US-China trade: how raids, restrictions and the art of woo are simultaneously employed amid tense ties

After China escalated anxiety across the foreign business community by raiding consultancies and imposing restrictions on US chip maker Micron, its commerce minister moved on Monday to settle the nerves of American investors.

At a meeting in Shanghai, attended by representatives of US firms and the local American Chamber of Commerce, Wang Wentao praised the economic and trade benefits of the two countries finding ways to continue working together.

Emphasising the importance of the China market for American companies, the minister's warm message of win-win cooperation also appeared to be aimed at advancing Beijing's attempts to thaw icy trade relations with Washington, as the two sides seem prepared to move past February's "spy balloon" saga.

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Later this week, Wang could be the first high-ranking Chinese official to have bilateral face-to-face meetings with US counterparts, on the sidelines of Asia-Pacific Economic Cooperation (Apec) talks in Detroit.

And analysts say Chinese authorities are keen on ascertaining the true meaning and intentions behind comments made by US officials in the past month, regarding China's alleged "economic coercion" and US aspirations to "de-risk" its relationship with China.

"The economies of China and the United States are deeply integrated," minister Wang told delegates from Johnson & Johnson, 3M, Dow, Merck, Honeywell and AmCham Shanghai on Monday, according to a statement by the Chinese Ministry of Commerce. "It is in the fundamental interests of the two countries to conduct economic and trade cooperation on the basis of mutual respect and mutual benefit. It is also beneficial to the entire world."

The international business community, including multinationals and Wall Street banks, has long been pushing for the normalisation of trade relations between China and the US, the world's two largest economies.

Wang emphasised how China's economy is recovering, and that its market potential continues to be released, in line with Beijing's ongoing push to lure more firms from abroad. Such efforts, however, have been met with criticism by American and European lobby groups that say not enough is being done, resulting in the postponement or cancellation of investment plans in China.

On Monday, representatives of American companies met with Minister of Commerce Wang Wentao (fourth from right) in Shanghai. Photo: AmCham Shanghai alt=On Monday, representatives of American companies met with Minister of Commerce Wang Wentao (fourth from right) in Shanghai. Photo: AmCham Shanghai>

"The Shanghai meeting that Mr Wang had with American corporate executives is yet another revelation that the Chinese government resists attempts at decoupling or de-risking - by the US and some of its allies - from the Chinese economy," said Zha Daojiong, a professor of international political economy at Peking University.

"After all, relationships between countries are, in the end, about the welfare of their citizens and residents," Zha said, adding that the two countries should work harder on concrete matters such as resuming direct flights.

Zhao Xijun, a finance professor at Renmin University in Beijing, said the two countries' attempts to smooth over trade relations are a reflection of how intensely they have come under pressure from decoupling. However, Beijing is still looking for more consistency from Washington, Zhao added.

"The deterioration in US-China relations started in the trade sector, then expanded to currency, finance and technology, and the two countries certainly need to begin negotiations in the trade sector to de-escalate relations," Zhao explained.

Both economies are indeed feeling the pressure of decoupling. China is experiencing trauma to its businesses, supply chains and overseas investment markets, while the US struggles to curb inflation amid a debt-ceiling crisis.

"Yet, Beijing is getting contradictory answers," Zhao said. "It sees the US expressing its willingness to communicate while joining other economies together to suppress China.

"For the upcoming meeting [of Apec ministers in Detroit], Beijing needs clear and consistent answers from the US."

In recent months, Washington hinted at trips to China by US Treasury Secretary Janet Yellen and Secretary of Commerce Gina Raimondo.

Despite their intentions to repair ties, the strained trade relations between the two economic superpowers may not be easily mended, with Beijing's rebuke of a recent Group of Seven summit and continued investigations into US firms for security reasons.

During last week's G7 summit, countries pledged to launch a new initiative to counter "economic coercion", without naming any countries. And they also called on China to adhere to international rules with respect to issues such as Hong Kong, Taiwan, the South China Sea and human rights.

Shortly after the statement, Beijing announced a de facto ban on sales in China of Micron Technology products, including semiconductors, citing national security reasons.

This followed Beijing's high-profile investigations into several management-consulting firms, including Mintz Group and Bain & Company, based on national security claims.

"National security reviews are standard practices around the world. The Micron case has been in the making for some time," said Zha with Peking University, adding that Beijing's decision coincides with other developments in bilateral ties. "But for the market, a conclusion drawn is a sign of clarity."

In an online statement following Monday's meeting, the AmCham Shanghai said its president, Eric Zheng, "highlighted some challenges faced by American companies and offered recommendations for improvement", without giving specific details.

Emailed attempts by the Post to get comments from AmCham, as well as Johnson & Johnson, 3M, Dow, Merck and Honeywell, were not immediately returned.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2023 South China Morning Post Publishers Ltd. All rights reserved.

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