Although the United States and China reaffirmed their phase one trade commitment after their talks in Hawaii, tensions are on the rise again over China’s actions with Hong Kong. Just before Beijing passed the controversial national security law for Hong Kong, Commerce Secretary Wilbur Ross announced that the U.S. will restrict Hong Kong’s access to sensitive technologies; This could be the first step towards removing Hong Kong’s special trading privileges. Prior to that announcement, China had downgraded the U.S. to “medium risk” for Chinese investment, citing that it has become increasingly difficult to invest in high-tech, financial and infrastructure projects in the U.S. due to national security concerns.
Actions taken over Hong Kong have thrown the trade deal into uncertainty. The U.S. Senate approved a bill that would impose sanctions on Chinese officials who interfere with Hong Kong’s autonomy, along with any banks and companies that do business with them. In retaliation, China announced visa restrictions on U.S. officials accused of “meddling” in China’s affairs in Hong Kong, and Chinese Vice Premier Liu He suggested that the future of the deal would also require the U.S. to “ease off pressure on other fronts.”
Despite the trade tensions, China’s economic recovery seems to be indicating positive growth for the second quarter, thanks to support from government policies and the reopening of some overseas markets. China’s manufacturing purchasing manager’s index (PMI) went up from 50.6 in May to 50.9 in June. The nonmanufacturing PMI also increased to a seven-month high, from 53.6 to 54.4 in the same time period. However, because demand has been slower to pick back up, some are skeptical about the sustainability of the recovery.
The United States has amended its ban on Huawei and is allowing U.S. companies to work with the Chinese telecommunications firm to develop 5G standards, although Huawei still remains on the U.S. Entity List. The U.S. will allow companies to share information about technologies with Huawei without requiring an export license, to ensure that U.S. companies continue to contribute to key “standards-developing activities” for 5G, artificial intelligence and autonomous technology, and remain at the forefront of global innovation.
However, U.S. Secretary of Commerce Wilbur Ross said that this move does not mean the U.S. is weakening its stance on Huawei; in May, the U.S. government decided to limit Huawei’s access to semiconductors made using American machinery and software by requiring companies to have export licenses.
Chinese tech giant Tencent is planning on rolling out its own gamer-focused livestreaming platform in the U.S. to compete with Amazon-owned Twitch. Tencent had been testing the platform, called Trovo Live, through a U.S. affiliate since March. On the Trovo website, the company announced a $30 million creator partnership program to jumpstart its content creation.
Tencent is China’s biggest gaming and social media company and owns popular game titles such as “Fortnite” and “PUBG Mobile.” Domestically, Tencent spent $263 million to buy a controlling stake of Huya Inc., China’s homegrown equivalent to Twitch. The company is also buying Malaysia-based streaming service IFlix, which operates in 13 countries, as part of its expansion into Southeast Asia.
As part of its promises to open up its multi-trillion-dollar financial markets, Beijing approved JPMorgan’s application to operate the first fully foreign-owned futures business in China. The U.S. bank first sought full ownership of its Chinese futures business in December 2019, after the Chinese government decided to remove caps on foreign ownership. JPMorgan is also seeking majority ownership in a Chinese securities joint venture (JV) and wants complete ownership of its mutual fund venture.
American Express has received approval from the People’s Bank of China to process transactions in RMB through its JV with Chinese fintech company LianLian DigiTech. The JV, called Express Company, is expected to begin processing transactions later this year.
As it ramps up its electric vehicle (EV) production capabilities in China, General Motors announced it will be working “very closely” with Chinese EV battery maker Contemporary Amperex Technology Ltd (CATL). According to a GM executive in China, the company will not be importing any major component for their EVs and will focus on producing the parts locally.
GM previously announced that it would invest $20 billion in electric and automated vehicles by 2025 to compete with Tesla, for which CATL also supplies batteries. CATL also announced that it is ready to produce an EV battery pack that can last for 1.2 million miles before needing to be replaced, instead of the typical 150,000 miles.