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Under Biden, China faces renewed trade pressure

Inside Telecom Staff

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The U.S.-Chinese trade war isn’t going away under President Joe Biden.

Biden won’t confront Beijing right away, economists say, because he wants to focus on the coronavirus and the economy. However, Biden looks set to renew pressure over trade and technology grievances that prompted President Donald Trump to hike tariffs on Chinese imports in 2017.

Negotiators might tone down Trump’s focus on narrowing China’s multibillion-dollar trade surplus with the United States and push harder to open its state-dominated economy, which matters more in the long run, economists say. But no abrupt tariff cuts or other big changes are expected.

“I think Biden will focus more on trying to extract structural reforms,” said Louis Kuijs of Oxford Economics. “It’s going to take some time before we get any shift or explicit announcements.”

Biden is evaluating tariffs on Chinese goods and wants to coordinate future steps with allies, White House spokeswoman Jen Psaki said Monday. She gave no indication of possible changes.

“The president is committed to stopping China’s economic abuses,” Psaki said.

Trump acted on complaints that are shared by Europe and other traders, but Washington has little to show for its bruising war. It brought President Xi Jinping’s government to the bargaining table but roiled global trade, raised consumer prices and wiped out jobs.

The last major development was a year ago, when Beiing promised in the “Phase One” agreement of January 2020 to buy more soybeans and other U.S. exports and stop pressuring companies to hand over technology.

China fell short on those purchases. Amid the coronavirus turmoil, it bought about 55% of what it promised. As for tech policy, some economists say those changes matter but question whether it counts as a win. They say Beijing might have made them anyway to suit its own plans.

China faces more opposition than ever in Washington due to its trade record, territorial disputes with neighbors, crackdown on Hong Kong, reports of abuses against ethnic Muslims and accusations of technology theft and spying.

“The ground has shifted in a significant way,” said Nathan Sheets, a former Treasury undersecretary for international affairs in the Obama administration.

Katherine Tai, Biden’s choice to succeed U.S. Trade Representative Robert Lighthizer, sounded a hawkish note on China in a speech this month.

“We face stiffening competition from a growing and ambitious China,’’ said Tai. “A China whose economy is directed by central planners who are not subject to the pressures of political pluralism, democratic elections or popular opinion.’’

That means China has to make changes if wants to make progress, said Raoul Leering, global trade analyst for ING. He said that while many of Trump’s statements were “close to nonsense,” he was right that China has more trade barriers and official intervention in the economy than the United States.

“It will depend on China, the speed at which they reform and change policies, to see whether Biden will roll back trade barriers,” he said.

Chinese officials say they want better relations but have announced no potential concessions.

Foreign Ministry Wang Yi, quoted by the official Xinhua News Agency, expressed hope Washington “will regain its rationality.” A foreign ministry spokeswoman, Hua Chunying, appealed to Washington to “bring China-U.S. relations back to the right track of development as soon as possible.”

After 2 1/2 years and 13 rounds of talks, negotiators have yet to tackle one of the biggest irritants for China’s trading partners — the status of politically favored state companies that dominate industries from banking to oil to telecoms.

Europe, Japan and other governments criticized Trump’s tactics but echo complaints that Beijing steals technology and breaks market-opening promises by subsidizing and shielding companies from competition.

Those complaints strike at the heart of a state-led development model Communist Party leaders see as the basis of China’s success.

They are building up “national champions” such as PetroChina Ltd., Asia’s biggest oil producer, and China Mobile Ltd., the world’s biggest phone carrier by subscribers. The party in 2013 declared state industry the “core of the economy.”

Outside the state sector, the party is nurturing industrial leaders in solar power, electric cars, next-generation telecoms and other fields.

Beijing could offer to drop its claim to being a developing economy, a status it insists on despite having become one of the biggest manufacturers and a middle-income society, Leering said. Under WTO rules, that allows the Communist Party to protect industries and intervene more in the economy.

