Companies "should fear" what's next for China business, Senate delays Taiwan policy overhaul after WH expresses "significant concerns" & Chinese firms “flock” to Switzerland -- China Boss News 8.08.22
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Companies "should fear" what's next for China business
“China’s business backlash to Pelosi’s visit” has, so far, been primarily directed at Taiwan, with a ban on certain food exports, New York Times Dealbook analysts reported. “But the broader impact” may still “reach U.S. shores,” they said.
Bloomberg’s Ian Marlow said on Bloomberg Technology TV last week that Nancy Pelosi’s visit is “significant” to the US-China Relationship for various reasons:
You have Xi Jinping kind of balancing Covid zero policies with a bit of a slowing economy and also a really important party congress coming up later in the fall where he is expected to secure a third term. So you've got a lot of sensitive dynamics internally and then, you know, internationally we just have a situation with the US leaning on on China over Russia and the war in Ukraine.
You've got a lot of high level dialogues that haven't particularly moved the needle on the Biden administration's China policy. And then you're playing with this extremely toxic situation where the word Taiwan is just the most sensitive issue in U.S. China relations.
When asked “how much retaliation versus posturing” for Pelosi’s visit China could convey, Isaac Stone Fish of Strategic Risks said that “companies should fear retaliation asymmetrically.”
Stone, Bloomberg Technology TV:
So worry less about military drills, more about executives from U.S. corporations getting arrested or detained or harassed in China or Chinese companies treating U.S. companies differently or Beijing suddenly discovering that a major U.S. corporation committed tax fraud or has some irregularities in their books.
Beijing loves to play it this way so that there's plausible deniability. And so that it reminds the business world that in Beijing's mind the business world is also responsible for what the U.S. government is or isn't doing.
Dan Harris, founder of the Seattle-based international law firm Harris Bricken, is not optimistic. He’s been “sounding the alarm” to warn clients about the risks of doing China business since 2018, and is “certain that Pelosi’s trip will substantially worsen relations between China and the West and that those relations will either stay at that lower level or, more likely, continue to get worse.”
Harris, China Law Blog:
Just like the last Cold War, we have Russia and the United States staking out opposing positions, and other countries having to choose one side or the other. I just today did an NDTV interview with Don Ma on how Chinese tech companies are in what Ma called a “lose-lose” situation in having to choose between China and the West. I agreed with him but emphasized that this choice between blocs is something that American companies have been facing for some time and will only increase. The idea of companies having to comply with the varying requirements and sanctions between the U.S. and the EU (and to a certain extent, Australia, Japan, Norway, Switzerland, and India) on the one side and China and Russia on the other side is much of what I discussed in my original post on Ukraine’s impact on doing business with China.
If I am right about this future cold war, we should expect the decoupling between China and the rest of the world to accelerate. You should expect American and EU companies that do business with China to be heavily scrutinized by the U.S. and the EU and also by their own customers and employees. You should expect more laws limiting what your company can do with China and also more moral outrage about doing business with China. See Doing Business with China: Peng Shuai and Your Reputation Risks.
For the rest of NYT Dealbook analysis, What Nancy Pelosi’s Taiwan Trip Means for Business, click here. To read Dan Harris’ China Law Blog post, Nancy Pelosi's Visit to Taiwan is Really Bad for Your China Business, click here.
Law and International Xi
Senate delays major Taiwan policy overhaul after White House expresses “significant concerns”
“Congressional sources confirmed the Biden administration and top lawmakers are at odds over the Taiwan Policy Act of 2022, which would authorize $4.5 billion in security assistance to Taiwan, designate it as a major non-NATO ally, and elevate it within international institutions, according to The Dispatch, a conservative newsletter on US politics, policy and culture. “The White House is worried stronger language about Taiwan’s status would undermine America’s existing balance on Taiwan, which Beijing claims as part of China,” writers said.
The Senate Foreign Relations Committee was scheduled to review the Taiwan Policy Act of 2022 on Wednesday,” the Washington Post said, just as Pelosi was meeting with President Tsai, exiled Tiananmen student leader Wu’er Kaixi, a Taiwanese pro-democracy activist whom China jailed for subversion, and Lam Wing-kee, the Hong Kong bookseller detained for selling anti-CCP manuscripts. Although, “[m]any of the bill’s provisions straddle the line between symbolic and substantive,” updating Taiwan policy to reflect a hardened China stance in D.C. would be like striking a match to an already inflamed Beijing.
WaPo:
The bill includes $6.5 billion in foreign military financing for Taiwan over the next four years. That State Department-administered program could provide Taiwan with loans or grants to purchase arms or conduct training or military exercises.
The Taiwan Policy Act would also designate Taiwan a “major non-NATO ally,” which facilitates deliveries of U.S. military hardware, but doesn’t come with a mutual defense commitment. Aides of both parties say that could help resolve the considerable backlog of deliveries to Taiwan.
As for the “major non-NATO ally” designation, Bloomberg staff explained that the bill would merely “formalize” the status granted the island “since the George W. Bush administration,” but that Biden “is already trying to deal with increasing US-China friction.”
“The White House has significant concerns,” Senator Chris Murphy, (D-CT) said. “[T]he Foreign Relations panel is delaying work on the legislation until September and it may be rewritten.”
For the rest of The Dispatch’s report, Taiwan Bill Delayed Amid White House Pushback, click here. For WaPo’s report, Analysis | Senate looks to update and deepen U.S.-Taiwan relationship, click here. For Bloomberg’s update, White House Lobbies Democrats Against Deepening Taiwan Ties, click here.
Samsung & SK Hynix rethink China after US chips act
“Samsung Electronics and SK Hynix are re-evaluating their investments in China as leading Korean chipmakers respond to incoming US restrictions on the production of advanced semiconductors,” Financial Times last week reported.
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