Treasury Secretary Janet Yellen is on her first visit to China since taking the post in 2021. The trip comes as the world’s two largest economies remain at odds. Here are five ways tensions between the United States and China are affecting business in this week’s Five For Friday.
#5: Executive visits
Talks of decoupling from China are picking up, forcing captains of industry to traverse the Pacific Ocean to calm the rhetoric.
JPMorgan Chase CEO Jamie Dimon visited Shanghai in May to assure the Chinese the bank will remain in the country in good times and bad. It was far more conciliatory than when he suggested America’s largest bank would outlast the Chinese Communist Party.
Elon Musk made the trip around the same time and also opposed the idea of decoupling while visiting Tesla’s Gigafactory in Shanghai, where the company made more than half of the vehicles sold in 2022.
Starbucks CEO Laxman Narasimhan also made China his first stop outside of North America since taking the role last year. Narasimhan stressed the company’s long-term commitment to the country, where a new location opens every nine hours.
#4: U.S. bans Chinese tech
America has had China’s tech dominance in its sights for decades. The U.S. recently banned new telecommunications equipment from Chinese telecom giants Huawei and ZTE, citing national security risks. The government even offered reimbursement for companies that rip and replace existing Chinese tech from its infrastructure.
The Biden administration is also looking to block Chinese companies from purchasing high-end chips used in artificial intelligence made by the likes of Nvidia, AMD and Intel. And Congress passed the $280 billion CHIPS Act last year, which takes aim at China by pushing manufacturers to build facilities in the U.S.
#3: China’s retaliatory bans
Technology bans are not a one-way street. China recently banned America’s biggest memory maker Micron from its infrastructure projects, also due to national security risks. Analysts don’t believe this will have too much of an impact based on Micron’s clientele in the country, which spans far beyond government entities.
The decision came one day after G7 leaders criticized China and brought up de-risking the relationship. China also launched espionage investigations into multiple American consulting firms, including Capvision. Authorities even raided of the company’s offices in several Chinese cities. Bans are nothing new in China, most of the biggest names in tech are barred from operating there, from Google to Facebook.
#2: TikTok in the crosshairs
Talking about TikTok is all the rage on Capitol Hill, but it’s not doom scrolling that’s caught politicians’ ire. They are more fearful that China could have a backdoor into user data.
Parent company Bytedance even switched to Oracle servers to quell those concerns, but employees were apparently still able to spy on journalists.
The federal government and many states have banned TikTok on government devices. There’s an outright ban in Montana taking effect in 2024, if it makes it through legal challenges.
#1: Moving manufacturing
China has long been the leader in manufacturing output throughout the globe, but the last thing a major company wants is production slowdowns due to supply chain disruptions, COVID lockdowns or geopolitical tensions. Apple is moving some of its China-based production to other locations in southeast Asia. Microsoft shipped its latest Xbox console from Vietnam, while Amazon is shipping Fire TV devices out of India.