Giving that up “would be a very important gesture,” Leering said.

Trump’s opening shot in 2017 was a tax hike on $360 billion worth of Chinese imports. Beijing retaliated with tariff hikes and suspended soybean imports, hitting farm states that voted for Trump in 2016.

The U.S. trade deficit with China narrowed by by 19% in 2019 over a year earlier and by 15% in the first nine months of 2020.

That failed to achieve Trump’s goal of moving jobs to the United States. Importers shifted instead to Taiwan, Mexico and other suppliers. The total U.S. trade deficit dipped slightly in 2019, then rose nearly 14% through November last year.

Meanwhile, the Congressional Budget Office estimates tariff hikes cost the average U.S. household nearly $1,300 last year. Businesses postponed investments, undoing some of the benefits of Trump’s 2017 corporate tax cut.

A study by the U.S.-China Business Council and Oxford Economics found the U.S. economy lost 245,000 jobs due to the tariffs. It said even a modest reduction would create 145,000 jobs by 2025.

Trump stepped up pressure by cutting off access to U.S. technology for telecom equipment giant Huawei Technologies Ltd. and other companies seen by American officials as possible security risks and a threat to U.S. industrial leadership. Americans were ordered to sell shares in Chinese companies Washington says have links to the military.

The Communist Party responded by vowing to accelerate its two-decade-old campaign to make China a self-reliant “technology power.”

Psaki, the White House spokeswoman, said Biden also was reviewing those issues but gave no indication of possible changes.

Biden wants to hold Beijing accountable for “unfair and illegal practices” and make sure American technology doesn’t facilitate its military buildup, Psaki said.

Biden’s envoys have the option of fine-tuning Trump’s penalties by dropping some in exchange for Chinese policy changes, said Kuijs. But he and other economists say rolling back tariffs and curbs on access to technology and financial markets is unlikely to be a priority.

“It is difficult to see a U.S. reversal of the recent hawkish trends in China policy,” Sylvia Sheng of JP Morgan Asset Management said in a report.

Tech curbs are unlikely to be eased because Washington “regards China as a competitor,” said Tu Xinquan, director of the Institute for WTO Studies at the University of International Business and Economics in Beijing.

Tariff cuts look like the only short-term option, Tu said. He said Biden could defend getting rid of taxes the World Trade Organization says were improperly imposed.

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Online review platform Trustpilot chooses London for IPO

Associated Press

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Online review platform Trustpilot chooses London for IPO

Online review platform Trustpilot said Monday it plans to sell shares in London, in a stock offering that helps shore up the city’s status as a financial hub and destination for tech companies after Brexit.

Trustpilot, which is based in Copenhagen, Denmark, said it will hold an initial public offering on the London Stock Exchange to sell 25% of its shares to raise $50 million.

While not yet profitable, Trustpilot’s net loss narrowed last year as its revenue rose to $102 million. It’s aiming for a market valuation of 1 billion pounds ($1.4 billion), according to a person close to the company who was not allowed to speak publicly.

People can use Trustpilot to publicly leave feedback for businesses. One of Trustpilot’s selling points is that it doesn’t allow businesses to pick and choose which reviews are published on, or deleted from its platform, as a way to raise trust and transparency.

The company also uses technology to weed out shady posts. Last year it took down 2.2 million reviews deemed to be fake or fraudulent, 70% of which were removed by automated systems.

Trusptilot is going public as a boom in online transactions due to the coronavirus pandemic is driving demand for reviews. The company said in its registration document that COVID-19 has resulted in more web domains carrying Trustpilot reviews as well as more consumer reviews on its platform, though it came at the expense of other businesses hit by the pandemic through store closures, travel restrictions, and social distancing.

The company, which was founded in 2007, says it has hosted more than 120 million reviews for more than 529,000 websites belonging to businesses in more than 100 country and territories. Its biggest markets are the U.K. and U.S.

