President Donald Trump has issued a document in recent days instructing a top government committee to limit Chinese investment in energy, technology, and other vital American industries.
President Donald Trump has issued a document in recent days instructing a top government committee to limit Chinese investment in energy, technology, and other vital American industries. In response to Chinese companies shifting their production to the US neighbor in order to avoid the penalties the Republican imposed during his first term, the administration also urged Mexican officials to impose their own taxes on Chinese goods.
In an effort to challenge China’s hegemony in the manufacture of commercial ships, the US has suggested imposing levies on their use. Monday saw a decline in Chinese shipping companies as the benchmark CSI 300 Index moved around. At 12:30 p.m. Shanghai time, the onshore yuan increased 0.2% to 7.2359 against the dollar.
When combined, the measures represent the most extensive and aggressive moves against Beijing during Trump’s second term and may make an agreement to cut China’s trade surplus with the US more difficult to negotiate, which the president has stated he wants to do.
The most significant of the flurry of activities appears to be the memo with the instruction to the Committee on Foreign Investment in the US, a covert group that reviews bids by foreign corporations to purchase US companies or real estate. The adjustments are necessary to safeguard “the crown jewels of United States technology, food supplies, farmland, minerals, natural resources, ports, and shipping terminals,” using Beijing as a “foreign adversary.”
According to Martin Chorzempa, senior scholar at the Peterson Institute for International Economics in Washington, “Beijing is probably disappointed because it was hoping to offer significant investments in the US as a concession in a negotiation.” “This raises doubts about whether the US would welcome such an investment.”
Indeed, by the end of last year, China’s investment in North America fell below levels observed during the worst of the pandemic. This decline was probably caused by potential investors holding off on making an investment until after Trump was elected president in November. According to US-based consultant Rhodium Group, companies only announced $191 million in new investments into Canada, Mexico, and the US last quarter. This is a more than 90% decrease from the same period the previous year.
Beijing asked Washington to refrain from using economic and trade issues as weapons and to cease politicizing them after the publishing of the memorandum. The Ministry of Commerce warned that Chinese companies investing in the US would lose faith in the US government’s efforts to tighten security-related evaluations of business relationships.
A 1984 tax agreement that exempts individuals and businesses from double taxation, as well as a “variable interest entity” structure that allows Chinese corporations to list on American markets, are also cited in the paper as a reason why the US government ought to examine them.
“Removing such treaties simply makes things very complicated and uncertain for investors because they don’t know if they’re going to be taxed,” Chorzempa stated.
UBS Group AG said in a report that the memo’s proposal for new and increased restrictions on US pension and endowment fund investments in China’s high-tech industries may have an impact on businesses along the Asian country’s supply chains for artificial intelligence. James Wang and other strategists noted that the restriction might affect companies that deal with hardware, software, and the internet.
Mandates demanding that some US products be transported on American vessels are also included in the draft for a plan for taxes on Chinese-built ships that transport commercial goods. It is the outcome of an investigation of China’s shipbuilding, logistics, and maritime policies that began under the Biden administration and concluded with a report just days before Trump took office.
Due in part to domestic demand for more ships, China’s share of the world’s shipbuilding capacity has increased over the last ten years to around half of all new builds. According to analytics platform VesselsValue, the nation’s fleet was valued at $255.2 billion in January, the highest in the world. The US came in fourth place with $116.4 billion, while Japan came in second with $231.4 billion.
In Hong Kong, shares of Cosco Shipping Holdings Co., which the Defense Department had previously placed on a blacklist due to suspected ties to the People’s Liberation Army, dropped as much as 8.3% on Monday. Yangzijiang Shipbuilding Holdings Ltd., listed in Singapore, also fell.
