(From left: Zhou Zhaoming, Economic and Commercial Counselor of the Chinese Embassy in Belgium; Gwenn Sonck, Executive Director of FCCC & Secretary General of the EU-China Business Association; Li Hong, Vice Chairwoman of the Shanghai Municipal Commission of Commerce; Gao Binxiang, Vice President of Eastday)

The launch ceremony for the Shanghai Overseas Promotion Center for Service Trade (SOPCST), which was initiated by Eastday and the Flanders-China Chamber of Commerce (FCCC) on June 14 marked the expansion of overseas promotion channels and the first Shanghai overseas promotion center for trade in services.

The SOPCST is a service platform supported by the Shanghai Municipal Commission of Commerce which, through its location in Brussels, Belgium, aims to form connections between the Chinese and European markets.

At the launch ceremony, Vice Chairwoman of the Shanghai Municipal Commission of Commerce, Li Hong, mentioned Shanghai’s efforts in establishing communication and interaction with Belgian and European service trade enterprises through government-enterprise cooperation.

During the ceremony Gwenn Sonck, executive director of the FCCC and the EU China Business Association, mentioned that as China’s middle-income class already counts 400 million consumers, companies can use the services of the Shanghai Overseas Center to become more known towards the Chinese consumer. Through media and internet services, such as Wechat and others, the Center can help businesses reach new customers in the city of Shanghai and in China as a whole. Similarly, Chinese companies can work together with Belgian companies to help them grow their business overseas.

In the past, the export market of Shanghai’s service industry was mainly concentrated in countries and economic centers such as the United States, Hong Kong, Macau, and Japan. However, according to Gao Binxiang, Vice President of Eastday, the newly established SOPCST aims to facilitate the development of the overseas service market for Shanghai and the promotion of communication and cooperation between EU and Chinese enterprises. This will be accomplished by supporting relevant projects through information exchange and cooperation with the respective governments and other institutions.

To keep businesses up to date with their expansion and development, SOPCST will regularly publish business information reports from Belgium and the EU, which will be promoted in China.

Eastday article: http://english.021east.com/Business/u1ai8635852_K23558.html

Presidents Donald Trump and Xi Jinping at their last meeting in Buenos Aires in December 2018

U.S. President Donald Trump and his Chinese counterpart Xi Jinping finally agreed to meet on June 29 on the sidelines of the G20 Summit in Osaka, Japan. It will provide an opportunity for both leaders to try to end or slow down the trade war between the two countries. The two leaders confirmed the meeting after a telephone conversation, made at the request of Donald Trump. The teams of both countries would already start talks prior to the meeting of the Presidents. Besides the trade war, Huawei, the principles on which the bilateral relationship should be based, and North Korea are expected to be also on the agenda. The most likely outcome on trade is expected to be similar to the one reached in Buenos Aires in December last year, when Trump and Xi agreed to a temporary truce while trade negotiators try to hammer out a deal. “The notion that we’ll get a comprehensive agreement any time before the end of this year is doubtful to me. I think we’ll see some market calming statement and a return to negotiations. So you’ll see something, I would assume, something similar to Buenos Aires,” said Charles Freeman, Senior Vice President for Asia at the U.S. Chamber of Commerce.

China has signaled its intention to not “weaponize” the yuan’s exchange rate as a message of good faith ahead of next week’s meeting, according to Stephen Innes, Managing Partner at Vanguard Markets Singapore. To prop up the yuan, the People’s Bank of China (PBOC) will sell CNY20 billion of one-month bonds and CNY10 billion of six-month bonds in Hong Kong on June 26. The U.S. had previously demanded China to limit the yuan’s depreciation.

Prior to confirmation of the meeting Trump had told CNBC that he would place tariffs on the remaining USD300 billion of currently untaxed Chinese imports should Beijing turn down the face-to-face meeting with Xi. Later he said that “it doesn’t matter if Xi Jinping agrees to meeting at G20 because U.S. is ‘collecting billions in tariffs’ from China.” Treasury Secretary Steven Mnuchin said in an interview with CNBC that President Trump would be “perfectly happy” to impose the new tariffs if China did not wish to resume negotiations. U.S. Commerce Secretary Wilbur Ross downplayed the likelihood of resolving the dispute at the G20 summit, saying it would not be “a place where anyone makes a definitive deal.” A further tranche of tariffs would bring the total value of Chinese goods subject to punitive taxes of 25% to around USD550 billion. George Magnus, Associate at Oxford University’s China Center, said that the anticipation surrounding a Trump-Xi summit in Osaka is “a mark of how far the U.S.-China relationship has deteriorated”.