LONDON (AP) — By KELVIN CHAN

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Senate vetting Biden’s choice for SEC head amid stock drama

Associated Press

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Senate vetting Biden's choice for SEC head amid stock drama

President Joe Biden’s choice to head the Securities and Exchange Commission is coming before a Senate panel for his confirmation hearing at a moment when a roiling stock-trading drama has spurred clamor for tighter regulation of Wall Street.

Gary Gensler, a chairman of the Commodity Futures Trading Commission during the Obama administration, has experience as a tough markets regulator during the financial crisis. More recently he has been in the academic world. Biden’s selection of Gensler to lead the SEC signals a goal of turning the Wall Street watchdog agency toward an activist role after a deregulatory stretch during the Trump administration.

The Senate Banking Committee is weighing Gensler’s confirmation in a virtual hearing Tuesday. Also being vetted and questioned is Rohit Chopra, a member of the Federal Trade Commission who is Biden’s nominee to lead the Consumer Financial Protection Bureau.

Gensler is promising to work toward strengthening transparency and accountability in the markets. That will enable people “to invest with confidence and be protected from fraud and manipulation,” he said in written testimony prepared for the hearing. “It means promoting efficiency and competition, so our markets operate with lower costs to companies and higher returns to investors. … And above all, it means making sure our markets serve the needs of working families.”

The trading frenzy in shares of the struggling video-game retailer GameStop lifted their price 1,600% in January, though they later fell back to Earth after days of wild price swings. A number of big hedge funds had bet that GameStop stock would fall, only to be thwarted by small investors who banded together on social media with a wave of buying that sent the price up. The saga was portrayed as a victory of ordinary investors over Wall Street giants. But some lawmakers charged that the online trading platform Robinhood acted to favor its big Wall Street clients when it blocked its customers on Jan. 28 from buying GameStop shares.

The SEC is investigating. Treasury Secretary Janet Yellen convened a meeting of top federal regulators to discuss the trading turbulence and whether the way the market operates may hurt individual investors.

Allison Herren Lee, the acting SEC chair, has said the agency is examining the role that short-selling may have played in GameStop’s extreme stock moves, as well as potential stock manipulation and whether companies issuing stocks are adequately disclosing risks to investors.

The GameStop episode has bolstered political momentum in the direction of closer regulation of the securities markets, though Republican lawmakers and regulators generally will oppose new rules. Possible avenues for new rules that have been raised include requiring market players to disclose short-selling positions and restricting arrangements of payment for order flow — a common practice in which Wall Street trading firms pay companies like Robinhood to send them their customers’ orders for execution.

Gensler was a leader and adviser of Biden’s presidential transition team responsible for the Federal Reserve, banking issues and securities regulation. He doesn’t appear to face enough opposition to derail his approval by the full Senate, which the Democrats control by a slim margin.

“Gensler will tip the SEC away from making it easy for companies to raise money and toward protecting unsophisticated investors,” says Erik Gordon, assistant business professor at the University of Michigan.

Jay Clayton, a former Wall Street lawyer who headed the SEC during the Trump administration, presided over a deregulatory push to soften rules affecting Wall Street and the financial markets, as President Donald Trump pledged when he took office. Rules under the Dodd-Frank law that tightened the reins on banks and Wall Street in the wake of the 2008-09 financial crisis and the Great Recession were relaxed. Clayton also eased rules for smaller companies raising capital in the market.

With a background of having worked for nearly 20 years at Goldman Sachs, the Wall Street powerhouse investment bank, Gensler surprised many by being a tough regulator of big banks as head of the Commodity Futures Trading Commission. He imposed oversight on the $400 trillion worldwide market for the complex financial instruments that helped spark the 2008-09 crisis. Gensler pushed for stricter regulations that big banks and financial firms had lobbied against, and he wasn’t afraid to take positions that clashed with the Obama administration.

