China’s Factory Bosses Are Wary of U.S. Market Despite Biden Win
(Bloomberg) -- China’s manufacturers are worried the U.S. under Joe Biden will remain hostile toward the nation, underscoring the deep mistrust that’s taken root since Donald Trump took office.
U.S. tariffs on billions of dollars worth of Chinese goods will be retained, as will strict restrictions on technology and investment. That’s the emerging view of Chinese factory bosses interviewed by Bloomberg News in the days since the U.S. presidential election.
Hangzhou-based Dicheng Technology Co. Ltd., a maker of bathroom cabinets, was among companies hit by Trump’s tariffs last year. According to Antony Hung, a sales manager, policy may become more predictable, but that won’t stop the company searching for new markets beyond the U.S., which accounts for around 20% of its revenue.
“We are not 100% sure what improvement Biden will bring about,” said Hung. “We are worried the same situation may occur again and we won’t dare to make the U.S. market even bigger.”
It’s a similar outlook for Li Huan, a sales manager at Wuhan-based EndoAngel Medical Technology Co. Ltd., which specializes in making medical instruments used in endoscopy. The already steep barrier for entry into the U.S. coupled with the state of political relations are among reasons it’s avoiding that market and plans instead to seek regulatory approval in Europe.
“The U.S. will definitely have a higher bar for our products, so we have not even tried,” Li said, adding she expects relations to only improve modestly under a Biden presidency.
What Bloomberg Economics Says...
“Relations between the U.S. and China continue to face uncertainties. While there may be no further abrupt escalation of trade tensions and cooperation on some areas such as the environment, tariffs may not come down quickly and decoupling may continue in some areas such as technology.”
-- Chang Shu, chief Asia economist
The incoming president will take office as his counterpart President Xi Jinping pursues a long-term vision for the Chinese economy that aims to see it double in size by 2035, driven by consumers and technological innovation. Those ambitions are part of a broad framework for a five-year economic plan and 15-year vision that was partially unveiled in October.
Whether Biden will aim to counter Xi’s economic goals as robustly as Trump did isn’t yet clear. On the campaign trail he stopped short of specifics on which parts of Trump-era China policies he would change, though he also criticized Beijing for its actions in Hong Kong, dubbed its policies toward Muslim minorities in the western region of Xinjiang “unconscionable” and called the Chinese president a “thug.”
Anyone hoping for a full reset of Trump’s tariffs or technology restrictions will likely be disappointed as Biden will recalibrate rather than rip up those policies, according to Arthur Kroeber, a veteran watcher of China’s economy and a founding partner at research firm Gavekal Dragonomics.
“President-elect Joe Biden has pledged to ‘restore’ the U.S., implicitly to its pre-Trump state,” Kroeber wrote in a note. “This will not be possible for China policy.”
Unlike the risks hanging over the U.S. growth outlook, Biden will face a relatively robust Chinese economic recovery when he assumes the presidency in January, fueled in part by American demand for Chinese-made goods -- especially medical equipment and electronics. China’s exports expanded faster than expected in October, with shipments to the U.S. alone jumping 22.5%.
While U.S. trade policy may become more predictable, analysts say it’s likely that Biden pursues a multilateral push against China with the support of allies, potentially muddying the outlook further for Chinese exporters.
It could also complicate the operations of foreign companies doing business in China. Olivier Brault, general manager for Asia Pacific at French construction materials company Soprema, said foreign companies are already nervous.
“I feel there’s a caution in foreign investment in China right now for many reasons and one of them is definitely the uncertainty of the trade war,” he said.
For now, Trump has lost office but remains in power, and the period before the handover in January will be a fragile one for U.S. and China relations, warned Wang Tao, chief China economist at UBS Group AG in Hong Kong.
“There is a considerable risk that the current U.S. administration may implement additional measures against China, some of which may be politically challenging to unwind,” she said.
Benny Xiao, a director of international operations at Wuhan Boyuan Paper & Plastic Co., which makes disposable cups, said he isn’t expecting any quick tonic for the U.S. dispute. Instead, he believes China needs to be able to grow more on its own.
“With Biden elected, I hope there will be a slight shift in policies,” Xiao said. “But I have no illusions.”
©2020 Bloomberg L.P.