Wed, 17 Jul 2019

A group of chief executive officers of American corporations are in Beijing this week to meet with China's Premier Li Keqiang, as the simmering trade war ensnares companies from both countries.

The heads of chemical giant Dow, United Parcel Service, drugmaker Pfizer, Hyatt Hotels, property developer Prologis and Honeywell International, met with Li at Beijing's Great Hall of the People - home to the nation's legislature - on Thursday, according to a statement released by the Chinese government. Also at the meeting were 13 other global business leaders, including the heads of Volkswagen, Australian miner BHP, and Nokia.

The visit comes as the geopolitical tensions between the two powers enter a new phase. Since trade talks broke off in May, US President Donald Trump has ordered additional tariffs on Chinese goods, blocked local champion Huawei, and threatened to widen a ban to Chinese video-surveillance companies.

Meanwhile, Beijing has clamped down on American corporations from Ford to FedEx and said it will create a blacklist of foreign firms that damage their Chinese counterparts.

At the meeting, Li promised to open up more sectors of China's economy to foreign investment, noting that the firms in attendance had both contributed to China's economic development and profited from the local market.

The premier also reminded the companies of the scale of China's consumer market and in an oblique reference to the country's dominant position in the production of many goods, asked them to consider the current uncertainties over trade from the perspective of the global industrial supply chain.

Jilted by Trump, Xi and Kim seek upper hand before G-20 summit

The CEOs are in the Chinese capital at a key moment, a week before Trump and China's President Xi Jinping are set to meet on the sidelines of the Group of 20 summit in Japan. Trump said Tuesday that he had a "very good" phone conversation with Xi, and will hold an "extended meeting" with him in Osaka, triggering a rally in financial markets.

US Trade Representative Robert Lighthizer said on Wednesday he'll speak with his Chinese counterpart, Vice Premier Liu He, this week to prepare for the meeting between the two countries' presidents.

Company Risk

The company chieftains' visit was scheduled ahead of time and isn't necessarily a response to the tensions between the US and China over trade, people familiar with the matter told Bloomberg ahead of the meeting. Speaking on behalf of the group - which had photos taken with Li afterward - Jean-Pascal Tricoire, chairman and CEO of France's Schneider Electric SE, stressed the contribution the companies in the room made to China.

"We all employ and train people in China," he said. "We all innovate in China."

Becoming collateral damage in a geopolitical dispute is a perennial risk for foreign companies in the world's second-largest economy. South Korean firms learned that in 2017, after their government agreed to allow the US to deploy the Thaad missile-defense system - intended to safeguard against attacks by North Korea - over Chinese objections.

Korea, Canada

Brands from Hyundai to Amorepacific saw sales plunge amid boycotts, K-pop performances were canceled and retail conglomerate Lotte Shopping was forced to largely wind down its Chinese business after allowing one of its golf courses to be used for the Thaad battery.

Canada has been at odds with China since December, when its police arrested Meng Wanzhou, the chief financial officer of Huawei, in response to a US extradition request. China subsequently detained two Canadians on spying allegations, prompting firms including Royal Bank of Canada to ask employees to avoid traveling there.

Some US companies have started to explore alternatives to China. Alphabet's Google is moving some production of Nest thermostats and server hardware out of China, avoiding punitive U.S. tariffs and an increasingly hostile government in Beijing, people familiar with the matter said this month. Others, including Mattel and several solar-panel makers moved some of their manufacturing to Mexico.

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