by up to 45% in response to potential tariffs from President-elect Donald Trump.
CEO Edward Rosenfeld told shareholders that the company has been preparing for this situation by exploring factories in other countries, and Trump's election triggered its Plan B.
"As of yesterday morning, we are putting that plan into motion. And you should expect to see the percentage of goods that we sourced from China to begin to come down more rapidly going forward," he said in an earnings call on Thursday.
Currently, over 70% of goods sold in the US by Steve Madden are sourced from China, putting nearly half of its business at risk of tariffs, CNBC staff said.
Why it matters
Cold reception in Moscow
Last week, Trump's "stunning political resurrection" was met in Moscow with official caution.
Kremlin spokesman Dmitry Peskov told reporters that while Trump expressed a desire to end the Ukraine war during his campaign, it remains to be seen if this will materialize.
Relations between Russia and the US have been strained, with Peskov unsure if President Vladimir Putin will congratulate Trump on his win.
Perhaps Putin - as the Kremlin would like you to think - is truly balking at groveling to the West after its sanctions turned Russia into a pariah state.
But an equally plausible reason for the “snub,” feigned or not, could be that he wants the President-elect to come to him, and is feeling underappreciated.
After all, some very smart Russia watchers think Putin's band of merry ex-KGB men are still hard at running ops to disrupt the West.
One that this China nerd follows even suggests they helped orchestrate Hamas' October 7th terrorist attacks on Israel to thin the Biden administration's influence in the region.
If true, did they also anticipate their Israel-Hamas War would crater support among Arab Americans and young people demanding the US end the Israeli killing of Palestinians in the critical swing state of Michigan?
It stands to reason. Such an outcome is certainly imaginable among blue-leaning immigrants and student liberals in the Great State of Michigan and elsewhere, especially if TikTok "handled" it.
This is where Moscow and Beijing's collaboration on disinformation to counter the West is almost certainly a factor.
The "TikTok 'handled it'" link two paragraphs back will take you to a New York Times exposé on how the platform’s coverage of the Israel-Hamas War found its way into the Senate’s national security discussions about Chinese control.
But back to Moscow and its repositioning of 2024 election InfoOps "just in time" to create discord around the Harris-Walz campaign using fabricated videos.
Microsoft's Threat Analysis Center released a report discussing the activity, which followed similiar previous reports on China and Iran.
Then, there were those fake bomb threats coming from Russia against polling stations in key states, especially in their "blue-er" cities.
But enough of that.
What really matters is that, for Kyiv, whose sovereignty—like Taiwan's—could soon be on the chopping block, the only information it has to operate on comes from a May 2023 CNN Town Hall during which then-former President Trump said, he "could end the war in one day if re-elected."
Trump did not offer specifics on how he could manage that, but he has criticized sending US military aid to Ukraine to deter Russian forces.
And that suggests Ukraine will lose the crucial military support it needs to defend itself on the battlefield and preserve its freedom.
Should the worst occur and Ukraine be forced to surrender to Russia, China, under Xi Jinping, would find more reason to set upon Taiwan.
China and Trump’s transactional cartwheels
While Trump has moderate views of Russia, his position on China is more mixed.
He has threatened to escalate tariffs on Chinese goods, further escalating trade tensions, but he has also praised Chinese President Xi Jinping for his "iron fist."
Trump's tendency to appoint loyalists in critical national security positions is also a concern, as it could lead to sweeping changes in policies and federal institutions that implement foreign policy.
Democrats and Republicans agree that China is the biggest foreign policy challenge facing the United States, but they differ in how they will handle it.
While Democrats under Biden favored a strategy of "managed competition, Republicans generally take a stricter stance.
Some Republican hawks argue for a "Cold War" approach, focusing on strength, confrontation, tech supremacy, sanctions, and military power.
But those are the endangered, old-guard Republicans, who can no longer check Trump’s fickleness since they have been overrun by MAGA.
In a recent op-ed for CNBC, Dewardric McNeal, a former Asia policy specialist at the Defense Department and now managing director and senior policy analyst at Longview Global, warned that Trump's preference for personal diplomacy could undermine the Biden administration's established channels of communication, leading to increased "misunderstandings and overreactions" in US-China relations.