The latest round of trade talks between teams led by Chinese Vice Premier Liu He and U.S. Trade Representative Robert Lighthizer took place on May 10 in Washington. Since then, both countries have imposed additional tariffs on imports and hostile rhetoric has increased. John Quelch, Dean of the Miami Business School at the University of Miami, said a face-to-face meeting between Trump and Xi “is essential, even if nothing is resolved”. “Global stock markets want assurance that communication lines remain open at the highest level between the world’s two most powerful economies,” said Quelch, who has also worked at the China Europe International Business School in Shanghai.

Hostility has also spread to the technology front after the U.S. placed Huawei on a trade blacklist, effectively banning U.S. firms from supplying the Chinese telecommunications equipment maker with hardware and software. China responded by announcing that it would launch its own “unreliable entity list” to target foreign firms that take action that harms Chinese firms for non-commercial reasons, the South China Morning Post reports.

U.S. President Donald Trump will probably want to reach a deal with China in the trade war by next year in order to avoid hurting the American economy before the 2020 elections, according to Sean Taylor, Chief Investment Officer for Asia Pacific at DWS Group, Deutsche Bank’s asset management arm. Trump’s threat to put 25% tariffs on USD300 billion of Chinese-made products later this year could hurt the U.S. economy by either forcing consumers to pay higher prices or squeezing corporate margins, he said. “If more of the tariffs start to impact the economy and the asset markets, that’s not going to be great for him going into the election,” according to Sean Taylor. Morgan Stanley said in a research note that the global economy could be in a recession within the next three quarters if the U.S. puts tariffs on nearly all Chinese-made products and Beijing responds with its own countermeasures.

China said that advocating the “decoupling” of the Chinese and U.S. economies by “a handful of people in the U.S.”, is extremely dangerous and irresponsible. Foreign Ministry Spokesperson Geng Shuang said the handful of people were sticking to a Cold War mentality and zero-sum game philosophy. Such a view is against the essence of China-U.S. relations featuring cooperation and win-win results, ignores public opinion on friendly and close exchanges between the two countries, goes against the trend of the times and is bound to fail, Geng added. He said a forced decoupling of China and the United States would inevitably disrupt the world economy and harm everyone.

Meanwhile the technology war between the U.S. and China continues. Huawei Technologies has told Verizon Communications that it should pay licensing fees for more than 230 of the Chinese telecoms equipment maker’s patents and in aggregate is seeking more than USD1 billion. The patents in question range from core network equipment and wireline infrastructure to internet-of-things (IoT) technology.

May’s escalation in trade tensions led to a sharp drop in the growth of American investment in China. According to the Chinese Ministry of Commerce (MOFCOM), U.S. investment in China grew 7.5% between January and May, year-on-year, a much slower pace than the 24.3% recorded between January and April. The rate also was significantly lower than the 16.3% growth posted for the first five months of 2018. The U.S. fell to sixth largest foreign investor in China in April from third largest in March. The trade war has caused U.S. exports to China in dollar terms for the January to May period to fall by 29.6% from a year earlier. A MOFCOM Spokesman told a press conference in Beijing that “there will be no winner in the trade war, which could cause a recession in the United States and global economies.”

Huawei Technologies has already been working seven years on the development of its own operating system (OS) for mobile phones, the South China Morning Post reports. The effort has become urgent in the past few months, as Huawei has been put on a U.S. blacklist, prohibiting U.S. companies and foreign companies with U.S. technology in their products from providing hardware and software solutions to Huawei without special U.S. government approval. The company is therefore deprived of future versions of the Android mobile operating system.

Seven years ago, a small group of top Huawei executives headed by founder Ren Zhengfei held a closed-door meeting that lasted for several days. Their mission was to brainstorm ideas on how Huawei should respond to the rising success of Google’s Android smartphone operating system (OS) around the world – software that it used on its own handsets. The underlying concern was that dependence on Android could render the company vulnerable to a U.S. ban in the future. The group agreed that Huawei should build a proprietary OS as a potential alternative to Android. This meeting was later called the “lakeside talks” internally and access to documents relating to the gathering became highly restricted last year, sources said.

