Trade War with China

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now I read this
Opinion 12:14, 15-May-2019
U.S. protectionism is a blessing in disguise for China
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Although the International Monetary Fund (IMF) is warning Washington's trade war is one of the greatest hinders to global growth this year, President Donald Trump continues to brag about his renewed trade fight with China. He doesn't give a toss if the unnecessary escalation thrusts the world's largest economies back into confrontation either.

In such a world, always in your face, the trade dispute could be a blessing in disguise for China. It makes no sense any longer for a country that has achieved a lunar milestone by sending a spacecraft to the dark side of the moon to continue to be "the workshop of the world" or only host "mid-tech" industries and manufacturers, or worse, play in the populist playing field of the Trumps of this world.

China, of course, has the right to tighten the noose and rightly increase its own tariffs on American goods. At the same time, the manufacturing superpower can leave the door open for negotiators to try and reach a deal before the new tariffs come into effect. On balance, everyone knows how Trump's tariffs are raising taxes on American consumers, threatening millions of American jobs that are dependent on global chains, and destroying American farmers' lives in rural communities.

The question remains: Is China, as a leader in quantum research and with its own successful space programs, going to focus on how much it can retaliate on American goods until a real deal is reached with Washington to guarantee its manufacturing future? Or can the world's leading exporter of goods rise to the challenge and ascend to the next level? More precisely, can China adjust its economic growth model so that it depends less on product exports and more on high-value services and high technology?

Surely, the world's leading exporter of goods doesn't wish to remain the world's leading exporter of goods forever. It is precisely here that Trump's protectionism does indeed become a blessing in disguise for China and its sheer scale and potentials in high-tech, scientific and innovative fields.

Under President Xi Jinping's vision, by 2030 China should become a leading player in science and technology and a leading innovator in the world. In his words: "Great scientific and technological capacity is a must for China to be strong and for people's lives to improve. The country and even humankind won't do without innovation, nor will it do if the innovation is carried out slowly."

Fast forward to Trump's self-destructive trade dispute and China faces a harsh reality check in maintaining its global competitive edge. It is clear that Trump's 19th-century policy of protectionism in the form of tariffs and trade fight is here to stay as it is not just with China. Ahead of his reelection bid in 2020, Trump says he will continue his trade and tariff wars on other fronts, including with Canada, Mexico, the European Union and Japan, and with so many others in between.

In pure attention terms, this should be a wake-up call for China to seize upon the chance to accelerate national and international efforts to realize President Xi's 2030 vision: Make technology innovation the main priority and move up from manufacturing and "mid-tech" industries value chain to higher-tech, higher-value products.

To this end, China needs to invest more in next-generation Industry 4.0 manufacturing technologies, such as cyber-physical systems, the Internet of Things, cloud computing and cognitive computing. China can and should also adopt world-class practices in technology and services in collaboration with private and public sectors and startups.

It doesn't take a strategic mind to realize that China can double down on these high-tech projects and plans with the Belt and Road Initiative (BRI) as well, the biggest infrastructure development project in history.

China's success in implementing the BRI projects is impressive, and many governments and business leaders are devoting immense resources to take this all-encompassing initiative to the next level. With the right policy and investment support, China can further maintain its global competitive edge while participating countries can reap the benefits of their cooperation.

To understand the power of the BRI, start with its success and investment potentials. Giving a briefing on the final day of the BRI Forum in Beijing on April 27, President Xi said more than 64 billion U.S. dollars' worth of deals were signed. This followed on his opening speech, where he ensured the sustainability of BRI projects commercially and financially to improve the livelihoods of communities in participating countries.

In this increasingly unpredictable world, it's with high-tech industries that China can and should begin the long overdue transition – not with Trump's trade war and certainly not by betting on his seemingly strange and unexpected acts. Can there be any doubt that China has what it takes to climb the industrial ladder, improve its global competitive position, and account for a greater share of global technology markets and growth?

To remain globally competitive, Chinese manufacturers can and should improve innovation, boost productivity and flexibility, diversify into higher-value sectors, and move up the industrial value chain with higher-tech, innovative products and multilateral approach. To get perspective on much of everything, there's still a greater world out there for the Asian giant than the one fused to Trump and his forever trade war and tariffs.
 

B.I.B.

Captain
Most Boeing aircraft ordered by China are the 737 MAX model even. China could either speed up the C919, do a deal with Airbus to increase A320 NEO assembly and production in China, sell Russia composites so they could produce the MC-21 and sell it to China, or simply do nothing at all. Given
the wide availability of high-speed rail in China a short range small aircraft like the 737 MAX isn't strictly required. Also with oil prices at more reasonable levels, Chinese airlines can simply sit this one out and continue using their older 737 aircraft.

