China and the World

Return to sender

China plans blacklist as US trade tension escalates – will FedEx be on it?


Delivery problems

Two weeks after the Trump administration put Huawei on an export blacklist, the Chinese have struck back by announcing a hit-list is being compiled of “unreliable entities”.

The authorities haven’t finalised which companies might feature, but have warned that they will target firms or individuals that don’t obey market rules or act in ways that harm the legitimate interests of Chinese companies or China’s national security.

On Monday the Global Times led the speculation about who might make it onto the “unreliable entity list’. The initial focus is likely to be relatively narrow, it thought, but anyone that joins the blockade of parts to Huawei is a prime candidate. Intel, Qualcomm and Microsoft are some of the potential targets, the newspaper predicted, along with another 29 US-based firms that are Huawei’s core suppliers.

Elsewhere there was confusion about what to do next: Toshiba called a halt to sales of some of its components to Huawei before resuming them shortly afterwards, while Panasonic put out a statement confirming it was still doing business with Huawei, despite an earlier notice suggesting that it would have to stop.

Amid the uncertainty, the first shots were fired at an unexpected party last Saturday – FedEx, the US logistics and delivery giant.

This followed reports in the state media that two packages of documents sent to Huawei from Japan had been deliberately diverted to the US. FedEx had also diverted two more parcels sent from Vietnam, it was alleged.

FedEx responded that the mix-ups were internal errors, and not a rerouting requested by an external party. However, the Wall Street Journal has since claimed that the packages were mishandled after changes made to comply with the Trump administration’s crackdown on Huawei.

That was already the suspicion in Beijing, where Ma Junsheng, head of the State Postal Bureau, told state television that an investigation was needed to protect the lawful rights of Chinese companies and their customers. Although officials have been coy about the case, newspapers have been making the link to the trade and tech rows more explicit, including Xinhua’s official weibo posts on the probe, which were hashtagged #ChinaUSTrade and #RetaliateAgainstUSTradeBullying.

On Wednesday, Ford’s China joint venture was hit by a $24 million fine for antitrust violations. Chinese media said the penalty, the second such action against American carmakers in three years, was another warning shot to the US government.

All of these moves are happening at a time when Chinese retaliatory tariffs have just kicked in on more than 2,400 categories of US goods, lifting duties to as much as 25%, compared with 10% previously.

Last Sunday, the Ministry of Commerce (MoC) published a new white paper on economic relations between the countries too, providing the first major rebuttal of Washington’s claims that the Chinese are to blame for the failure to reach a deal on the trade row. “It is common practice for both sides to make new proposals for adjustments to the text and language in ongoing consultations. In the previous more than 10 rounds of negotiations, the US administration kept changing its demands. It is reckless to accuse China of ‘backtracking’ while the talks are still under way,” the white paper suggested.

Despite the darkening mood, the Chinese government still isn’t flying full-throttle into battle because it wants to leave room for resolution of the row. The local media has been warned to be restrained in its reporting on the trade row and the MoC even made efforts earlier this week to downplay the ‘unreliable entities’ list, with denials that it might be used to retaliate against US companies. That was an “over-interpretation,” Wang Shouwen, a MoC vice minister said, adding that China welcomed foreign firms that operate within the law.

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