US companies are canceling investment into China at a faster clip, survey shows

However, survey respondents did note an overall improvement in nearly all issues of concern — including intellectual property protection and forced technology transfer. The proportion of businesses that said the Chinese government treats foreign and local companies equally also rose from 34% to 40% in the latest survey. But retaliatory tariffs from both sides are hitting revenues and causing some American firms to change their China strategy, the AmCham survey showed. Just over half of the surve


However, survey respondents did note an overall improvement in nearly all issues of concern — including intellectual property protection and forced technology transfer. The proportion of businesses that said the Chinese government treats foreign and local companies equally also rose from 34% to 40% in the latest survey. But retaliatory tariffs from both sides are hitting revenues and causing some American firms to change their China strategy, the AmCham survey showed. Just over half of the surve
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Company: cnbc, Activity: cnbc, Date: 2019-09-11  Authors: evelyn cheng
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US companies are canceling investment into China at a faster clip, survey shows

Chinese shipping containers are stored beside a US flag after they were unloaded at the Port of Los Angeles in Long Beach, California on May 14, 2019. – Global markets remain on red alert over a trade war between the two superpowers China and the US, that most observers warn could shatter global economic growth, and hurt demand for commodities like oil. (Photo by Mark RALSTON / AFP) (Photo credit should read MARK RALSTON/AFP/Getty Images) MARK RALSTON | AFP | Getty Images

Some American companies in China are speeding up their move away from the mainland as increasing tariffs continue to hurt their businesses. That’s according to a survey released by the American Chamber of Commerce in Shanghai on Wednesday. More than a quarter of the respondents – or 26.5% – said that in the past year, they have redirected investments originally planned for China to other regions. That’s an increase of 6.9 percentage points from last year, the AmCham report said, noting that technology, hardware, software and services industries had the highest level of changes in investment destination. The research, conducted in partnership with PwC, surveyed 333 members of the American Chamber of Commerce in Shanghai. It was conducted from June 27 to July 25 — during the period when U.S. President Donald Trump and Chinese President Xi Jinping agreed to resume trade talks, and before the latest escalation in retaliatory tariffs. U.S. firms in the mainland also said restrictions to accessing the local market have made it difficult for them to carry out their business, the report said. Asked about the best possible scenarios in ongoing trade negotiations, more than 40% of respondents said greater access to the domestic market would be the most important outcome to help their businesses succeed. That was followed by more than 28% that ranked improved intellectual property protection as key. The third most hoped-for outcome of the trade talks was “increased purchases of U.S. goods,” at 14.3%, the survey showed. That’s in contrast to the Trump administration’s latest efforts to pressure China into buying more American products, especially in agriculture.

Barred from market access

One of the longstanding complaints U.S. companies have about operating in China is that many industries are closed to foreign businesses. In the sectors that are open, it is difficult to compete with state-owned enterprises or privately owned companies that may benefit from local connections or policies, they say. Allegations of forced transfer of critical technology to Chinese partners and lack of intellectual property protection are just some of the challenges U.S. businesses cite for operating in China. The latest AmCham survey found accessing the local market remained one of the key problems companies faced, with more than half the respondents — or 56.4% — saying that obtaining licenses was not easy.

Still, with no sign of a trade agreement, 2019 will be a difficult year; without a trade deal, 2020 may be worse. AmCham Shanghai and PwC survey

By industry, the one that most sought improved market access was the banking, finance and insurance sector. The high 81% of respondents in that sector seeking a better business environment contrasts with Beijing’s announcements in the last 18 months that it will be relaxing foreign ownership rules in the financial sector. Some measures include allowing majority foreign ownership of a local securities venture and increased foreign ownership of local stocks. However, survey respondents did note an overall improvement in nearly all issues of concern — including intellectual property protection and forced technology transfer. The proportion of businesses that said the Chinese government treats foreign and local companies equally also rose from 34% to 40% in the latest survey.

Tariffs hurting US firms

The U.S. business presence in China remains strong, with American companies and their affiliates raking in more than $450 billion in sales in the Asian country, according to an August report from research firm Gavekal Dragonomics. The analysis also pointed out that sales figure is more than twice the value of U.S. exports of goods and services to China. But retaliatory tariffs from both sides are hitting revenues and causing some American firms to change their China strategy, the AmCham survey showed. If Washington were to impose all the duties as threatened, essentially all Chinese goods exported to the U.S. will be subject to tariffs by the end of the year. In response to the increasing American duties, Beijing has countered with tariffs of its own on U.S. exports to China.

Just over half of the survey respondents said revenue has decreased as a result of the increased tariffs. One third of them attributed a drop of between 1% and 10% of revenue to the higher duties. Overall profitability did not decline in 2018, the report said. But more respondents said revenue and margins declined last year, especially compared with operations in other countries. Pessimism levels shot up by 14 percentage points to about 21% — respondents felt less optimistic about the outlook for 2019 due in part to a slowing domestic economy.

Bright spots remain in China

The survey, however, did find some areas of optimism among respondents in China. The pharmaceuticals, medical devices and life sciences category ranked among the industries with the most respondents reporting revenue growth last year. That sector also came in second among those most optimistic about 2019. The AmCham report said the positive outlook was “likely due to government policy changes, including accelerated approvals of foreign drugs.” More than two-thirds of companies in food and agriculture planned to increase investment in 2019, the most of any industry, the report said. Retail and consumer companies also intended to invest more in China, especially in smaller cities where many analysts still see a major growth opportunity. However, businesses are getting ready for a drawn out trade war between the two economic giants. Of those surveyed, 35% expect trade tensions to continue for another 1 to 3 years, while nearly 13% say it will go on for 3 to 6 years. About 17%, however, were even more pessimistic, and predict that the trade conflict will drag on indefinitely. The report added: “Still, with no sign of a trade agreement, 2019 will be a difficult year; without a trade deal, 2020 may be worse.”