Might
China hasn't even hit the US where it hurts yet. Imagine they simply dropped Boeing aircraft imports. Or if they started taxing heavily transfers from US corporations in China to the US. Imagine what that would do to the likes of General Motors. GM sells more with its China joint venture than in the US. Or reduce the amount of movies and other US copyrighted media allowed to be sold in China. Under WTO rules China can do counter sanctions against US anti-competitive behavior. The case of Huawei is a perfect example of something China can and should use as grounds to sanction the US and US companies. The more targeted the counter sanctions the most effective they would likely be.

Most Boeing aircraft ordered by China are the 737 MAX model even. China could either speed up the C919, do a deal with Airbus to increase A320 NEO assembly and production in China, sell Russia composites so they could produce the MC-21 and sell it to China, or simply do nothing at all. Given the wide availability of high-speed rail in China a short range small aircraft like the 737 MAX isn't strictly required. Also with oil prices at more reasonable levels, Chinese airlines can simply sit this one out and continue using their older 737 aircraft.

I think the problem with that is, it might strike more problems in the C919 achieving certification in the US.

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gelgoog

Brigadier
Registered Member
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Mike Pompeo was in Brazil in the last couple months and you know what he wanted Brazil to do... He wanted Brazil to help the US gang-up on China and bring China to its knees with soybeans. But that would mean Brazil would lose China buying their soybeans. And that's pretty much how the world is going react to the US trying to enlist the help of other countries against China. Any country that helps the US will cut-off their nose to spite their face. No one is going to help the US allow Trump to abuse power over even close allies and he has done.

And that is with someone like Bolsonaro who was put into power thanks to a coup and US funding. His son took money from US "investors" and used it in their campaigns.
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They even incarcerated the opposition leader, an ex-President, so he wouldn't run on the elections.
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gelgoog

Brigadier
Registered Member
Might
I think the problem with that is, it might strike more problems in the C919 achieving certification in the US.
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AFAIK the C919 won't have the range to fly from China to the US.
I would not count on a lot of exports for the plane either. It is really hard to displace the incumbents.
China would have to build a huge support network for the aircraft. Same reason why the Russians have had terrible luck exporting the Sukhoi Superjet.
Also, large civilian aircraft sales are often quite political in nature.

Certification will be more of an issue with the CRAIC CR929.
 
an interesting view from
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Caught between Trump and its biggest market, America’s sole rare earths mine is an unusual victim in the US-China trade war
  • MP Materials, which runs the Mountain Pass rare earths mine, said it will kick-start its own processing operation by the end of 2020
  • China last week more than doubled the import tariffs on ores and concentrates to 25 per cent, effective June 1
Updated: 10:39pm, 26 May, 2019
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MP Materials, which runs the sole operating rare earths mine in the United States, is an unusual victim in the year-long tit-for-tat trade war between the two largest economies on the planet, as the conflict looks set to open up a new battlefront over technology.

The operator of the Mountain Pass mine in California said it will kick-start its own processing operation by the end of 2020, after China last week more than doubled an import duty on concentrates to 25 per cent effective June 1. MP exports pellets – ground-up ores that contain oxides of rare earth elements – to China for processing into neodymium, cerium and other elements used in magnets, electric vehicles, smartphones and a myriad of industrial applications and electronic products.

“A 25 per cent tariff is likely to make domestic sources of rare earth ores in China more competitive, although importing ore still circumvents the mining quota and associated environmental legislation,” said David Merriman, a London-based analyst at Roskill Information Services.

MP’s strategy underscores the lopsidedness in one aspect of the complicated US-China commercial relationship, where America had run a
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when US census data began. Mountain Pass lost its two-decade dominance of the world’s rare earths supply in the mid-1980s when China began to exploit, extract and process the nation’s vast reserves, ending up with a stranglehold of about 90 per cent of global supply today.

US President Donald Trump, who ordered his administration to more than double US duties on US$200 billion worth of Chinese products to 25 per cent, had wanted to slap a 10 per cent tariff on Chinese rare earths in July, but dropped it from a long list last September.

“This trade war, and the fact that the US has not retaliated against the unilateral tariff on our products highlights [America’s] reliance on Chinese rare earth products supply,” Las Vegas-based MP Material’s chief executive, Michael Rosenthal, told the South China Morning Post. “It focuses American manufacturers’ and government officials’ attention back on what we are trying to do and can do.”

The deposits at Mountain Pass, discovered in 1949, contain cerium, lanthanum, neodymium and europium. It was exploited by Molycorp for more than half a century until the company filed for bankruptcy in 2015, as tight environmental laws in California made the processing of
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– a highly polluting and potentially radioactive process – commercially non-viable.
China’s rare earths miners and refiners, based primarily in Inner Mongolia and Jiangxi province, had been catching up with Mountain Pass since the mid-1980s, taking advantage of the country’s lax environmental laws and lower labour cost.

“Our high ore grade and quality gives us significant competitive advantage in the ease and cost of processing, but we face different cost pressures from environmental compliance, labour, waste water processing and transport,” Rosenthal said.

