The Chinese Commerce and Foreign Affairs ministries issued strong responses on Thursday, just hours after Biden signed off on the measure targeting “countries of concern” on the basis of national security.
“China is strongly dissatisfied with and resolutely opposed to the U.S.’s insistence on introducing restrictions on investment in China,” the Foreign Affairs Ministry said in a statement, according to a CNBC translation. “This is blatant economic coercion and technological bullying.”
The Chinese Embassy in Washington called the move by the Biden administration another attempt to “politicize and weaponize trade” between the world’s two largest economies.
“The latest investment restrictions will seriously undermine the interests of Chinese and American companies and investors, hinder the normal business cooperation between the two countries and lower the confidence of the international community in the U.S. business environment,” wrote Liu Pengyu, spokesman of the Chinese Embassy in Washington, in a statement to CNBC.
He added that Beijing will closely follow the situation and called on Biden to stop attempting to “halt China’s economic development or contain China.”
The Chinese Commerce Ministry called upon the U.S. to “respect the market economy and the principles of fair competition” and to “refrain from artificially hindering global trade and creating obstacles that impede the recovery in the global economy.”
“The message is quite clear,” Eswar Prasad, a professor in international trade at Cornell University, told CNBC Thursday.
“Washington wants to use the national security imperative as a way of trying to limit the transfers of technology and investments related to technology to China, because there’s not just a national security angle, but also quite frankly, a commercial angle,” he added.
On Wednesday, Biden signed off on the executive order that limits U.S. investment and expertise in semiconductors and microelectronics, quantum computing and certain artificial intelligence capabilities in China, Hong Kong and Macao.
It comes amid an escalating race for global technological supremacy that has both national security and economic implications.
“I think it is going to have a pretty broad chilling effect on technology transfers and investments by U.S. firms in China,” Prasad said.
‘National emergency’
Biden warned in the executive order that certain American investments may contribute to “the development of sensitive technologies and products in countries that develop them to counter United States and allied capabilities.”
“I find that countries of concern are engaged in comprehensive, long-term strategies that direct, facilitate, or otherwise support advancements in sensitive technologies and products that are critical to such countries’ military, intelligence, surveillance, or cyber-enabled capabilities,” said the president, who further characterized the situation as “a national emergency.”
This is spectacularly bad timing for China.
Eswar Prasad
economics professor, Cornell University
“The investment restrictions largely mirror export controls already in place, including those that ban exports to China of machinery and software used to produce advanced semiconductors,” Gabriel Wildau, a Teneo managing director focusing on China political risk, wrote in a note to clients.
“Unprecedentedly tough restrictions that the US Commerce Department issued in October (soon to be expanded) already rendered new U.S. investment in advanced Chinese semiconductor production effectively impossible, since any such factory would need imported equipment covered by those restrictions,” he added.
During a visit to Beijing in July, U.S. Treasury Secretary Janet Yellen assured her Chinese counterparts that any curbs on U.S. outbound investments would be “transparent” and “very narrowly targeted.”
Biden’s executive order though is still some way from becoming concrete legislation.
The U.S. Treasury has been tasked to formulate exact regulations to implement the order, including defining the boundary between prohibited transactions and those that merely require notification.
Late Wednesday, the U.S. Treasury Department invited public comment to “seek early stakeholder participation in the rulemaking process” — including input on the sub-sets of national security technologies and related products to the areas of technology identified in Biden’s executive order.
The Treasury Department said it anticipates excepting certain transactions, including potentially those in publicly-traded instruments and intracompany transfers from U.S. parents to subsidiaries.
‘Spectacularly bad timing’
Biden’s executive order comes at a time when a raft of economic data has underscored slowing growth momentum in the world’s second-largest economy.
Official data Wednesday showed that China’s consumer prices fell for the first time in two years in July from a year ago, as producer prices declined on a year-on-year basis for a 10th straight month.
“I don’t think the U.S. Treasury or the [Biden] administration planned it this way, but this is spectacularly bad timing for China,” Prasad said. “Confidence is falling, growth is stalling, China seems to be sliding into a downward spiral with deflation, low growth and lack of confidence all feeding on each other.”
“This does very little to inspire confidence that China is going to be able to pull back on short-term growth. And this could also affect its long-term growth potential because China is very eager to move into high tech, higher value-added industries,” Prasad said.