Company: cnbc, Activity: cnbc, Date: 2019-09-11  Authors: evelyn cheng
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The Chinese face-swapping app that went viral is taking the danger of ‘deepfake’ to the masses

The “Zao” app, which is the phonetic sound of the Chinese character “to create,” was developed by a unit that’s majority-owned by online social networking platform . Users can pretend to be starring in blockbuster movies by uploading pictures to the app, which then create simulated video clips using machine learning. As a result, the ubiquitous Chinese messaging app WeChat reportedly banned users from sharing videos created using the app. A screenshot of the iOS App Store in China In response, Z


The “Zao” app, which is the phonetic sound of the Chinese character “to create,” was developed by a unit that’s majority-owned by online social networking platform . Users can pretend to be starring in blockbuster movies by uploading pictures to the app, which then create simulated video clips using machine learning. As a result, the ubiquitous Chinese messaging app WeChat reportedly banned users from sharing videos created using the app. A screenshot of the iOS App Store in China In response, Z
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Company: cnbc, Activity: cnbc, Date: 2019-09-04  Authors: grace shao evelyn cheng, grace shao, evelyn cheng
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The Chinese face-swapping app that went viral is taking the danger of 'deepfake' to the masses

People on their smartphones in Shanghai, China. Qilai Shen | Bloomberg | Getty Images

A face-swapping app that surged to the top of ‘s domestic download rankings has raised concerns about how fabricated but realistic-looking videos may be breaking into the mainstream. The “Zao” app, which is the phonetic sound of the Chinese character “to create,” was developed by a unit that’s majority-owned by online social networking platform . Users can pretend to be starring in blockbuster movies by uploading pictures to the app, which then create simulated video clips using machine learning. It’s the latest example of “deepfake” — a term that refers to manipulated videos or other digital representation produced by sophisticated artificial intelligence that yield seemingly realistic, but fabricated images and sounds. The rapid development of deepfake technology has raised concerns about how it could be used to influence elections or for some other malicious activity.

‘Uncharted territory’

Zao was first released on Aug. 30 and jumped quickly to the top of free mobile downloads on both Android and iPhone app stores in China. But users soon began to criticize Zao for its loose data privacy protections — including giving the company perpetual and transferable rights to uploaded data, according to Chinese media reports of Zao’s original user agreement. As a result, the ubiquitous Chinese messaging app WeChat reportedly banned users from sharing videos created using the app. , WeChat’s parent, did not respond to a CNBC request for comment. A screenshot of the iOS App Store in China In response, Zao changed its privacy policy on Sep. 3. In a statement Tuesday on Weibo, China’s version of Twitter, the start-up said it will not store personal biometric information, which data has become key to personal security given its use for passwords. It’s rare for a Chinese company to publicly address privacy issues so quickly, said Ziyang Fan, head of digital trade at the World Economic Forum. Zao also said the “face-swapping” effect is created by a technical overlay, which the company clarified meant the machine-generated images are approximations rather than integrations of actual facial data. The company added that once a user deletes an account, it will follow the “required rules and laws” in handling that user’s information. However, it was not clear whether that meant data would be completely wiped out, or if the new terms also applied to previously uploaded data. Zao did not publicly respond to concerns raised by users below its statement on Weibo. Shares of Zao’s parent, Momo, which is traded on the Nasdaq, fell 1.6% to $36.18 a share in Tuesday’s session in New York. A representative for Momo was not available for comment, and Zao did not respond to a CNBC request for comment via Weibo. “Zao is (in) a completely uncharted territory,” said Jennifer Zhu Scott, founding principal of Radian Partners, a private investment firm focusing on artificial intelligence. The company’s future will not likely be easy due to rising distrust of technology, she added.

Danger of deepfakes


Company: cnbc, Activity: cnbc, Date: 2019-09-04  Authors: grace shao evelyn cheng, grace shao, evelyn cheng
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China takes cautious steps with new tariffs, leaving most to December

A cargo ship holds shipping containers as other containers sit at the Port of Los Angeles, the nation’s busiest container port, in September 2018. BEIJING — China is moving slowly in the implementation of retaliatory tariffs as trade tensions with the U.S. escalate. However, the proportion of tariffs that kicked in on Sunday only account for about one third of the more than 5,000 product lines listed in the latest announcement. The increases are part of the Ministry of Finance’s Aug. 23 announce


A cargo ship holds shipping containers as other containers sit at the Port of Los Angeles, the nation’s busiest container port, in September 2018. BEIJING — China is moving slowly in the implementation of retaliatory tariffs as trade tensions with the U.S. escalate. However, the proportion of tariffs that kicked in on Sunday only account for about one third of the more than 5,000 product lines listed in the latest announcement. The increases are part of the Ministry of Finance’s Aug. 23 announce
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China takes cautious steps with new tariffs, leaving most to December

A cargo ship holds shipping containers as other containers sit at the Port of Los Angeles, the nation’s busiest container port, in September 2018.

BEIJING — China is moving slowly in the implementation of retaliatory tariffs as trade tensions with the U.S. escalate.

The Chinese government pushed ahead Sunday with increased duties of between 5% and 10% on a variety of major American goods exported to China, including soybeans and crude oil.

However, the proportion of tariffs that kicked in on Sunday only account for about one third of the more than 5,000 product lines listed in the latest announcement. The majority of the duties will take effect Dec. 15, and China’s plans to reinstate tariffs on U.S. autos and auto parts will also not take place until that time.

