06 June 2019

Predictions

  • Continued hostility between US and China means Beijing will increase efforts to disrupt operations of US firms, particularly in technology sector
  • Some form of trade agreement is likely in coming months, but tit-for-tat penalties will damage longer-term business climate for US firms
  • Non-US firms will be less affected by deterioration in US-China ties, and may find increased opportunities, partly due to displacement of US firms

Analysis

The Government said it would open investigations into US delivery services firm FedEx on 1 June, after Chinese tech company Huawei accused it of diverting packages sent from Japan to China via the US without authorisation. This came a day after the Commerce Ministry said it would draft a list of “unreliable” foreign businesses and individuals who do not abide by market rules or contractual agreements. FedEx apologised for what it said was a mistake, and no details have been released about the penalties that FedEx, or prospective “unreliable” firms, might face. Separately, the Finance Ministry gave five-year tax cuts to domestic semiconductor and software companies on 22 May, in order to support the country’s domestic technology industry.

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