A specialist OS team led by executives including Eric Xu, currently one of the three rotating Chairmen of Huawei, was established and began to work on an OS under conditions of tight secrecy. A specialized zone was created on the Huawei campus to house the OS team, with guards at the door. Only employees on the OS team had access to the specialist area, where personal mobile phones were not allowed. The OS project became an important part of Huawei 2012 Laboratories, which functions as the innovation, research and technology development arm of the company.

When the OS project started, Huawei had less than a 5% share of the global market. Now it is the world’s second-biggest smartphone supplier and shipped a total of 206 million smartphones in 2018. Huawei is now facing U.S. charges that it stole trade secrets, violated economic sanctions and concealed its Iran business dealings via an unofficial subsidiary, charges which Huawei has repeatedly denied. Google and Microsoft, whose Android and Windows software Huawei largely relies upon in its smartphones, tablets and laptops, have both suspended access for new Huawei devices. With only a 90-day reprieve from the U.S. government until supplies are completely blocked, the Chinese company has finally had to acknowledge its long-secret plans for an alternative OS.

One of the biggest technical challenges for the Huawei OS – codenamed Hongmeng in Chinese and Ark in English – has been its compatibility with Android. Compatibility would enable a Huawei phone with its own OS to download and run Android apps seamlessly, while app developers around the world would not need to develop extra code for Huawei’s OS. Past attempts by other companies – including Microsoft and Samsung – to create an Android alternative have not been successful. Huawei faces a challenging task: Google’s Android and Apple’s iOS account for 99.9% of the global market for mobile phone operating systems, the South China Morning Post reports.

Huawei, is gearing up to ship almost 225 million devices already running HongMeng or Ark OS by October 2019. A recent report from Rosenblatt Securities revealed that Huawei has already shipped around 1 million devices pre-loaded with the HongMeng OS. It will be compatible with all Android apps and pre-loaded devices will have increased security functionalities to maximize protection of users’ personal data. One source claimed that the Ark OS performed 60% faster than Google’s Android.

Huawei is also considering to use a Russian OS. Russian Telecom and Mass Communications Minister Konstantin Noskov and Huawei’s rotating Chairman Guo Ping discussed the Chinese firm’s switching to Aurora, the Russian version of the Finnish OS Sailfish, and Russian President Vladimir Putin and his Chinese counterpart, Xi Jinping, also touched on the issue during their talks. Sailfish OS was developed in 2012 by the Finnish company Jolla, founded by former Nokia staffers. In 2014, Russian billionaire Grigory Berezkin purchased a share in it after he agreed with the Russian government to develop a Russian mobile Sailfish-based OS. Sailfish is based on Nokia’s and Intel’s aborted MeeGo OS and uses only Android’s hardware layer. If it is installed on Huawei devices, they will not be able to access many Android apps because Sailfish’s compatibility layer is far from perfect. As the U.S. turns the screws on Huawei, launching its own OS has now taken on critical importance. Additionally, China and Russia are negotiating the creation of joint chip manufacturing and software development, according to RT.

Huawei, which has been accused of infringing on U.S. patenst, has now turned the IP case around against the U.S. Huawei holds 56,492 active patents on telecom, networking and other hi-tech inventions worldwide, according to Anaqua’s AcclaimIP, and it is stepping up pursuit of royalties and licensing fees as its access to American markets and suppliers is being restricted. The company is in protracted licensing talks with phone-services provider Verizon Communications and is in a dispute with chip maker Qualcomm over the value of patents. “Given Huawei’s position and the pressure they are feeling, they have nothing to lose at this point than to go after American companies in the patent arena,” said Peter Toren, a Washington-based patent lawyer. “They get poked in one area and they’re going to stick back in another to show there are consequences for this continued pressure. I don’t see how the government can stop them. They have ownership in the patents,” Toren added.

Huawei’s American chip suppliers, including Qualcomm and Intel, are quietly pressing the U.S. government to ease its ban on sales to Huawei, even as the company itself avoids government lobbying. Executives from top U.S. chip makers Intel and Xilinx attended a meeting in late May with the U.S. Commerce Department to discuss a response to Huawei’s placement on the blacklist. The ban bars U.S. suppliers from selling to Huawei without special approval. U.S. chip makers argue that Huawei units selling products such as smartphones and computer servers use commonly available parts and are unlikely to present the same security concerns as the company’s 5G networking gear. “This isn’t about helping Huawei. It’s about preventing harm to American companies,” one source said. Out of USD70 billion that Huawei spent buying components in 2018, some USD11 billion went to U.S. firms including Qualcomm, Intel and Micron Technology, the South China Morning Post reports.