A report by Panjiva, a supply chain data company that’s part of S&P Global Market Intelligence, pointed out that the products in the Sept. 1 group may have been chosen since those items saw some recovery in shipments rather than further decline. The Aug. 27 analysis pointed out that U.S. exports in the Sept. 1 group fell by 15.2% in the second quarter from a year ago, versus a drop of 20.4% for the Dec. 15 group.

The increases are part of the Ministry of Finance’s Aug. 23 announcement for retaliatory tariffs on $75 billion worth of U.S. goods. A portion of President Donald Trump’s latest tariff increases also took effect Sunday.

Essentially, all $550 billion worth of Chinese exports to the U.S. are set to be subject to duties when another round is implemented in December.


Company: cnbc, Activity: cnbc, Date: 2019-09-02  Authors: evelyn cheng
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China says it’s willing to resolve the trade war with a ‘calm attitude,’ hints it won’t retaliate for now

BEIJING — China is willing to calmly resolve the trade dispute with the United States and is against any further escalation in tensions, Gao Feng, spokesman for China’s Ministry of Commerce, said Thursday. “We firmly reject an escalation of the trade war, and are willing to negotiate and collaborate in order to solve this problem with a calm attitude,” Gao said, according to a CNBC translation of his Mandarin-language remarks. He noted that the Chinese and U.S. trade delegations have maintained


BEIJING — China is willing to calmly resolve the trade dispute with the United States and is against any further escalation in tensions, Gao Feng, spokesman for China’s Ministry of Commerce, said Thursday. “We firmly reject an escalation of the trade war, and are willing to negotiate and collaborate in order to solve this problem with a calm attitude,” Gao said, according to a CNBC translation of his Mandarin-language remarks. He noted that the Chinese and U.S. trade delegations have maintained
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China says it's willing to resolve the trade war with a 'calm attitude,' hints it won't retaliate for now

BEIJING — China is willing to calmly resolve the trade dispute with the United States and is against any further escalation in tensions, Gao Feng, spokesman for China’s Ministry of Commerce, said Thursday.

“We firmly reject an escalation of the trade war, and are willing to negotiate and collaborate in order to solve this problem with a calm attitude,” Gao said, according to a CNBC translation of his Mandarin-language remarks. He noted that the Chinese and U.S. trade delegations have maintained “effective” communication.

But he did not confirm a claim from President Donald Trump on Monday which said the Chinese team had called the U.S. over the weekend with the desire of reaching a deal soon. China’s Ministry of Foreign Affairs has previously said it is unaware of the call that Trump described.

“China has plenty of means for counter measures, but under current situation, the question that should be discussed right now is about removing the U.S.’ new tariffs on $550 billion Chinese goods to prevent escalation of the trade war,” Gao said.

His comment came after Trump on Friday threatened to raise duties on $250 billion in Chinese goods to 30% from 25% and increase tariffs on another $300 billion in products to 15% from 10%, in response to Chinese retaliation.

Gao indicated the Chinese are more interested in negotiations than they are on retaliating, highlighting the need to prevent further escalation.

Tensions between the world’s two-largest economies escalated late last week and into the weekend with each country announcing plans to increase tariffs on billions of dollars’ worth of goods from the other.

“At present, there have been quite a lot of all kinds of sayings. In the area of economics and trade, we will clarify the facts and let everyone understand the truth,” Gao said. He declined to confirm whether Trump’s comments counted among such sayings.

The last publicly known high-level call between both delegations was on Aug. 13. The Ministry of Commerce said at the time in a statement that a similar call was planned within two weeks. The two sides were also expected to meet face-to-face in September.

However, after the latest escalation it is still not clear how close the U.S. and China are to taking another step forward in negotiations. When asked Thursday about whether the two sides will meet in September, Gao said both are discussing the matter.


Company: cnbc, Activity: cnbc, Date: 2019-08-29  Authors: evelyn cheng
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Trump wants US companies to leave China. Here’s what it could mean for Chinese businesses

A Chinese denim factory STR | AFP | Getty ImagesBEIJING — As trade tensions rise, American firms are facing an increasingly complex environment in China, while Chinese companies are looking for ways to adapt — all that may present new opportunities for Chinese businesses, analysts say. “I’m convinced the China-U.S. trade tensions is a long-term situation,” said Wei Jianguo, a former vice minister at the Ministry of Commerce. If investors are concerned about the impact of escalating trade tension


A Chinese denim factory STR | AFP | Getty ImagesBEIJING — As trade tensions rise, American firms are facing an increasingly complex environment in China, while Chinese companies are looking for ways to adapt — all that may present new opportunities for Chinese businesses, analysts say. “I’m convinced the China-U.S. trade tensions is a long-term situation,” said Wei Jianguo, a former vice minister at the Ministry of Commerce. If investors are concerned about the impact of escalating trade tension
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Trump wants US companies to leave China. Here's what it could mean for Chinese businesses

A Chinese denim factory STR | AFP | Getty Images

BEIJING — As trade tensions rise, American firms are facing an increasingly complex environment in China, while Chinese companies are looking for ways to adapt — all that may present new opportunities for Chinese businesses, analysts say. On Friday, China announced plans to impose additional duties on $75 billion worth of American goods on Sept. 1 and Dec. 15. In response, U.S President Donald Trump tweeted later that day his administration would also raise tariffs on $550 billion of Chinese imports. The latest round of tariff announcements in the last few days means that by the end of the year, essentially all Chinese goods exported to the U.S. will be subject to duties.