"While Trump's shoot-from-the-hip approach may resonate with his base, it also risks intensifying economic friction, frustrating alliances, and destabilizing an already fragile global economic landscape," he wrote.
One potential intermediary for China in navigating relations with Trump could be Elon Musk, whose significant investments in China, particularly with Tesla, position him as a natural bridge.
That said, McNeal noted that Musk's involvement in sensitive sectors, like autonomous vehicles and satellite technology, could actually worsen tensions between Washington and Beijing.
All the above provides fertile ground for new confrontations between the US and China under Trump 2.0.
The rivalry between the US and China will continue for years to come, with the potential for escalation into military conflict over Taiwan or the South China Sea.
As Trump embarks on his second term, we watch with awe and trepidation.
Experts are telling companies to speed up the diversification of their supply chains to reduce exposure to China.
But I've yet to see any suggestion that can get past the risk that Trump will do transactional cartwheels around America’s front- and backyard policies.
The seatbelt sign is on. Are you strapped in?
This Week's China News
The Big Story in China Business
NEW OUTBOUND TECH INVESTMENT CURBS SET FOR JANUARY: China has lashed out at the US Treasury Department's announcement last week of new restrictions on outbound investment in high-tech sectors, which will go into effect on January 2, 2025.
The new rules target investments in Chinese companies involved in artificial intelligence (AI), semiconductors, and quantum computing and aim to prevent the development of new technologies that could threaten US national security.
The measures generally classify investments into two categories: prohibited and notifiable.
However, all investments in Chinese companies engaged in quantum computing will be prohibited.
The restrictions also apply to other investment activities, such as equity acquisitions, loans, joint ventures, and limited partner interests.
"China deplores and rejects the US' Final Rule to curb investment in China. China has protested to the US and will take all measures necessary to firmly defend its lawful rights and interests," Ministry of Foreign Affairs spokesman Lin Jian said last week at a regular news conference.
Chip toolmakers cut China from supply chains: According to the Wall Street Journal, the US semiconductor industry is taking steps to eliminate Chinese companies from its supply chains.
Chip toolmakers like Applied Materials and Lam Research are telling their suppliers to find alternative sources for components currently obtained from China, or they risk losing their business.
Their demands involve trade in the opposite direction, targeting Chinese parts or tools used by US-based semiconductor equipment manufacturers.
Veeco, a New York-based company that produces semiconductor processing systems, has already issued a directive to its vendors, demanding they stop using new Chinese suppliers and completely transition away from existing ones by 2025.
WSJ staff said Applied Materials and Lam Research have communicated their directives verbally to vendors but have not incorporated them into official guidelines or agreements.
Law and International Xi
BIDEN IMPOSES NEW SANCTIONS ON 14 CHINESE FIRMS FOR AIDING RUSSIA'S WAR IN UKRAINE: As part of a new round of sanctions on some 400 entities and individuals to disrupt Moscow's illegal war, the Biden administration imposed new sanctions on 14 Chinese firms it accuses of aiding the Russian military.
The US Department of State said in a statement that the measures are aimed at disrupting procurement networks still enabling Russia to acquire technology for its war efforts.
Entities selling critical items to Russia, like microelectronics and CNC tools, were added to the Department of Commerce's "entity list."
The Department of State designated over one hundred firms and individuals, including the 14 Chinese firms. The list is here.
China denounced the move, labeling it a double standard amid increasing tensions.
CHINESE CITIZEN CHARGED WITH VOTER FRAUD IN MICHIGAN: A Chinese citizen was charged with voter fraud in Michigan for allegedly casting a ballot in the 2024 General Election.
The 19-year-old student, who resides in Ann Arbor, is not a US citizen and was therefore ineligible to vote.
The student, who is legally present in the US, allegedly registered to vote on the same day at the polling place using his university ID and other documents to prove residency.
However, after casting his ballot, the student reportedly raised suspicions by asking polling employees to retrieve it.
Investigations are underway, with authorities diligently working to determine whether this was an isolated incident, an accident, or foreign interference.
