Presidents Donald Trump and Xi Jinping have agreed to a temporary trade truce after talking during a dinner meeting at the G20 summit. The White House agreed to hold off on raising tariffs from 10 percent to 25 percent on January 1, and China has agreed to purchase a “very substantial” amount of agricultural, energy, industrial and other products from the United States. Chinese and U.S. officials will continue trade negotiations over the next 90 days and hope to come to a deal in that time frame.
The outlook for the upcoming U.S.-China trade negotiations had fluctuated leading up to the meeting. When the meeting was first announced, both Trump and Xi expressed optimism that a deal could be reached. However, both sides had clashed over trade tactics, with the U.S. accusing China of not changing its “unreasonable” trade policies. Trump had emphasized that he would implement the tariff increase on January 1, and also threatened to impose tariffs on an additional $267 billion worth of Chinese goods. The World Trade Organization has also launched a dispute investigation into the United States’ accusation that China has continued a “state-backed campaign of intellectual property and technology theft.” In response, a Chinese official has said that the claim “reeks of hypocrisy.”
German insurance company Allianz SE became the first wholly foreign-owned insurance holding company in China, granting Allianz broad access to China’s insurance market. The Wall Street Journal posits that allowing Allianz to become the first wholly foreign-owned insurance holding company is China’s way of improving ties with Europe, in light of trade tensions with the United States. Despite the step forward, some still believe that it falls short of the full access to offer life insurance that some companies want.
Swiss bank UBS became the first foreign bank in China to have majority ownership of its business there. The bank received approval from Chinese regulators to increase its stake in its securities joint venture from 25 percent to 51 percent. Prior to this, foreign banks were only allowed to hold up to a 49 percent stake in their Chinese securities businesses. Other foreign banks like JPMorgan Chase are also awaiting approval from Chinese regulators to gain majority share.
American Express got approval to set up card-clearing services in China, becoming the first American card network to get permission in what a Beijing official calls “a goodwill gesture.” AmEx will form a 50-50 joint venture with Chinese fintech company Lianlian Group to set up a payment network, which they must complete in 15 months. Mastercard also has a pending application for a joint venture, and Visa has a pending application to form a wholly owned entity in China.
China also approved American multinational United Technologies Corp.’s $23 billion takeover of aerospace supplier Rockwell Collins Inc., clearing the final hurdle for a deal that was struck more than a year ago. The deal, announced in September of 2017, had been approved by U.S. the following month, but had been waiting for months for a decision from Chinese regulators. However, the approval is conditional and requires United Technologies to divest of several businesses related to aircraft systems, which are similar conditions European regulators had given them.
Alibaba’s answer to Black Friday (named Singles Day because it falls on November 11) hit a new sales record, reaching $30.8 billion during the 24-hour event and surpassing last year’s record by over $15 billion. The company had spent weeks promoting the event, including launching a “mini space station” and a satellite into space to support customers’ user experience during the sales. They also hosted a gala the day of the event that featured celebrities such as model Miranda Kerr and singer Mariah Carey.
Alibaba offered steep discounts across its e-commerce platforms and introduced new aspects to its Singles Day bonanza. Lazada, a Singapore-based e-commerce platform that is majority-owned by Alibaba and operates across Southeast Asia, offered its own sales. Ele.me, Alibaba’s food delivery service, provided delivery for select Starbucks stores in 11 Chinese cities for the day.
However, despite this year’s record sales, Alibaba cut its sales forecast for the fiscal year ending in March by 5 percent. The New York Times attributes the company’s cut to China’s slowing economic growth and tightening of consumer spending.
Tesla has shifted its strategy and decided to cut the prices of its Model X and Model S cars in China to make them more affordable. Tesla vehicle sales plunged 70 percent in October compared to one year ago, selling just 211 cars that month. The company blamed the sales slump on the U.S.-China trade war and says their new strategy is to attract more customers in the world’s largest electric vehicle market. As a result, Tesla will absorb an even greater part of the tariffs on U.S. goods that China enacted in retaliation against Trump’s tariffs on Chinese goods. Tesla will cut the prices of the two models by 12-26 percent.
Prices of Tesla cars have fluctuated in China this year. In May, Tesla cut prices when China announced they would reduce tariffs on car imports by 15-25 percent. In July, Tesla had hiked up prices again by about 20 percent after Beijing put a 25 percent tariff on American cars.
Dolce & Gabbana products are being pulled from major Chinese e-commerce sites after intense backlash over derogatory remarks about China allegedly sent from co-founder Stefano Gabbana’s personal Instagram. The D&G team claims that Gabbana’s Instagram had been hacked and that he was not responsible for the offensive comments. This came after an outcry over a Dolce & Gabbana’s advertisement. The ad, which featured an Asian woman struggling to eat Italian foods such as spaghetti and pizza with chopsticks, was to promote Dolce & Gabbana’s multimillion-dollar Shanghai fashion show called #DGTheGreatShow.
The fashion show was cancelled after dozens of celebrities such as Zhang Ziyi and Li Bingbing said they would no longer be attending in light of the accusations. Soon afterwards, e-commerce platforms run by Alibaba and JD.com pulled all Dolce & Gabbana products from their sites, and Lane Crawford, a luxury Hong Kong-based fashion retailer, also announced it would be halting sales of the brand’s goods. The founders, Stefano Gabbana and Domenico Dolce, have since released an apology video for the offensive comments and ad. According to Dolce & Gabbana’s Weibo account, the event is being rescheduled.
Chinese consumers currently make up 33 percent of global luxury goods sales and will likely hit 46 percent by 2025.