I’m convinced the China-U.S. trade tension … is a long-term situation. Wei Jianguo former vice minister, Chinese Ministry of Commerce

Although that adds to the burden on Chinese companies, which already face pressure from a slowdown in the domestic economy, data and other analysis indicate businesses in the mainland are finding ways to remain resilient — even if it sometimes means absorbing the costs of tariffs. “I’m convinced the China-U.S. trade tensions is a long-term situation,” said Wei Jianguo, a former vice minister at the Ministry of Commerce. He told CNBC on Sunday that while the Chinese side awaits a fair and equal trade deal, the country has made preparations to counter any negative impact from trade tensions. “We are not afraid,” Wei, who is currently vice chairman and deputy executive officer at Beijing-based think tank China Center for International Economic Exchanges, said in a Mandarin-language phone interview translated by CNBC. He laid out four ways in which China is bolstering its own businesses. They are: Increasing government support; Opening channels to other international markets through programs such as free trade zones and the Belt and Road Initiative — a Beijing-led massive infrastructure project; Developing a higher-quality operating environment for state-owned and foreign enterprises; and Implementing policies such as tax and fee cuts.

The world’s two largest economies have been embroiled in an escalating trade conflict for more than a year. While the dispute initially focused on the large U.S. trade goods deficit with China, the discussions have widened to complaints including unequal foreign access to the massive Chinese market and forced technology transfer.

What it means for China businesses

The latest retaliatory tariffs mark a reversal from an agreement between Trump and Chinese President Xi Jinping at their meeting in late June, when they agreed not to levy duties on goods from each other’s country. “That breach, and the limited movement from the US in relaxing restrictions on Huawei, means that Xi has effectively given up on efforts to curry favor with Trump,” Michael Hirson, practice head, China and Northeast Asia, at consulting firm Eurasia Group, said in a note Saturday Beijing time. “China’s leaders have likely not made a definitive decision yet to rule out a trade deal with Trump until after the US election, ” Hirson said. “However, they are increasingly skeptical about Trump’s viability as a negotiating partner and (are) no longer willing to make significant concessions to appease him.”

In the short term, increased U.S. tariffs will have a negative impact on the profitability of Chinese enterprises. In the long term, if the China-U.S. trade tensions continue, they will impact the structure of the global industrial chain. Wang Zhe senior economist at Caixin Insight

U.S. stocks plunged Friday, with the Dow Jones industrial average falling more than 600 points. If investors are concerned about the impact of escalating trade tensions to American corporations, Chinese companies may start finding more business opportunities. “In the short term, increased U.S. tariffs will have a negative impact on the profitability of Chinese enterprises,” Wang Zhe, senior economist at Caixin Insight, said last Monday in written commentary to CNBC. “In the long term, if the China-U.S. trade tensions continue, they will impact the structure of the global industrial chain,” Wang added, according to a CNBC translation of the Chinese-language comments. “Of course, this will also force domestic companies to change their production methods and promote transformation and upgrading (of their operations).” Analysts noted that another consequence of the trade tensions may be that Chinese companies gain greater market share, at the expense of U.S. businesses. Already, data and company reports indicate how Chinese companies are shifting agricultural purchases away from the U.S. to other countries, especially those in Latin America. “For companies with sales exposure, they are absorbing some of the tariff cost or trying to pass it on, but they are losing business to competitors from other countries — something that is already happening,” said Jake Parker, vice president of China operations at the U.S.-China Business Council. “Ability to pass along those costs will depend on margin, availability of alternative sources, and supplier contract terms.”

Trump urges US firms to leave China

On Friday, Trump said in a tweet that U.S. companies “are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA. ” It was not immediately clear under what authority or how the president could implement such orders. “If it does however result in US companies, to one degree or another, vacating the China market that would presumably open opportunities for Chinese companies to fill the void,” Stephen Olson, research fellow at the nonprofit Hinrich Foundation, said in an email Sunday. More significantly, he said “such a move would be an unprecedented rupture in the trade and economic relationship between the two largest economies in the world” that would create uncertainty that’s bad for both Chinese and U.S. companies. While there are challenges to conducting business in China, leaving the market is not the answer, said Parker. “It is important to keep in mind that US business has been a positive example for progress in China … American companies bring ideas, values, and examples that are pervasive, consistent catalysts for progress,” said Parker. On the other hand, if U.S. companies left China, they would miss out on a major global growth opportunity. “The only way to resolve the many challenges US companies face operating in the China market is for the two sides to continue negotiations and find a compromise that removes tariffs and sets the relationship on a more stable, predictable and constructive trajectory.”

China firms looking for ways to adapt


Company: cnbc, Activity: cnbc, Date: 2019-08-26  Authors: evelyn cheng
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Here’s everything that happened over the weekend with the US-China trade war

Tensions stemming from the U.S.-China trade war escalated sharply over the last few days, with much happening as Asian markets were shut down for the weekend. The move is a response to the U.S. government’s announcement on Aug. 1 that it is adding a 10% tariff to $300 billion worth of Chinese goods. The bulk of the Chinese tariffs will take effect on Sept. 1, while the rest of the duties will be implemented Dec. 15. The tariffs were suspended this year in the wake of the meeting between Chinese


Tensions stemming from the U.S.-China trade war escalated sharply over the last few days, with much happening as Asian markets were shut down for the weekend. The move is a response to the U.S. government’s announcement on Aug. 1 that it is adding a 10% tariff to $300 billion worth of Chinese goods. The bulk of the Chinese tariffs will take effect on Sept. 1, while the rest of the duties will be implemented Dec. 15. The tariffs were suspended this year in the wake of the meeting between Chinese
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Here's everything that happened over the weekend with the US-China trade war

Tensions stemming from the U.S.-China trade war escalated sharply over the last few days, with much happening as Asian markets were shut down for the weekend.

Before U.S. stock markets open, China’s Ministry of Finance announces on its website that it will apply new tariffs of between 5% and 10% on $75 billion worth of goods from the United States.

