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US-Asia Business

US-China Market Watch: Trade Tensions, Financial Markets, Intel Chip Investments

June 1, 2020
(Photo credit): Chaiyawong/EyeEm

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

U.S.-China trade tensions escalate

China has passed a national security law that would severely diminish Hong Kong’s autonomy. Secretary of State Mike Pompeo had said earlier that Hong Kong is no longer autonomous from China, and President Trump announced that he is moving to end Hong Kong’s special trade status with the U.S., as punishment for China’s actions and their response to the COVID-19 pandemic. The U.S. will also no longer support the World Health Organization, due to Trump’s belief that the WHO was under the “total control” of China in their response to the coronavirus outbreak.

During the press conference, President Trump also expressed frustration with how far China is lagging behind in their agricultural purchases that were agreed upon in phase one trade deal; however, he also said that he had no intentions of scrapping the deal, despite earlier reports of his dissatisfaction.

As part of the deal, China had agreed to buy $200 billion more in U.S. goods over the next two years than it had bought in 2017. Although China has significantly ramped up purchases of U.S. agricultural products, many agree that China is unlikely to meet targets, especially after the pandemic shutdown closed China’s economy for a good two months this year. However, the U.S. Department of Agriculture announced that both sides are making progress in opening up the market for U.S. exports and loosening tariffs on both sides.

China further opens up financial markets

In a move to attract more foreign capital and decrease capital outflow, China has decided to get rid of quota restrictions on the Qualified Foreign Institutional Investor (QFII) and the Renminbi Qualified Foreign Institutional Investor (RQFII) schemes. The two programs were launched by the Chinese government to allow foreign investors to invest in China’s capital markets.

The move would make it much easier for foreign investors to participate in China’s domestic financial markets, which comes right when China is experiencing an economic downturn and tensions with the U.S. are high. China’s securities regulator also published draft rules that would combine the RQFII and QFII programs and simplify access.

Ted Cruz proposes bill to prevent Hollywood censorship in China

U.S. Senator Ted Cruz of Texas has proposed a bill that would impact Hollywood’s ties to China. The bill, called the SCRIPT Act, would prevent Hollywood studios from receiving government support on film projects if they edit their movies to appease Chinese government censors. The SCRIPT Act is part of a broader series of legislation that Senator Cruz is introducing, targeted at Chinese Communist Party propaganda in the U.S.

Previously, the bill’s scope was limited to just the U.S. Department of Defense, but now includes other government agencies like NASA and the U.S. Coast Guard. Studios often rely on their relationships with these agencies in order to do things like film on federal property or use government logos in movies and TV shows.

Intel invests in Chinese chip companies

Intel Corp.’s venture capital arm, Intel Capital, has invested in two Chinese semiconductor startups, at a time when U.S.-China trade relations, particularly over technology, are tense. The two companies are ProPlus, which makes electronic design automation software that chipmakers use to design products before manufacturing them, and Spectrum Materials, which makes gases that are critical for producing physical chips. The former industry is currently dominated by U.S. companies, and the latter by companies in the U.S., Japan and South Korea.

Intel has previously invested in two other Chinese chip startups in 2018 and 2019. China is also preparing to boost its own domestic technology sector to cut reliance on U.S. tech exports, as trade tensions rise.

Popeyes opens first store in China

Fried chicken chain Popeyes opened its first restaurant in China on May 15, on Shanghai’s popular Huaihai Road. The chain announced its plans to open 1,500 locations in China last July and will directly compete with Yum China’s KFC, which is currently the most popular fast-food chain in the country. Popeyes’ China launch marks its most successful entry into a new market in its entire 48-year history.

Thanks to its immensely popular chicken sandwich, which was launched in August 2019, Popeyes had a 29.2 percent sales increase, year-over-year, in the last quarter, despite other chains experiencing declines caused by the COVID-19 pandemic.

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