Daily Management Review

US Businesses Claim China Is "Uninvestible," According To The USB Commerce Secretary


US Businesses Claim China Is "Uninvestible," According To The USB Commerce Secretary
U.S. corporations have complained to Gina Raimondo, the secretary of commerce for the United States, that China has become "uninvestible," citing fines, raids, and other steps that have made doing business in the second-largest economy in the world dangerous.
The remarks were the bluntest Raimondo has made on her trip, and they painted a grim image of how American businesses regard China as her party of U.S. officials travelled from Beijing to Shanghai.
"Increasingly I hear from American business that China is uninvestible because it's become too risky," she said. Raimondo said American firms are facing new challenges, among them "exorbitant fines without any explanation, revisions to the counterespionage law, which are unclear and sending shockwaves through the U.S. community; raids on businesses – a whole new level of challenge and we need that to be addressed."
She disputed any similarities to U.S. export restrictions, claiming that "no rationale given" had been provided for Chinese steps against chipmaker Micron Technology (MU.O), whose exports were blocked by Beijing early this year. Due process hasn't been given much weight, which is why I brought it up.
An inquiry for comment was not immediately answered by the Chinese embassy in Washington.
The commerce secretary is the most recent member of the Biden administration to travel to China in an effort to improve relations, particularly in the areas of economy and defence, amid worries that tension between the two superpowers could get out of hand.
The United States, according to Raimondo, does not wish to sever ties with China. She continued, "We can't put all of our eggs in one basket.
Prior to Raimondo's remarks, John Ramig, a partner at the law firm Buchalter with decades of experience in international commercial transactions, including the structure of international sourcing and manufacturing operations, stated that many companies do not intend to expand in China.
"I don't have one client wanting to invest in China. Not a single client. Everyone is looking to either sell their Chinese operation, or if they're sourcing products in China, they're looking for an alternative place to do that. That's dramatically different from what it was even five years ago.”
In the Great Hall of the People earlier that day, Raimondo addressed Chinese Premier Li Qiang, saying: "There are other areas of global concern, such as climate change, artificial intelligence, and the fentanyl crisis, where we want to work with you as two global powers to do what's right for all of humanity."
For many years, businesses have been at the centre of a power struggle between the two nations. While the United States claims that export restrictions are necessary to protect its national security, China has criticised U.S. efforts to restrict China's access to sophisticated semiconductors through export controls.
The United States is also encouraging automakers to relocate their supply chains out of China by leveraging electric vehicle tax laws, investing billions in subsidies to increase American semiconductor manufacture, and adopting other steps, such as a new executive order, to do so.
Beijing is also limiting the shipments of well-known chipmaker Micron, delaying Intel Corp.'s acquisition of another chipmaker, effectively killing the deal, and raiding and fining American company Mintz Group $1.5 million for performing "unapproved statistical work." She previously blamed the Chinese government for Boeing's inability to deliver and collect payment for 85 737 MAX jets bought by Chinese clients years ago.
Formerly the two countries' main trading partners, Washington today conducts more business with neighbours Canada and Mexico, while Beijing conducts more business with Southeast Asia.
"All of that creates uncertainty and unpredictability," Raimondo said of recent Chinese actions. "So businesses look for other opportunities, they look for other countries, they look for other places to go." Referring to both old and new business restrictions, Raimondo said, "The sum total of which is making China feel too risky for them invest."
Chinese officials might take exception at the remarks. Last year, JP Morgan incorrectly referred to Chinese internet companies as "uninvestible" in a research note, which contributed to a dramatic decline in the value of those companies' stocks. JP Morgan eventually acknowledged the error and apologised.
In regards to Boeing, Intel, or Micron, Raimondo claimed she had not received any guarantees. "I was extremely clear about what we expected. I believe you heard me, Raimondo said. "We need to watch to see if they act."