The move is a response to the U.S. government’s announcement on Aug. 1 that it is adding a 10% tariff to $300 billion worth of Chinese goods. Washington eventually delays some of those tariffs, saying they will be implemented in two tranches: on Sept. 1 and Dec. 15.

The bulk of the Chinese tariffs will take effect on Sept. 1, while the rest of the duties will be implemented Dec. 15.

The tariff increases cover U.S. goods such as peanut butter, raisins, skateboards, life jackets, old clothes and treadmills.

At least some of the items were previously mentioned in tariff lists released in May.

Also on Friday, the Chinese Ministry of Finance announces that a 25% tariff on U.S. automobiles and auto parts will be reinstated Dec. 15. The tariffs were suspended this year in the wake of the meeting between Chinese President Xi Jinping and U.S. President Donald Trump in Argentina at the end of 2018.

As an annual meeting of central bankers in Jackson Hole, Wyoming, wraps up, Trump tweets: ‘Who is our bigger enemy,’ Fed Chairman Powell or Chinese President Xi?

Trump then tweets that U.S. companies are “ordered” to immediately start looking for an alternative to China.

“Our Country has lost, stupidly, Trillions of Dollars with China over many years. They have stolen our Intellectual Property at a rate of Hundreds of Billions of Dollars a year, & they want to continue. I won’t let that happen! We don’t need China and, frankly, would be far better off without them. The vast amounts of money made and stolen by China from the United States, year after year, for decades, will and must STOP.”

“Our great American companies are hereby ordered to immediately start looking for an alternative to China, including bringing your companies HOME and making your products in the USA.”

“I will be responding to China’s Tariffs this afternoon. This is a GREAT opportunity for the United States.”


Company: cnbc, Activity: cnbc, Date: 2019-08-26  Authors: evelyn cheng
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Trade war is turning China’s local manufacturers to the domestic market, says e-commerce giant JD.com

As JD.com seeks to tap the growth potential of China’s smaller cities, the pressure is on to undercut competitors on price and quality. Meanwhile, Chinese manufacturers are finding it more expensive to sell to the U.S. given tariffs imposed on billions of dollars’ worth of goods. “Given perhaps the trade tension, more and more manufacturers will actually turn their attention to (the) domestic market,” said Sidney Huang, JD.com’s chief financial officer. Importantly, JD.com’s margin ticked up sha


As JD.com seeks to tap the growth potential of China’s smaller cities, the pressure is on to undercut competitors on price and quality. Meanwhile, Chinese manufacturers are finding it more expensive to sell to the U.S. given tariffs imposed on billions of dollars’ worth of goods. “Given perhaps the trade tension, more and more manufacturers will actually turn their attention to (the) domestic market,” said Sidney Huang, JD.com’s chief financial officer. Importantly, JD.com’s margin ticked up sha
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Trade war is turning China's local manufacturers to the domestic market, says e-commerce giant JD.com

Several boxes of goods, bought from JD.com, are stacked on the floor.

BEIJING — Chinese e-commerce giant JD.com sees a business opportunity in factories that have been affected by trade tensions between the world’s two largest economies, the company’s chief financial officer told CNBC on Wednesday.

As JD.com seeks to tap the growth potential of China’s smaller cities, the pressure is on to undercut competitors on price and quality. Meanwhile, Chinese manufacturers are finding it more expensive to sell to the U.S. given tariffs imposed on billions of dollars’ worth of goods. Chinese exports to the U.S. have fallen for eight straight months, according to China Customs data from Wind Information.

“Given perhaps the trade tension, more and more manufacturers will actually turn their attention to (the) domestic market,” said Sidney Huang, JD.com’s chief financial officer.

“This is a phenomena actually already happening for quite some time, slowly, that there are excess capacities for those manufacturing facilities,” Huang said. “So there are a lot of very, very low-priced products at good quality they used to produce (as) branded products for global brands. So we think it’s a good opportunity for us to reach down to those quality manufacturers, so we can provide those products at a really good value to our consumers.”

JD.com’s shares surged nearly 13% in New York trading overnight after the company delivered second quarter numbers showing exactly what the market wanted — profitability.

On Tuesday, the Chinese e-commerce giant reported these results for the June quarter:

Net revenue of 150.3 billion yuan ($21.9 billion), a 22.9% year-on-year rise

Net income attributable to ordinary shareholders of 618.8 million yuan ($90.1 million), compared to a net loss in the same period last year.

Importantly, JD.com’s margin ticked up sharply and management raised adjusted net income guidance to between 8 billion yuan and 9.6 billion yuan for the full year. JD has reported full year losses for the past three years. That improving profitability picture helped propelled shares higher in U.S. trade on Tuesday, with the company adding about $5 billion to its market capitalization.

“The street didn’t expect them to do well on the bottom line … this is not (just) going to be the first time, it’s going to be the beginning of a new trend,” Tian Hou, founder and CEO of T.H. Capital, told CNBC’s “Street Signs” on Wednesday.

For CFO Huang, the latest results indicate that the company’s spending on warehouses, delivery people and other investments are beginning to pay off. He pointed out that fulfillment expenses as a percentage of net revenues decreased to 6.1% in the second quarter, the lowest since the company went public in 2014. The IPO was the last time Huang spoke with the media before sitting down on Wednesday with CNBC, he said.

Fulfillment costs overall did rise, even if the ratio fell. But the company also revealed Tuesday that its logistics business broke even from an operating income perspective.

“We are seeing operating leverage,” Huang said, noting that July sales numbers are pretty robust.


