China Woos Global CEOs as Trade War Rages On

As China further opens up to international investors, Li said restrictions on access will continue to be relaxed in more areas of the economy to create a market-oriented, law-based internationalized business environment. “As the instabilities and uncertainties of the international situation are on a rise, we need to push for the steady development of the world economy and trade, improve the global industrial chain and safeguard the peaceful global environment,” said Li, acknowledging the current trade issues.

Li called on global business leaders to expand investment in the country and share its development opportunities. Currently, China has allowed foreign capital to fully access the manufacturing industry, said Li, and the opening-up will be gradually expanded in the services sector.

Despite the positive rhetoric, however, the U.S. and other trade partners have long complained about the uneven playing field that foreign companies encounter in China. These include entry barriers to crucial sectors of the economy that favor state-backed companies, and undue pressure for technology transfer, an issues that lies at the heart of the U.S.-China trade war. Latest developments between the U.S. and China have also seen actions designed to ratchet up the pressure between the two countries prior to resuming trade talks. The U.S. placed Chinese company Huawei Technologies on its Entity List, thus restricting the company from doing business with its American suppliers without government approval. Given the substantially greater importance of the U.S. market over China for many non-U.S. global technology companies, the ban is likely to extend well beyond American borders.

China responded in due course. The government said it would soon be releasing the first batch of entities it has placed on its “Unreliable Entities List” of foreign companies, organisations, and individuals that are considered to have damaged the interests of Chinese companies for non-commercial reasons, according to the Chinese Commerce Ministry.

Global technology firms are finding themselves increasingly between a rock and a hard place. Many need rare earth metals in their products, in which China holds a near monopoly, producing 80% of the world's supply. In turn, China's fast growing tech sector is heavily reliant on U.S.-manufactured components such as processors, and critical software like Android for its mobile phones, for which there are few alternative suppliers. According to a New York Times report, prior to the Global CEO Council meeting, the Chinese government convened a meeting with top technology companies and warned them of sanctions if they cut off their technology sales to China.

Much of this may be viewed as simply strengthening negotiating positions. Chinese and U.S. officials are now expected to resume trade talks after a broad trade deal broke down in May when U.S. officials accused China of backing away from previously agreed commitments. “The heads of the two trade teams will communicate, according to instructions passed down from the two presidents,” Chinese commerce ministry spokesman Gao Feng recently told reporters.

The general consensus of the market is that it's in the long term interests of both countries to reach a deal at some stage. At that time, global business leaders will feel easier about living up to the commitments made at the Global CEO Council: strengthening cooperation with China; expanding cooperation in such fields as finance, automotives, digital economy, 5G, innovation, infrastructure and manufacturing; and jointly upholding free trade and opposing protectionism.