Malign acts in Michigan?: The incident follows the FBI's announcement of espionage charges against five Chinese nationals who concealed a visit to a military site in Michigan in 2023.
According to local news media, investigators say they "were told conflicting stories about whether the group saw or heard indications of military activity at the camp and how long the group was on site. "
The group described the Camp Grayling visit as spontaneous, but motel records revealed that one of them had booked the room a week prior.
The FBI said it found other false statements in the case, contradicting the group’s initial explanation.
Geopolitics
CHINA CONTINUES BUILDING ON BHUTAN'S LAND: New satellite images provided by Planet Labs and reviewed by CNN reveal extensive Chinese development in Bhutan's eastern Jakurlung Valley.
Research showed that 19 "cross-border villages" and smaller settlements have been constructed in the region since 2016.
That same year, China established Jieluobu, its first official village in Jakarlung Valley, where Chinese Communist Party officials employ heavy doses of patriotic education.
"In 2021, the village held 150 study sessions on Xi's speeches, party policies and history, Mandarin Chinese, and border defense," CNN staff said, citing Chinese state media.
'Show me the money': To attract settlers to the cold and damp valley, the party's cadres in Tibet lure locals with new homes and substantial financial incentives.
Tibetan studies expert Robert Barnett of SOAS University of London told CNN that China is expanding its land grab into Bhutan to see how far it can go.
"China, as the most powerful player in the relationship, seems to be experimenting whether it can more or less decide for itself whether or when it is entitled to take ownership of territory disputed with a neighbor … and how and if the international community will respond," Barnett said.
THE TRUMP-CHINA OUTLOOK FOR EUROPE: Trump's return to power could be a catalyst for change in Europe, forcing the bloc to take more decisive action on China and security.
That's the silver lining George Marshall Fund's Noah Barkin says he found in Trump's presidential win last week.
Europe faces multiple crises, including economic stagnation in Germany, a potential financial crisis in France, a fragile Dutch coalition, and Russia's war in Ukraine.
But despite these challenges, Brussels is seeking closer cooperation with the US on China, Barkin wrote.
New tools to counter China: The bloc is acting against China's unfair trade practices, including monitoring outbound investments, assessing cybersecurity risks, and exploring export controls.
It also plans to use its new anti-coercion instrument if China responds aggressively to the EU's actions.
Despite the US’ misgivings about Europe’s commitment to confronting China, some think that a Trump victory could jolt the EU into action.
"If it takes a crisis to move the EU forward [on China policy], as the adage goes, then we may be on the brink of major breakthroughs," Barkin said.
Best Reads
Xi May Lose His Gamble (Michael Schuman, The Atlantic): Xi is gambling that the Chinese economy can tolerate the more volatile world he is creating.
Why China Won't Give Up on a Failing Economic Model (Zongyuan Zoe Liu, Foreign Affairs): Beijing shifts towards self-reliance and national power as prospects for the Chinese middle class grow increasingly bleak.
The 2024 Nobel Laureates Are Not Only Wrong About China, But Also About the West (Yuen Yuen Ang, The Ideas Letter on Substack): Ang criticizes the recent Nobel Prize in economics winners Daron Acemoglu, Simon Johnson, and James Robinson, collectively known as AJR, on their moral equivalence of historic exploitation by the West and China's communist authoritarianism.
Middle Kingdom Surreal
'FEWER AND FEWER' FOREIGNERS IN BEIJING, SCMP SAYS: Last week, the South China Morning Post reported that, despite Beijing's ambitions to become an innovation hub, only 22,000 foreigners are living and working long-term in the city, a decrease from the 37,000 foreigners a decade ago.
News staff cited a recent report by the Beijing International Talent Exchange Association, which "said fewer foreigners had taken up long-term jobs in the city in recent years, to the point where they account for just 0.2 percent of the capital's workforce and 0.1 percent of its population."
The report also specifically highlighted a change in the post-pandemic origin of Beijing's foreign community, with Americans and Europeans decreasing from 16% to 12%.
At the same time, the report said, the number of Russians and residents from Eastern Europe increased from 11% to 16%, while the number of Africans increased to 31%.
****
Enjoy your weekend.
Democratic Centralism :)