Still, modifying and completing the downstream processing facilities at Mountain Pass had always been a key part of MP’s business plan since it bought the mine in 2017 from Molycorp. The strategy was given added impetus last year when China imposed a 10 per cent tariff on imported ores, leaving MP in a hard place between Trump and its largest market.

MP, which sells its output primarily to Chinese processors, was able to offset the initial China tariff by reducing its fixed cost per unit of output through raising production, Rosenthal said.

Some of Molycorp’s strategic “mistakes,” such as the investments in expensive processes and facilities to extract the low-value cerium, can also be corrected with adjustments to the production lines at Mountain Pass, Rosenthal said.

“Molycorp went on the wrong path. Neodymium magnet materials should have been the focus. Cerium prices five to seven years ago were four times today’s prices. I don’t think Molycorp anticipated prices would fall so fast and for so long,” said Ryan Castilloux, managing director of rare earth and electric battery metals consultancy Adamas Intelligence.

The vast majority of the project’s downstream processing facilities for separating materials and extracting out the useful minerals has been built by Molycorp at a cost of around US$1.5 billion.

Rosenthal declined to divulge the spending required but said no fresh financing needs to be raised to complete the work.

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, a Chengdu-based rare earths producer that is listed on the Shanghai exchange, owns less than 10 per cent in MP. It provides technical advice and acts as the main distributor of MP’s products in China.
“It is worrying times for Shenghe and the other US consortium members as there is little capacity to process materials outside China,” said Merriman.

A Shenghe spokeswoman said it expects its investment return on the Mountain Pass project to be hurt by the tariff, but declined to comment on the impact on its distribution business.

Castilloux said price rises in recent days caused by trade war-related speculation has so far helped offset around half the tariff increase.

He estimated it will take less than 20 per cent of what Molycorp already spent to bring the downstream operations online.

“Magnets, used in high growth industries like electric cars, wind turbines and industrial robotics, are the most important material in the entire rare earth industry, driving 90 per cent of the total value of rare earth demand,” he said.
 
here comes this
Opinion
Time is ripe for Huawei to launch an IPO, to address political and security concerns once and for all
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  • The tech firm has said it neither needs funds nor wants a distraction but a clearer ownership structure and a chance for the public to have a stake is the best way forward
Huawei, China’s leading telecoms and consumer electronics company, has dominated headlines in the past year. The company is at the centre of the economic conflict between the United States and China, and targeted by US policymakers for its
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to the Communist Party of China. The Commerce Department recently took the dramatic step of placing Huawei on its “
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,” limiting its ability to buy critical US components.
We are in no position to judge the veracity of the allegations. What we do know is that the situation is not only untenable for Huawei, but also bad for the US-China economic relationship.

Huawei may be hampered in the short term but it is unlikely to go out of business. It claims it has long prepared for this scenario and the Chinese government may offer support during this period of disruption.

Meanwhile, Huawei continues to struggle to lift the cloud of suspicion. Even if it modifies its commercial behaviour, it cannot address the background political and security concerns that make it such a target for the US.

The futility of this situation will cause anger and frustration in China, giving credence to those who claim the US is trying to contain China's technological rise. It may even push Huawei towards even less transparency, weaker compliance with international standards and practices, and closer links with the Chinese government.

It is high time Huawei reversed this unfortunate course of events by reforming its ownership structure and publicly listing its shares. Huawei states that it has no investment from state entities and is employee-owned, controlled via the Huawei Investment & Holding Company Trade Union, whose operating guidelines are opaque. This unusual holding structure, combined with the historical reluctance of Huawei founder Ren Zhengfei to engage with the public, has only added to suspicions.

Huawei’s leadership has said the company does not need to raise funds and does not want the short-term distractions of a public listing. Yet Huawei is swimming in short-term distractions and faces the threat of being closed off from many of the world’s largest markets. Ren himself has
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he would rather shut down Huawei than have it serve as a tool for government spying. Given these stakes, is an IPO really too much of a burden?

A primary listing on the domestic A-share market and a secondary listing in Hong Kong, London or New York would be appropriate. IPOs, or initial public offerings, do involve substantial costs and Huawei would be required to make difficult and time-consuming reforms to its ownership structure. Huawei’s senior leadership team would also need to hit the road and make the case for their company. They may have to answer difficult questions about its activities and government links.

An IPO would not solve all Huawei’s problems, but it would be a substantial step in the right direction. A more open and globalised ownership structure would lead to better oversight and more transparency. Huawei could even invite foreign independent directors to its board — such as a former senior US official – to enhance its credibility. Giving public investors a stake in the company's success would also remind us that we have a mutual interest in China's peaceful rise.

A public and transparent Huawei would be better positioned to argue its case, both legally and in the court of public opinion. This may help Huawei regain access to overseas markets currently shut and evolve into the global technology leader it strives to be.

Huawei has delayed going public for far too long, helping to create its current quagmire. It is time for that to change and for the world to have a stake in China’s most important tech company. If it is unwilling to do so, Huawei will give weight to all those who say it has something to hide.
 
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