Although his successor, Joe Biden, campaigned on the promise to end the trade war, claiming that high tariffs on Chinese imports are hurting American consumers, farmers and manufacturers, his administration now continues to enforce the China’s so-called “phase one deal”. with the Trump administration in early 2020.
The first phase commits, among other things, China to buying an additional $ 200 billion worth of exports not only of American agricultural products, but also of manufactured goods, energy and services, by the end of 2021. On time Currently, China is estimated to have purchased just over 60 percent of the goods pledged.
The phase one agreement also commits China to progress in enforcing intellectual property rights, removing non-tariff barriers to agricultural imports and liberalizing its financial services sector.
It is possible that the Biden administration is using trade tariffs as leverage in its negotiations with China. However, some former and current administration officials have told media that there is no better alternative to achieving his trade goals with China just yet. They also say that it is not opportune to cut tariffs all at once. This despite more than 30 trade associations in the United States appealing to the government and complaining that the tariffs are “expensive and onerous”. There is also a political dimension to this as the American public opinion has turned negative towards China and the tariff reduction will be considered weak for China.
The trade war has led to the diversion of foreign investment out of China in favor of Chinese competitors. Vietnam and India are the two countries that have benefited the most, and it makes sense that the two have closer political and economic ties to offset China.
Vietnam, like China, is a communist state with a planned economy and has pivoted to a similar version of free market state capitalism. This is where the parallels end. The two have enjoyed a cordial but difficult relationship. There has been some mistrust and bitterness between the two since a bloody 28-day border war between February and March 1979. Current diplomatic relations are complicated by maritime territorial disputes, security concerns, and geopolitical competition. It does not help that China has recently become more assertive in its relations with its various partners.
Last December, the Speaker of the National Assembly of Vietnam, Vuong Dinh Hue, visited New Delhi to mark the 5th anniversary of the Vietnam-India Comprehensive Strategic Partnership. He also attended the “Vietnam India Business Forum organized by the Embassy of Vietnam and Confederation of Indian Industry. To cement the relationship, a total of 12 multi-billion dollar memoranda of understanding were signed, covering areas such as pharmaceuticals, information technology, oil and gas and the environment.
In his remarks at the event, President Vuong revealed that bilateral trade turnover between India and Vietnam has grown by an average of 20% per year, and despite the complicated course of the pandemic, Trade between the two countries totaled $ 11 billion for the first 10 months of 2021, on track for an increase of around 40% year-over-year.
The trade war between the United States and China is not the only factor impacting investment in China. Perceived human rights violations in Xinjiang, erosion of Hong Kong’s autonomy, China’s zero COVID strategy, supply chain challenges and rising costs are pushing many global companies off the coast Chinese.
Research firm Gartner has revealed that by 2020, a third of supply chain leaders plan to move at least some of their manufacturing out of China before 2023. Another UBS Evidence Lab study found that ‘In 2020, 76% of US companies with factories in China were in the process of or planning to move their operations to other countries. Some of the companies that have moved or are planning to move include sportswear giants Nike, Adidas, Puma, and South Korean conglomerates Samsung and LG.
India has benefited from companies looking for alternative locations to locate their manufacturing operations. Subcontractors Apple Foxconn, Wistron and Pegatron have factories in India. The same goes for Apple’s rival, Samsung. Samsung has established large handset manufacturing plants in Noida and Sriperumbudur. The first, with a capacity of 120 million people, would be the largest mobile phone factory in the world. Reports also say it is set to inject an additional $ 90 million into its Noida plant by the end of this year.
Additionally, China is doing itself no favors by cracking down on its big tech companies, which began with the blocking of Alibaba’s fintech arm, Ant Group’s IPO in 2020. Then, last year, she lobbied app-based transportation services company Didi Chuxing. in delisting from the NYSE citing confidentiality concerns. It also introduced restrictions on private education companies. Presumably, these movements are correctly taken into account and calculated. However, this scared away investors who sold Chinese stocks.
This, coupled with the crisis in its real estate sector precipitated by struggling developer Evergrande, a slowing economy and continued strict COVID lockdowns have led to lower investor confidence in the Chinese market. Analysts say these problems are expected to continue until 2022.
Stocks of Chinese companies, especially those traded on the US market, performed poorly in 2021. The Shanghai Stock Exchange Composite Index SSE managed to achieve a gain of 4% over the full year , which is good for an index linked to Chinese companies. The FTSE ST China index which tracks companies doing business in China on the Singapore Stock Exchange remained stable, the Hang Seng index fell almost 15% while the Invesco Golden Dragon ETF which tracks 98 of the most large Chinese companies listed in the United States fell 42.4 percent. During the same period, the SENSEX climbed 20.9% and the S&P 500 rose 28.8%.
This market uncertainty has led to the diversion of technological money – venture capital funds and private equity funds – to other countries. Once again India, which was previously a second choice for investors, has benefited.
âBecause China is not in turmoil, it has drawn investors’ attention to alternatives such as India,â Timothy Moe, chief Asia-Pacific equities strategist at Goldman Sachs Group Inc. told the Financial Times.
Daulet Singh, the managing partner of Touchstone Partners who advises foreign investors, agrees. He added, âThe regulatory crackdown that China has undertaken over the past 12 months has made investors view India more favorably. But it’s not just a push, there’s a pull as well. . ”
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