Company: cnbc, Activity: cnbc, Date: 2019-08-14  Authors: evelyn cheng arjun kharpal, evelyn cheng, arjun kharpal
Keywords: news, cnbc, companies, billion, turning, ecommerce, jdcom, yuan, quality, market, huang, chinese, products, war, domestic, net, trade, local, manufacturers, giant, company


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China’s central bank has one less worry after the Fed’s rate cut, analysts say

Zhang Peng | LightRocket | Getty ImagesThe U.S. Federal Reserve’s interest rate cut takes some pressure off China’s central bank, amid the multitude of challenges it already faces to keep the economy growing steadily. The People’s Bank of China is unlikely to respond with major changes to its monetary policy, analysts said. The Fed cut its benchmark interest rate on Wednesday New York time for the first time since 2008. The greater challenge is the (Chinese) central bank has many goals and needs


Zhang Peng | LightRocket | Getty ImagesThe U.S. Federal Reserve’s interest rate cut takes some pressure off China’s central bank, amid the multitude of challenges it already faces to keep the economy growing steadily. The People’s Bank of China is unlikely to respond with major changes to its monetary policy, analysts said. The Fed cut its benchmark interest rate on Wednesday New York time for the first time since 2008. The greater challenge is the (Chinese) central bank has many goals and needs
China’s central bank has one less worry after the Fed’s rate cut, analysts say Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-08-01  Authors: evelyn cheng
Keywords: news, cnbc, companies, rate, analysts, say, china, peoples, zhu, chinas, fed, bank, policy, central, yield, measures, worry, cut, feds


China's central bank has one less worry after the Fed's rate cut, analysts say

Zhang Peng | LightRocket | Getty Images

The U.S. Federal Reserve’s interest rate cut takes some pressure off China’s central bank, amid the multitude of challenges it already faces to keep the economy growing steadily. The People’s Bank of China is unlikely to respond with major changes to its monetary policy, analysts said. Instead, the central bank can worry less about the key U.S. dollar-yuan exchange rate, amid drawn-out trade tensions between the two countries, a slowdown in economic growth and criticism China keeps its currency artificially weak to boost exports. Rates overall are in a downward trend, Zhu Chaoping, a global market strategist at J.P. Morgan Asset Management said in Mandarin, according to a CNBC translation. Among multiple policy measures, the People’s Bank of China can step back on foreign exchange policy and put more focus on other measures, such as increasing financing to small and medium-sized enterprises, Zhu said.

The Fed cut its benchmark interest rate on Wednesday New York time for the first time since 2008. However, contrary to market expectations that the move was a signal that there will be further rate cuts ahead, Fed Chairman Jerome Powell called the decision a “midcycle adjustment to policy.” Some investors interpreted the move as indicating tighter monetary policy than expected, and major U.S. stock indexes fell by more than 1% on Powell’s commentary. The rate-sensitive 2-year Treasury yield jumped to its highest since late May, while the 10-year Treasury yield fell, causing the so-called yield curve to flatten. The U.S. dollar index hit its highest in more than two years. Matt Toms, chief investment officer of fixed income at Voya Investment Management, said the market moves were likely an overreaction. “We would look to the Fed to come out and talk more about the lack of inflation,” he said. “That should help weaken the dollar, steepen the yield curve.”

The greater challenge is the (Chinese) central bank has many goals and needs many policies to achieve these goals. This is a lot more complex than the Fed. Zhu Chaoping JP Morgan Asset Management

On Thursday, the People’s Bank of China set the yuan’s midpoint slightly weaker against the greenback, at 6.8938. The currency has remained in a relatively narrow range this year, about half a percent weaker against the dollar for the year so far, according to Wind Information. Ma Yan, researcher at Chinese brokerage Nanhua Futures, said it expects greater pressure on the yuan, but noted the economy is not doing so poorly as to warrant a significant devaluation. In a Chinese statement translated by CNBC, Ma also said that if economic growth slows in the third or fourth quarter, a central bank cut to the reserve requirement ratio — or the amount that banks need to set aside as reserves — is a possibility. Some other loosening measures may also be possible.

More complex for China


Company: cnbc, Activity: cnbc, Date: 2019-08-01  Authors: evelyn cheng
Keywords: news, cnbc, companies, rate, analysts, say, china, peoples, zhu, chinas, fed, bank, policy, central, yield, measures, worry, cut, feds


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US companies are increasingly interested in China’s big import event despite trade war

Giant Panda statues at the China International Import Expo (CIIE) — held from Nov. 5 to Nov. 10, 2018 at the National Exhibition and Convention Center in Shanghai, China. BEIJING — American companies remain keen on tapping business opportunities in China , despite the trade tensions between the two countries. More than 170 American companies participated, making the U.S. one of the top three countries represented, Ren said in Mandarin, according to a CNBC translation. However, it’s doubtful whet


Giant Panda statues at the China International Import Expo (CIIE) — held from Nov. 5 to Nov. 10, 2018 at the National Exhibition and Convention Center in Shanghai, China. BEIJING — American companies remain keen on tapping business opportunities in China , despite the trade tensions between the two countries. More than 170 American companies participated, making the U.S. one of the top three countries represented, Ren said in Mandarin, according to a CNBC translation. However, it’s doubtful whet
US companies are increasingly interested in China’s big import event despite trade war Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-07-29  Authors: evelyn cheng
Keywords: news, cnbc, companies, trade, increasingly, american, tensions, war, interested, chinese, big, china, import, event, countries, companies, purchases, expo, despite, chinas


US companies are increasingly interested in China's big import event despite trade war

Giant Panda statues at the China International Import Expo (CIIE) — held from Nov. 5 to Nov. 10, 2018 at the National Exhibition and Convention Center in Shanghai, China.

