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All posts by RWZ

China’s Direct Investment in the U.S. Went into Free Fall

Well-known Chinese news site Tencent News recently reported that, according to an independent study that the Rhodium Group conducted, in the first five months of this year, China’s direct investment in the United States (including mergers) saw a year-over-year sharp decline of 92 percent, to US$1.8 billion. This is the lowest level in seven years. If one counts the sell-off of China-owned U.S. assets, China’s direct investment in the U.S. is actually -US$7.8 billion. The drama of Chinese companies “sweeping” the U.S. market with mega-deals has “faded into history.” The same statistics in 2016 were a completely different story. China’s direct investment doubled in 2016 to $46 billion. Since the second half of last year, the Chinese government has put a very tight control over out-flowing capital. As Xinhua has indicated, starting early this year, in the name of national security, the U.S. government has subjected Chinese investments to tight reviews. The Committee on Foreign Investment in the United States (CFIUS) has stopped many Chinese investment projects. Many Chinese companies are still in the process of selling their U.S. assets.

Source: Tencent News, June 21, 2018

Chinese Foreign Exchange Administration Warned about Illegal Activities

Well-known Chinese news site Netease recently republished a report from Xiamen Daily News that the State Administration of Foreign Exchange, Xiamen Branch, issued a public risk warning on illegal foreign exchange activities. The warning said that, without approval and authorization from the Administration, no organization is allowed to conduct the business of exchanging Chinese currency for any foreign currencies. Any organization without a permit will have to face law enforcement. The warning listed the authorized local commercial banks as well as companies that have a permit. Some companies may require a prior appointment for doing an exchange transaction. {Editor’s note: before the great Reform that Deng Xiaoping started, China used to have a large foreign exchange black market. In the past few decades, since the government authorized organizations have had an ample supply of foreign currency, especially the U.S. dollar, the black market nearly disappeared from everyday life. However, recently, the Chinese government has been tightening up the supply of U.S. dollars.}

Source: Netease, July 2, 2018

BBC Chinese: Acquisition from Hong Kong Questioned in Australia

On July 2, BBC Chinese reported that Hong Kong Cheung Kong (Holdings) recently announced a plan to acquire Australia’s largest natural gas pipeline company, APA. However, this once again triggered considerable debate in Australia, based on the worry about losing control of critical national infrastructure to a foreign power. Hong Kong is currently under Chinese rule with the “One Nation Two Systems” policy. However, the system has no assurance that a Hong Kong company could be prevented from obeying an order from Beijing. The Cheung Kong acquisition attempt is to obtain a 100 percent stake in APA. The deal is valued at around US$9.5 billion. However, there is no signed agreement yet and multiple Australian officials have already stood up to express their concerns on antitrust and national security grounds. Cheung Kong has a large number of investments on a global level, especially in Britain and Canada. It already has control over many infrastructure companies covering most of the Australian states.

Source: BBC Chinese, July 2, 2018

Xinhua: Over 270 U.S. Commerce Organizations Called for Restricting Presidential Tariff Power

Xinhua rapidly reported on the same day when over 270 U.S. commerce organizations, national and local, issued a joint letter to the U.S. Congress asking that new laws be established to restrict the presidential power to determine tariffs. According to Article 232 of the Trade Expansion Act of 1962, the President has the power to start an investigation on imports to prevent damage to national security. President Trump ordered tariff increases based on the authorization of Article 232 and received widespread opposition both domestically and internationally. The commerce organizations were deeply concerned about the limitless potential of this tariff power, which may cause serious damage to the U.S. economy. The joint letter emphasized that the U.S. Constitution gave the Congress the right to administer imports and exports as well as tariffs. The congress should act now to ask the President to propose tariff plans for Congressional approval first, before their execution.

Source: Xinhua, June 26, 2018

Ministry of Defense: Renting Taiping Island to the U.S. Is a Dangerous Idea

Global Times recently reported that the spokesperson of the Chinese Ministry of Defense, Wu Qian, commented at a press conference that the idea that the Taiwanese military could rent Taiping Island to the U.S. military was a very dangerous one. The comment was based on some media reports indicating such a possibility. Taiping Island is the largest of the naturally occurring Spratly Islands in the South China Sea. Taiwan currently controls the island. However, China, Taiwan, the Philippines and Vietnam all have claimed sovereignty. Earlier reports suggested that some Taiwanese military think-tank provided the idea. The rental to the U.S. military would be under the name of humanitarian rescue missions. Wu Qian said the Chinese government is strongly against this idea and has the determination as well as the capability to defend China’s sovereignty. Taiping Island is the size of 70 soccer fields and is 860 nautical miles from Southern Taiwan. Currently Taiwan has around 200 troops guarding the island. The Taiwanese government later clarified that there was no such official plan.

Source: Global Times, June 28, 2018

Global Times: The U.S. Asked the World not to Buy Iranian Oil. How should China Respond?

Global Times recently published a commentary offering some strategic suggestions on how to respond to the U.S. position of asking the world to ban Iranian oil. The commentary started with the fact that most EU companies decided to stop doing business with Iran. However, China and India are the largest buyers of Iranian oil. The U.S. exit from the Iranian Nuclear Deal was in itself a betrayal to the promise the U.S. made as a government – or should people call it bullying. However just like other nations, China faces the choice of losing the profitable business with Iran or losing more business with the U.S. Global Times suggested: First, the U.S. position has no basis in international law – and China should not just agree. Second, China should not stick its head out to lead the opposition against the U.S. since China does not have the power to lead in such a case. Third, China should strengthen coordination with other large Iranian oil buyers to negotiate with the U.S. jointly. In a case of not touching China’s core strategic interests, China should avoid being recognized as “the leader of the united front-line against the United States.”

Source: Global Times, June 28, 2018

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