Welcome to the 162nd edition of Trade War.
New expanded espionage law spooks foreign investors as crackdown on business widens. Bain & Co. the latest victim of regulatory heavy hand. And Beijing targets firms in auditing, law, and consulting to tighten control over China’s global development narrative.
Politburo warns that weak consumer demand requires “forceful” support. And leaders talk nice to private sector companies but state enterprises the real winners on stock markets and in China this year.
Political meeting gives a shoutout to artificial intelligence and electric vehicles. Chinese EV companies already outcompeting foreign auto rivals including Tesla, Volkswagen, and Toyota. And outspoken Foxconn founder Terry Gou, in a second bid for the Taiwan presidency, says that China’s leaders “don’t want war.”
Two Takes
“Many in the U.S. are still buying a lot of Chinese products and vice versa . . . I don’t think that either for the Chinese economy or for the U.S. economy, it would be good to stop that.” - Bernard Arnault, chief executive of LVMH
“Our business community is spooked, and our members are asking, ‘Who’s next?’” -Michael Hart, president of the American Chamber of Commerce in China
Foreign companies spooked by espionage accusations
Overseas companies in China are deeply spooked by both an ongoing crackdown on firms and their executives, and Beijing’s expansion of the reach of its espionage law, report the Wall Street Journal’s Yoko Kubota and Miho Inada.
One of the latest victims: Hiroshi Nishiyama, a Japanese executive at Astellas Pharma who had lived in China for some 20 years but disappeared late last month on what was supposed to be his final day before heading home to Japan. Beijing has since announced he is being held on suspicion of espionage.
Other incidents include the recent questioning of employees at consulting firm Bain & Co in Shanghai, and earlier, a raid on the Beijing office of American due diligence company Mintz Group which saw all five of its employees detained. And in March Beijing announced it was carrying out a cybersecurity review of Boise-based semiconductor firm Micron Technology.
On April 26, China also passed an update of its anti-espionage law, apparently broadening what it covers to “documents, data, materials or items related to national security,” from its previous scope of just “state secrets and intelligence.”
“It has become even more unclear to foresee the situation, and companies are forced to be more cautious in many ways,” the then head of the Japanese Association of Corporate Executives Kengo Sakurada, said April 4.
The moves follow efforts by top Chinese officials including premier Li Qiang to woo foreign investors into the country after it reopened late last year after ending strict pandemic controls. In a speech in March the premier called China “an anchor for world peace and development. ”
“The Chinese government has continuously said it welcomes foreign investment,” says Michael Hart, president of the American Chamber of Commerce in China. . “However, a flurry of recent actions taken again US enterprises in China has sent the opposite message.”
“The amended legislation covers not just state secrets but all documents concerning national security—and it doesn’t define what constitutes national security. That, in combination with China’s willingness to weaponize globalization, makes it extremely dangerous for Western businesses to remain in China,” writes the American Enterprise Institute Senior Fellow Elizabeth Braw in an analysis of the newly expanded security law.
Aim to ‘tightly control’ China development narrative
“Chinese authorities have embarked on a campaign to bring foreign businesses to heel,
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