From left: China Securities Regulatory Commission Chairman Yi Huiman, Chinese Vice Premier Liu He, Shanghai Party Secretary Li Qiang and Shanghai Mayor Ying Yong, celebrate the launch of the SSE STAR Market

Chinese securities regulators launched a NASDAQ-style sci-tech innovation board, a breakthrough that experts said is aimed at promoting the country’s technological power and supporting efforts by domestic companies in research and innovation amid the U.S. suppression of China’s technological development. The launch also highlights China’s resolve to further develop and invest in core technologies. The new board is known by its English name – STAR Market – in the hope that it will become a rising star in the country’s financial markets. The STAR Market will try a registration-based IPO system and will allow companies that have yet to make a profit to get listed, as in the case of NASDAQ.

To show the importance the central government attaches to the new tech board, Vice Premier Liu He attended the launch on June 13 at the Lujiazui Forum in Shanghai, with Yi Huiman, Chairman of the China Securities Regulatory Commission (CSRC), Secretary of the Shanghai Municipal Committee of the Chinese Communist Party Li Qiang and Shanghai Mayor Ying Yong. In his keynote speech, Liu stressed that the two priorities for the new board are registration-based IPO reform, with information disclosure at its center, and enhancing the rule of law by raising penalties for violations and strengthening supervision and law enforcement.

Yi cited two reasons for the launch of the STAR Market and the piloted registration-based listing system. The first is to support the development and growth of science and technology companies with development potential and high market acceptance. The second is to use the board as a test for reforms, which could be implemented on other boards. So far, 122 companies have applied for listing on the board. “It’s time to further open China’s capital market, and the opening-up will be made notwithstanding the trade war with the U.S.,” said Dong Dengxin, Director of the Finance and Securities Institute at Wuhan University of Science and Technology.

Trading on the STAR market is expected to start within two months. Meanwhile, a stock connect program linking the London and Shanghai markets has been launched, after both sides worked out the regulatory framework and cross-border trading rules. Huatai Securities, one of China’s largest brokerages, announced plans to raise USD1.2 billion through the London Stock Exchange. It will become the first Chinese company to sell shares in London.

The yuan is widely expected to drop below the psychologically important rate of seven to a U.S. dollar for the third time in three years, amid an escalating trade war between China and the United States. But unlike in 2016 and 2018, when Beijing intervened to support the Chinese currency, People’s Bank of China Governor Yi Gang has indicated there are no “redlines” for the exchange rate this time. “Chinese growth is likely to be further derailed by the ongoing trade war and is expected to slow down. It would need to see a devaluation of the yuan to help boost the economy,” said Bruce Yam, Forex Strategist at Hong Kong broker Everbright Sun Hung Kai. He said he expected the yuan to devalue beyond seven per U.S. dollar in the coming months, hovering in the range of CNY6.68 to CNY7.15 in the medium term. State-owned Chinese lender Bank of Communications International and Swiss bank UBS too have forecast the Chinese currency to devalue beyond seven yuan per U.S. dollar in the next three months.

“Generally speaking, the depreciation of the yuan will benefit sectors such as exporters and mining firms, since the depreciation will help them reduce exporting costs or exploring costs,” said Kenny Ng, Securities Strategist at Everbright Sun Hung Kai. Shares of exporters, utilities and mining companies will benefit from a weaker yuan, while airlines, papermakers and Chinese companies with high U.S. dollar debt should be avoided, according to analysts. The onshore yuan – traded in mainland China – was changing hands for about 6.9354 a U.S. dollar last week, down 8.2% over the past year, while its offshore counterpart was down 8.6% in the same period to 6.9281, very close to the rate of seven yuan per U.S. dollar. The last time the yuan devalued below that rate was before the global financial crisis in 2008.

“A weakening Chinese yuan does not bode well for companies with high foreign currency debt. Real estate and airlines are sectors with domestic revenue but relatively higher U.S. dollar debt,” said BEA Union Investment Chief Investment Officer Henry Chan. Share prices of the three major Chinese airlines suggest their stock went down with the yuan, the South China Morning Post reports.