USA restrictions on Chinese investment next front in trade dispute

27 June, 2018, 23:56 | Author: Mary Valdez
  • The Chinese flag and the US Stars and Stripes fly on a lamp post along Pennsylvania Avenue near the US Capitol. Reuters  File

This is what the South China Morning Post reported about Apple in early February this year: "The world's most valuable company reported on Thursday in the United States an 11% increase in its combined fiscal first-quarter revenue from mainland China, Hong Kong and Taiwan to US$17.9 billion, up from US$16.2 billion in the same period a year ago".

BEIJING-China and the European Union (EU) agreed Monday to launch a group that will work to update global trade rules to address technology policy, subsidies and other emerging irritants and preserve support for worldwide trade amid USA threats of import controls.

Derek Scissors, a China scholar at the American Enterprise Institute who consults regularly with the administration, said that he believes Mnuchin would prefer to apply the text of a bill working its way through Congress to strengthen national security reviews of USA acquisitions to investments by China.

Treasury's move is part of the Trump administration's actions taken under Section 301 to respond to China's alleged theft of US intellectual property and follows rounds of tit-for-tat tariff threats between the two largest economies.

Both China and the European Union are locked in trade disputes with the United States, which has led the two sides to find common ground to counter Trump administration's growing trade protectionism.

But US authorities have also been looking into investment restrictions.

The twin initiatives, set to be announced by the end of the week, are created to prevent Beijing from moving ahead with plans outlined in its "Made in China 2025" report to become a global leader in 10 broad areas of technology, including information technology, aerospace, electric vehicles and biotechnology.

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"We hope the USA side will see these (Chinese) companies' business activities in an objective manner, and provide Chinese companies a good, fair and predictable environment for their investment and business activities", Foreign ministry spokesman Geng Shuang said.

The secretary called reports in the Wall Street Journal, Bloomberg and elsewhere "fake news", saying restrictions will apply to "all countries that are trying to steal our technology".

The Chinese government also issued its own set of retaliatory tariffs on US$2.4bn of United States exports including aluminium waste and scrap, pork, fruits and nuts. Katainen urged China to tackle overcapacity in its steel, aluminum, and other sectors including technology, the European Union said in a statement. I'd like to have faith in the big guy, that it will all end like one of his scripts from his TV show, but the apprentice President might just have ruined a bull market that he helped to sustain. Trump administration officials have said they are considering the use of the 1977 International Emergency Economic Powers Act to impose new restrictions on China, an act widely used to freeze assets after the 9/11 attacks in 2001.

Consequently, PowerShares QQQ Trust, Series 1 (ETF) (NASDAQ: QQQ) closed down 2.3 percent, the S&P 500 Index 1.3 percent and the Dow Jones Industrial Average 1.3 percent.

But on May 29, the White House announced that the Trump administration would proceed with a 25 percent tariff on $50 billion of Chinese goods and China-specific investment restrictions.

CFIUS could become more powerful in the near future.

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