Dominic's Take: Targeting Chinese Students and Entrepreneurs in the U.S. is the Wrong Way to Battle Beijing
A worker transports boxes at a Chinese factory amid US-China trade war
US-China Market Watch: New Tariffs, China VC Slowdown, Alibaba

US-China Market Watch: G20 Talks, 5G Race, Hollywood-China

By Angela Bao

Jul. 7, 2019
President Donald Trump and President Xi Jinping at the G20 summit in Osaka, Japan
(Photo credit): Sheng Jiapeng/China News Service/VCG/Getty Images

Your monthly roundup of the latest US-China business and industry news.

U.S. and China to Resume Trade Talks

President Donald Trump and Chinese President Xi Jinping called a trade truce at the G20 Summit in Japan, and agreed to resume high level talks. No timeline has been set for reaching a deal, and no major breakthrough has been reached between the two sides, but the temporary cease fire will give negotiators another chance to regroup. Although no additional tariffs will be imposed on Chinese goods, current ones will stay in place. President Trump also suspended his ban on U.S. companies supplying equipment to the Chinese technology giant Huawei, though he was not yet willing to remove the company from a trade blacklist. President Xi agreed to buy large quantities of American food and agricultural products.

Previous trade talks suddenly broke down in early May, after the U.S. accused China of reneging on concessions and China shot back by saying the United States’ demands were damaging to Chinese economic interests. President Trump had threatened to impose another 25 percent duty on an additional $300 billion or so of Chinese goods if the latest talks went poorly, which would cover nearly all remaining Chinese imports into the United States, including consumer products such as electronics and clothing. In the last year, the U.S. has imposed import taxes on $250 billion in Chinese products, while China has hit back with tariffs on $110 billion in American goods. Economists say the confrontation has contributed to a global economic slowdown, with growth rates in U.S. manufacturing contracting as much as in China.

Major U.S. tech companies like Apple and Google are speeding up their shifts in production away from China to circumvent the tariffs. Apple has reportedly asked its biggest suppliers whether it was possible to move 15-30 percent of their output to Southeast Asia. Google, which owns smart-home electronics company Nest, plans on moving more of its Nest production to Taiwan, where it already has a significant presence, and Malaysia.

U.S. adds more Chinese tech restrictions

The United States Commerce Department announced it was adding several more Chinese companies and a state institution to its national security blacklist. The listed Chinese entities are involved in military applications and are barred from buying American components, unless they receive government approval. The companies include Sugon, the Wuxi Jiangnan Institute of Computing Technology, Higon, Chengdu Haiguang Integrated Circuit and Chengdu Haiguang Microelectronics Technology, along with these entities’ aliases.

Trump is also considering to require that next-generation 5G technology used in the U.S. has to be manufactured outside of China. Officials are asking telecom equipment makers whether they can shift their production of hardware such as routers, switches, and software headed for the United States to other countries other than China.

After the Pentagon’s Defense Advanced Research Projects Agency (DARPA) gave nearly $5 million to a biotech startup called Twist that subsequently announced a Chinese partner, Florida Senator Marco Rubio has also introduced an amendment to Congress’s annual defense bill to limit China’s biotech ambitions. The amendment would prohibit DARPA from partnering with organizations that are “subject to foreign company or government control” and would ensure that grant recipients give preference to American manufacturers.

New Hollywood-China projects announced

Although there are concerns that the trade war will negatively impact Hollywood-China relations, there has been a slew of announcements about cross-border projects.

Beijing-based Er Dong Pictures has announced its involvement in new projects with Roland Emmerich, Jon M. Chu, Sylvester Stallone and Frank Grillo through its 12-film co-financing deal with Hong Kong and Los Angeles-based film investment company Starlight Culture Entertainment. Emmerich will be executive producing a television series called “Those About to Die,” which is about the world of Roman gladiators. Stallone will be working with Er Dong and Starlight on three projects, including a remake of Korean-language action movie “The Gangster, The Cop, The Devil.” Er Dong also announced it started working with actor Frank Grillo’s War Party Films, and director Jon M. Chu (“Crazy Rich Asians”) revealed at an event that he will be “cooperating with” Er Dong and Starlight.

Tencent Pictures confirmed that it had invested in five Hollywood productions, including TriStar’s film about TV host Mr. Rogers, “A Beautiful Day in the Neighborhood,” and Tom Cruise-starrer “Top Gun: Maverick.”

iQiyi looking to expand outside of China

Chinese video streaming platform iQiyi, also known as China’s Netflix, hit 100 million paid subscribers in June and now wants to expand further into other markets, such as North America and Japan. iQiyi hopes to distribute more of its self-produced Chinese-language content outside of China, where the company says it is seeing growing interest. In comparison, Netflix has reached 149 million subscribers, as of April 2019. iQiyi signed a licensing deal in 2017 with Netflix, which streams some of its content on iQiyi since Netflix is not accessible in China, but iQiyi’s growing ambitions could pit the two companies against each other.

iQiyi produces a range of scripted and reality television shows, as well as made-for-streaming movies. The company is in direct competition with Tencent Video, which, as of May 2019, had 89 million paid subscribers, and Alibaba’s YouTube-esque site, Youku Tudou.

Xiaomi ramps up competition against Huawei

Chinese smartphone maker Xiaomi plans on spending an additional $725 million to expand its retail network in China. The company will reportedly use the money to expand distribution channels and develop rewards programs for its partners and employees.

The move comes after Huawei, the world’s number-two smartphone maker, said its international smartphone sales were likely to drop between 40-60 percent, due to President Trump’s previous ban. It’s unclear how the lifting of the ban will impact sales and whether it will last. Huawei will reportedly be shifting its focus back to the Chinese domestic market and wants to grab “as much as half” of the market, reports Bloomberg. Xiaomi, which is currently China’s fourth-largest smartphone maker, aims to become number one and sees the rollout of 5G networks as its opportunity to rise to the top.

Click here for more US-China news updates

east west bank logo
Find out how East West Bank can help your business grow

About
Reach.Further


Reach Further by East West Bank is our business news magazine connecting you to emerging opportunities in the United States and Greater China, helping you gain the edge to succeed.

Discover stories from the frontlines of entrepreneurial life, financial tips for small and midsize businesses, and in-depth insights on US-China business, trade, tech, innovation, entertainment, lifestyle and more.

CMA logo

2018 Best Digital Publication

Finalist in the prestigious

Content Marketing Awards.

Stay Connected!

We’ll keep you in the know about the latest US-China business news and trends.

Follow us:
Questions? Email us:
reachfurther@eastwestbank.com