The narrative also ties into one of U.S. President Donald Trump’s primary complaints in the ongoing trade dispute: The large American trade deficit in goods with China, which the U.S. Census Bureau said increased to $419.5 billion last year from $375.4 billion in 2017. The countries’ ongoing negotiations have in part centered on efforts to get China to increase its purchases of American products, particularly in agriculture.

China’s first such import expo was held in Shanghai last year in a bid to boost the country’s profile as a buyer of the world’s goods, rather than the role of exporter, which it has held for years.

More U.S. companies than last year plan to participate in this November’s China International Import Expo, Ren Hongbin, assistant minister of commerce and deputy director of the expo’s organizing committee office, said Friday at a press event.

BEIJING — American companies remain keen on tapping business opportunities in China , despite the trade tensions between the two countries.

“We have heard very positive feedback from U.S. companies who participated in (the import expo) last year,” Jake Parker, vice president of China operations at the U.S.-China Business Council, said in an email to CNBC.

“Significant numbers of purchases made at last (year’s) event were fulfilled and fully executed,” Parker said. “These commercial opportunities led to an uptick in interest from USCBC members to participate in 2019.”

Last year’s massive exhibition claimed to host more than 3,600 businesses from 172 countries, with a total $57.83 billion in purchase agreements signed. More than 170 American companies participated, making the U.S. one of the top three countries represented, Ren said in Mandarin, according to a CNBC translation.

“According to what we know so far, the majority of agreements have already been completed,” Ren said. “There are still some agreements and contracts in the process of being carried out because they are a one-year agreement.”

State-owned enterprises and regional governments accounted for the bulk of professional buyers at last year’s expo, and are expected to play a significant role at this year’s as well.

“(U.S. companies’) participating in this event would be a pretty important demonstration of commitment to the Chinese market,” Nick Marro, analyst at the Economist Intelligence Unit, said in an email. “It also signals a strong interest among U.S. corporates in resuming a sense of ‘normalcy’ — i.e., to how things were before the trade war — even though returning completely to the pre-tariffs status quo looks unlikely.”

The U.S. and China have each slapped tariffs on billions of dollars’ worth of goods from the other amid the trade tensions that have lasted for more than a year. In addition to reducing the trade deficit, the Trump administration would like China to improve the business environment for foreign companies by addressing complaints on issues such as forced technology transfer, a lack of intellectual property protection and an uneven playing field in a system controlled by the state.

Representatives from both countries are set to meet in Shanghai this Tuesday and Wednesday to discuss trade.

On the deficit front, China appears intent on signalling greater purchases, although it’s unclear how large such deals are. State-run news agency Xinhua said Sunday in an English-language report that “since July 19, some Chinese firms have inquired with U.S. suppliers about the new purchases of U.S. farm produce including soybeans, cotton, pork and sorghum.”

“Additional deals are expected to be made as long as the U.S. products are reasonably priced and of premium quality,” the article added.

However, it’s doubtful whether more Chinese buying from U.S. companies can play a significant role in reducing trade tensions at this point.

“The real challenge is the structural issues, in particular the difficulty in reconciling the very different U.S. and Chinese economic systems under the framework of a single set of international trade rules,“ Stephen Olson, research fellow at the nonprofit Hinrich Foundation, said in an email. “Increased orders for U.S. products at an import expo won’t do anything to help address that.”


Company: cnbc, Activity: cnbc, Date: 2019-07-29  Authors: evelyn cheng
Keywords: news, cnbc, companies, trade, increasingly, american, tensions, war, interested, chinese, big, china, import, event, countries, companies, purchases, expo, despite, chinas


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China wants to track and grade each citizen’s actions — it’s in the testing phase

Since the push to build a social credit system kicked off in earnest five years ago, a few dozen pilot programs have emerged with varying tracking metrics, and consequences for violations. Worries about misuseThe overarching concern, whether or not a social credit system reaches national scale, is the potential for abuse. Especially as technology develops, a social credit system has the potential to be far more invasive, with few checks on its power in authoritarian China. He is a co-author of t


Since the push to build a social credit system kicked off in earnest five years ago, a few dozen pilot programs have emerged with varying tracking metrics, and consequences for violations. Worries about misuseThe overarching concern, whether or not a social credit system reaches national scale, is the potential for abuse. Especially as technology develops, a social credit system has the potential to be far more invasive, with few checks on its power in authoritarian China. He is a co-author of t
China wants to track and grade each citizen’s actions — it’s in the testing phase Cached Page below :
Company: cnbc, Activity: cnbc, Date: 2019-07-26  Authors: evelyn cheng shirley tay, evelyn cheng, shirley tay
Keywords: news, cnbc, companies, wants, month, credit, system, chinese, individuals, country, grade, testing, citizens, social, china, track, scores, peoples, actions, phase


China wants to track and grade each citizen's actions — it's in the testing phase

People walk past the Public Credit Information Service Hall in Suzhou, China, on May 6, 2019. Suzhou was one of several places chosen in 2018 by the Chinese government to run a social credit trial, which can reward or punish citizens for their behavior. Qilai Shen | Bloomberg | Getty Images

The Chinese government is forging ahead with official efforts to create a national social credit system, even as several academic analysts doubt whether authorities can ever reach that goal. Beijing affirmed its commitment last month to building out social credit, a plan which has sparked fears that the government will gain overt control over ordinary people’s lives. At its core, the proposed system tries to create a standard for trust by tracking individual actions across Chinese society, and rewarding or punishing accordingly. It’s unclear how fairly such a system could impose penalties on individuals, or how easy it would be to get off blacklists. Still, authorities already claim to have the records of 990 million individuals and 25.91 million enterprises, as the central government runs up against a self-imposed 2020 deadline to formulate a nationwide social credit plan that includes the capital city. Since the push to build a social credit system kicked off in earnest five years ago, a few dozen pilot programs have emerged with varying tracking metrics, and consequences for violations. In many respects, the measures are China’s attempt to manufacture a more law-abiding society in a country where respect for contracts has a far shorter history than that of the U.S. or England. Nevertheless, the trials have sparked concerns.

