CKGSB Knowledge - China Business and Economy

STUCK IN THE MIDDLE

As the Sino-US trade war heated up in the fall, the International Monetary Fund warned that the entire global economy would suffer if things got serious. But the group that has felt the effects most severely so far is the one that the United States is ostensibly trying to help: the many multinational companies doing business in China.

Apart from reducing the bulging bilateral trade deficit of the US, the Trump administration’s main justification for launching the trade war has been to force China to improve its treatment of foreign firms. Businesses continually complain of inadequate intellectual property protection, forced technology transfers and heavy subsidies for state-owned domestic competitors.

“The end goal of the US is to press China to abide by its World Trade Organization commitments and accept the norms of global trade,” says Tom Sun, an analyst at the Hong Kong-based consultancy Risk Advisory.

Yet the trade war has hit multinationals hard, with many forced to absorb much of the extra costs imposed by American and Chinese tariffs. “The trade war is having a profound impact on us—the tariffs on steel imports really hurt,” said an Asia-based executive of a global automaker, who spoke to CKGSB Knowledge on condition of anonymity.

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