As part of its plan to bolster growth, China’s top leaders have recently changed their tone on private and foreign investors, while anticipating the country’s post-pandemic economic recovery to proceed in a “tortuous” manner.
“At the moment, its domestic innovation program is not going that well. China still needs foreign technology — it needs foreign capital a lot less than foreign technology. Without foreign technology, I think it’s very difficult for China to make that leap,” he added.
— CNBC’s Evelyn Cheng contributed to this story and Amanda Macias contributed to this story from Washington.
NEW YORK (AP) — Shares of Tesla soared Wednesday as investors bet that the electric vehicle maker and its CEO Elon Musk will benefit from Donald Trump’s return to the White House.
Tesla stands to make significant gains under a Trump administration with the threat of diminished subsidies for alternative energy and electric vehicles doing the most harm to smaller competitors. Trump’s plans for extensive tariffs on Chinese imports make it less likely that Chinese EVs will be sold in bulk in the U.S. anytime soon.
“Tesla has the scale and scope that is unmatched,” said Wedbush analyst Dan Ives, in a note to investors. “This dynamic could give Musk and Tesla a clear competitive advantage in a non-EV subsidy environment, coupled by likely higher China tariffs that would continue to push away cheaper Chinese EV players.”
Tesla shares jumped 14.8% Wednesday while shares of rival electric vehicle makers tumbled. Nio, based in Shanghai, fell 5.3%. Shares of electric truck maker Rivian dropped 8.3% and Lucid Group fell 5.3%.
Tesla dominates sales of electric vehicles in the U.S, with 48.9% in market share through the middle of 2024, according to the U.S. Energy Information Administration.
Subsidies for clean energy are part of the Inflation Reduction Act, signed into law by President Joe Biden in 2022. It included tax credits for manufacturing, along with tax credits for consumers of electric vehicles.
Musk was one of Trump’s biggest donors, spending at least $119 million mobilizing Trump’s supporters to back the Republican nominee. He also pledged to give away $1 million a day to voters signing a petition for his political action committee.
In some ways, it has been a rocky year for Tesla, with sales and profit declining through the first half of the year. Profit did rise 17.3% in the third quarter.
The U.S. opened an investigation into the company’s “Full Self-Driving” system after reports of crashes in low-visibility conditions, including one that killed a pedestrian. The investigation covers roughly 2.4 million Teslas from the 2016 through 2024 model years.
And investors sent company shares tumbling last month after Tesla unveiled its long-awaited robotaxi at a Hollywood studio Thursday night, seeing not much progress at Tesla on autonomous vehicles while other companies have been making notable progress.
TORONTO – Canada’s main stock index was up more than 100 points in late-morning trading, helped by strength in base metal and utility stocks, while U.S. stock markets were mixed.
The S&P/TSX composite index was up 103.40 points at 24,542.48.
In New York, the Dow Jones industrial average was up 192.31 points at 42,932.73. The S&P 500 index was up 7.14 points at 5,822.40, while the Nasdaq composite was down 9.03 points at 18,306.56.
The Canadian dollar traded for 72.61 cents US compared with 72.44 cents US on Tuesday.
The November crude oil contract was down 71 cents at US$69.87 per barrel and the November natural gas contract was down eight cents at US$2.42 per mmBTU.
The December gold contract was up US$7.20 at US$2,686.10 an ounce and the December copper contract was up a penny at US$4.35 a pound.
This report by The Canadian Press was first published Oct. 16, 2024.
TORONTO – Canada’s main stock index was up more than 200 points in late-morning trading, while U.S. stock markets were also headed higher.
The S&P/TSX composite index was up 205.86 points at 24,508.12.
In New York, the Dow Jones industrial average was up 336.62 points at 42,790.74. The S&P 500 index was up 34.19 points at 5,814.24, while the Nasdaq composite was up 60.27 points at 18.342.32.
The Canadian dollar traded for 72.61 cents US compared with 72.71 cents US on Thursday.
The November crude oil contract was down 15 cents at US$75.70 per barrel and the November natural gas contract was down two cents at US$2.65 per mmBTU.
The December gold contract was down US$29.60 at US$2,668.90 an ounce and the December copper contract was up four cents at US$4.47 a pound.
This report by The Canadian Press was first published Oct. 11, 2024.
