31 May 2019   Leave a comment

China has introduced a new weapon in the trade war with the US. Instead of using broad-based measures such as tariffs that affect the entire economy, it will now target specific companies. According to the New York Times:

“The Chinese government said on Friday that it was putting together an ‘unreliable entities list’ of foreign companies and people, an apparent first step toward retaliating against the United States for denying vital American technology to Chinese companies.

China’s Ministry of Commerce said the list would contain foreign companies, individuals and organizations that ‘do not follow market rules, violate the spirit of contracts, blockade and stop supplying Chinese companies for noncommercial reasons, and seriously damage the legitimate rights and interests of Chinese companies.’”

The move will put pressure on specific companies (and there are many US companies that operate in China). Those companies will then place pressure on their representatives in Congress and on different agencies in the Federal government. This tactic will put direct pressure on decision-makers instead of the more diffuse pressure caused by consumers complaining about price increases caused by tariffs. The Chinese government has a very good understanding of how the US government makes decisions.

The Chinese move is also a response to the US ban on the products of the Huawei corporation which the US believes distributes products that allow the Chinese government to conduct surreptitious surveillance. Global Times, a Chinese media outlet with strong ties to the Chinese government outlines the framework of the new policy:

“The US recently put Huawei on its entity list and threatened to  blacklist more Chinese high-tech companies. Meanwhile, some US companies have taken part in cutting supplies to and blocking Chinese companies. China’s non-reliable entity list comes out under this background.

“The first signal of this move is that China will never yield to US pressure and China will take active countermeasures instead of reacting passively under US suppression.

“The move also shows that China is improving laws and regulations in its contention with the US, and China can take precautions ahead of any US crackdown against Chinese enterprises.”

The move also signals that the Chinese government is looking at the trade war as something that may last a very long time. That possibility is definitely unsettling.

Posted May 31, 2019 by vferraro1971 in World Politics

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