Worries about misuse

The overarching concern, whether or not a social credit system reaches national scale, is the potential for abuse. China has a far from stellar human rights record. Earlier this month, 22 countries issued a joint statement calling on the world’s most populous nation to “refrain from the arbitrary detention and restrictions on freedom of movement” of ethnic minorities in Xinjiang. The region in the westernmost part of the country is known for intense surveillance and is where the United Nations last year said more than a million people were being held in “counter-extremism centres” and another two million were forced into “re-education camps.” Especially as technology develops, a social credit system has the potential to be far more invasive, with few checks on its power in authoritarian China. Still, the country hasn’t crossed that threshold yet. “At the moment, the negative consequences (e.g., the sticks, not the carrots) are only carefully used, and if, only to those businesses and individuals, who clearly broke a law,” Genia Kostka, professor of Chinese politics at Freie Universitat Berlin (the Free University of Berlin), said in an email. “So the consequences are not huge at the moment,” she said, “but the system is developing fast and more sticks can quickly be added to the system once it is running.” That sentiment was echoed by the Economist Intelligence Unit, which said in a Monday report that “the social credit system is set to become a steadily more important aspect of daily life in China, including while doing business.”

It’s not yet a sure thing

For now, however, it remains to be seen how far-reaching the social credit system will be in practice, or when it will be implemented nationally. In fact, there are some who doubt it will ever realize its stated goals. “The social credit system is such a sprawling endeavor that it may never actually be ‘done’ in any meaningful sense,” said Martin Chorzempa, research fellow, at the Washington-based Peterson Institute For International Economics. He is a co-author of the June 2018 report “China’s Social Credit System: A Mark of Progress or a Threat to Privacy?” “They are years away from having some system that integrates all government data and data from the private sector into a unified nationwide system with a single score, and they may never actually achieve that because of bureaucratic infighting over data and growing privacy concerns, ” Chorzempa said in an email to CNBC last month. Launching social credit in the capital city would be significant for the country, but little has yet been divulged about Beijing’s plans to establish individual scores for permanent residents by the end of 2020, as was announced in November 2018. The major government entities involved in creating the China-wide system, the National Development and Reform Commission and the People’s Bank of China, did not respond to CNBC requests for comment. The Municipality of Beijing also did not respond. Currently, social credit is tied to a handful of disparate initiatives. One is the stringent garbage sorting regime that took effect in Shanghai this month, according to city regulations that were adopted in January. It’s not clear to what extent individual scores will be affected by adherence to the rules, although the Communist Party newspaper People’s Daily noted that in Xiamen, multiple violations of similar waste management statutes land individuals on a so-called blacklist. It was not clear from publicly available resources what that list does. Of various government efforts to track individuals in China, the Supreme People’s Court system of issuing travel restrictions for anyone who defies a court order is the most widely used, the EIU report said. These cases typically involve unpaid debt, and prevent offenders from taking flights or traveling by high-speed rail. Critics say such punishments are not enough to prevent fraudulent behavior, while the consequences would be rather extreme if tied to, say, a few improperly sorted pieces of garbage.

Low awareness in China

Despite the many pilot programs and government-run websites such as “Credit China,” the Chinese public so far generally does not know much about the country’s plans for social credit. Dev Lewis, research associate at Digital Asia Hub, said last month that most people he spoke with in Xiamen and Fuzhou did not know such scores existed, and that less than 4% of people in Xiamen had signed up. Lewis’ findings match other recent news reports about how few people in China actually know about a social credit test that is happening in their own city. However, while he noted that more rewards for high scores could improve awareness, other academic research and anecdotes indicate many in the country favor a system that steps up punishments on wrongdoers. “An algorithm with public criteria is more transparent than systems depending on human, possibly corrupt decision making, and it is supposed to supervise officials too,” Peterson Institute’s Chorzempa said. “There is a real problem with lack of rule of law in China that affects everyone, and lets people off (without punishment) when they’ve done terrible things.” The Chinese government’s push to move forward with social credit, and launch a system in Beijing, is part of the powerful State Council’s announcement in 2014 of a “Planning Outline for the Construction of a Social Credit System.” The document called for nationwide, uniform credit information collection, and for the regulations to be established by the year 2020. The council noted e-commerce, logistics and statistics as areas in which to use a credit system to build “social sincerity.” The idea for such a program has a longer history. The first well-known test for a local social credit system in China launched back in 2010 in the rural county of Suining in the province of Jiangsu. As much as modern China has moved toward an increasingly rigid system, the local environment was vastly different just half a century ago. During the decade-long Cultural Revolution that began in the late 1960s, “Mao’s word was the law, like that of the emperors who preceded him,” Weijian Shan, CEO of investment firm PAG, wrote in his 2019 book “Out of the Gobi: My Story of China and America.” “Even now (in the 1980s) that the chaos of the Mao era had ended, laws, policies, and rules were subject to change, sometimes arbitrarily or quite suddenly,” Shan said. “There was a common expression in China at that time: ‘ji hua (a plan) cannot catch up with bian hua (change).’ The resulting uncertainty and risk necessarily led to greater social costs. ”

Testing phase


Company: cnbc, Activity: cnbc, Date: 2019-07-26  Authors: evelyn cheng shirley tay, evelyn cheng, shirley tay
Keywords: news, cnbc, companies, wants, month, credit, system, chinese, individuals, country, grade, testing, citizens, social, china, track, scores, peoples, actions, phase


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