The U.S. has nailed Chinese companies this year. Why hasn’t Beijing retaliated?

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Huawei sanctions. The Hong Kong Autonomy Act. The Holding Foreign Companies Accountable Act. A demand that TikTok’s U.S. operations be sold and the threat to ban WeChat. These are all regulations the U.S. has imposed on China this year.

Despite that barrage from Washington against Chinese firms, Beijing’s response has “broadly been restrained” against U.S. companies, said Gavekal Research technology analyst Dan Wang, who’s based in Beijing. The reason? There are few U.S. corporations in China that Beijing could target without hurting itself.

“Anything that really hurts these companies also significantly hurts China,” he said, adding that U.S. companies—like Apple, Starbucks and McDonald’s—are big employers in China and China still depends on American technologies like semiconductors. Since China’s unemployment is still relatively high, Beijing is hesitant to take any action that would cost jobs. There’s less incentive for Beijing to “hit these companies very hard,” Wang said, since the Chinese economy remains “sort of weak and fragile.”

In a Eastworld Spotlight interview with Fortune’s Clay Chandler on Monday, Wang talked more about U.S. sanctions against China, the implications of TikTok proposed deal with Oracle, and U.S.-China relations under a possible Biden administration. This interview has been edited for length and clarity.

Fortune: I was taken by your note the other day about China’s relatively restrained response to barrage of new sanctions from the United States against Chinese tech companies. Why do you perceive China’s response as “restrained”?

Dan Wang: Since the start of the trade war, analysts, my peers, have been wondering what are good targets for Beijing to hit. And actually, we’ve sort of concluded that there are not a great number of targets that Beijing can hit without hurting China much more broadly. China still needs quite a lot of U.S. technologies, and U.S. firms are very large employers in China. There’s another timing issue in which China has now been very concerned about employment after the COVID outbreak. There’s been no growth targets set [in China] this year. Instead, the premier is targeting more employment. While the economy is sort of weak and fragile, [Beijing] doesn’t really want to hit these companies very hard.

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Another factor is that Beijing can see that many of these U.S. companies are doing what Beijing wants them to do, which is to sell as much product as they can to Chinese companies and lobby hard in Washington, D.C., to maintain their access to the Chinese market. 

The last bit I should mention is that in around 50 days, the U.S. [will have] a general election. Right now it seems like Vice President Biden has a fairly commanding lead over President Trump. But so long as there’s a pretty good chance that the administration changes hands, I think Beijing does not need to hit really hard and cut off future room to maneuver. 

Microsoft’s bid to acquire TikTok has failed, …read more

Source:: Fortune

      

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