Among his likely priorities as SEC chair would be requirements for corporations to disclose their climate change risks, political spending and executive compensation. Gensler, who co-authored a 2002 book of investing advice for moderate-income people titled “The Great Mutual Fund Trap,” also could push for protections in ordinary investors’ relationships with their advisers. He may take up tighter rules for new “blank-check” offerings used by companies in developing stages to raise money in the markets, observers say.

Gensler comes armed with receptiveness to new financial technologies and cryptocurrency. As a professor of economics and management at MIT’s Sloan School of Management, he has focused research and teaching on public policy as well as digital currencies and blockchain, the global running ledgers of digital currency transactions.
WASHINGTON (AP) — By MARCY GORDON

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Huawei daughter back in Canada court in US extradition case

Associated Press

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Huawei daughter back in Canada court in US extradition case

Lawyers for a senior executive for Chinese communications giant Huawei Technologies were in court Monday arguing evidence should be introduced which would undermine the case to have their client extradited to the U.S.

Canada arrested Meng Wanzhou, the daughter of Huawei’s founder and the company’s chief financial officer, at Vancouver’s airport in late 2018. The U.S. wants her extradited to face fraud charges. Her arrest infuriated Beijing, which sees her case as a political move designed to prevent China’s rise.

The U.S. accuses Huawei of using a Hong Kong shell company called Skycom to sell equipment to Iran in violation of U.S. sanctions. It says Meng, 49, committed fraud by misleading the HSBC bank about the company’s business dealings in Iran. Much of the case centers around an August 2013 PowerPoint presentation made to a HSBC executive during a lunch in Hong Kong.

Defense lawyer Frank Addario asked the court to admit evidence he says shows officials with HSBC were aware of Huawei’s connection to Skycom and another company called Canicula Holdings Inc.

“It was widely known in the bank … that Huawei owned Skycom,” Addario told Associate Chief Justice Heather Holmes. “It sold Skycom to Canicula and thereafter Huawei controlled Canicula’s account at the bank.”

Addario said by omitting this evidence, the U.S. misled Canadian courts.

“The case put to you for the prosecution is the bank’s knowledge came from all these misleading statements by Huawei employees generally,” said Addario. “Once you see all this evidence the picture that emerges is a different picture abut the knowledge of HSBC employees generally and the decision makers.”

Canadian government lawyer Robert Frater told Holmes an extradition hearing is not a trial and said some of Addario’s comments are standard defense cross examination material.

“It is up to a trial to decide if a witness is credible and to determine what officials knew at a certain time. What my friend wants to do is to argue the trial issues,” Frater said.

Meng attended the hearing wearing a mask and an ankle tracking bracelet. She followed the proceedings with an interpreter while reading documents on her lap and taking sips of water.

Over the next several weeks, Meng’s defense team will present several justifications for halting the extradition proceedings.

On Wednesday they will be back in court to argue her arrest was politically motivated and will point to comments made by former U.S. President Donald Trump that he was using Meng as a bargaining chip to force a better trade deal with China.

Canada’s attorney general said in court documents that Trump’s comments were public statements by a president no longer in office about a possible intervention that never occurred.

Later this month, Meng’s lawyers will claim an abuse of process, saying Canada Border Services Agency officers detained and questioned Meng without a lawyer, seized her electronic devices and compelled her to give up the passcodes before her official arrest.

Her lawyers also contend the U.S. is exceeding the limits of its jurisdiction by prosecuting a foreign citizen for actions that took place in Hong Kong and that Canada was misled by the U.S. about the strength of its case.

Meng’s arrest has soured relations between Canada and China. In apparent retaliation, China detained former Canadian diplomat Michael Kovrig and Canadian entrepreneur Michael Spavor. China has also placed restrictions on various Canadian exports to China, including canola oilseed. China also handed death sentences to four Canadians convicted of drug smuggling. Kovrig and Spavor remain jailed. Meng remains free on bail in Vancouver and living in a mansion.

VANCOUVER, British Columbia (AP) — By JIM MORRIS.

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