Corona crisis and US-China trade dispute: the end of Chimerica

Corona crisis and US-China trade dispute: the end of Chimerica

US President Trump escalates the dispute with China to distract from his own failure in the corona crisis. But it’s not just about his re-election: the superpowers are becoming more and more opponents.

© Kevin Lamarque / REUTERS

The small Chinese startup apparently already had the victory against the overpowering American rival almost in its pocket: At the end of last year, the coffee chain Luckin Coffee, founded in 2017, announced that it now has more branches in China than the top dog Starbucks. An adrenaline rush rushed through the stock market. In mid-January, the Luckin Nasdaq share price was over $ 50.

The paper is now available for two dollars. The sales success reports, it turned out, were fictitious.

He feels “deep pain and guilt,” apologized boss Charles Lu whining after the fraud was exposed. The founder is deprived of sleep, however, above all by the fact that the US stock exchange wants to throw Luckin off the course slip. The Nasdaq wants to make an example of a problem that, according to experts, is by no means limited to the supposedly hot coffee start-up: the lack of transparency of Chinese companies listed on the United States.

“A wake-up call for politics and regulators”

The hapless end to Luckin’s American stock market dream has reinforced those who China think of it as a rogue state anyway. “The Luckin Coffee scandal is just one of many examples of Chinese fraud,” said Republican Senator Marco Rubio. “It’s a wake-up call for politicians and regulators.” The US Senate promptly passed a long-debated bill last week that requires listed companies such as Alibaba and Baidu to confirm in future that they are “not owned or controlled by a foreign government.” In addition, companies would have to open their books to US auditors, which Beijing rejects as an encroachment on its sovereignty.

President Donald Trump has signaled sympathy for stricter regulations, coupled with concerns that Nasdaq and NYSE will lose lucrative business if there is a mass exodus of Chinese values ​​from the US stock exchanges. “What will they do? They will move their listing to London or elsewhere,” Trump said.

Since the eruption of the Coronavirus pandemic the US President has rhetorically targeted China, which he accuses of being responsible for “global mass extinction”. The attacks against Beijing should distract from their own failure in the crisis: Around 100,000 people have already died of the virus in the world’s leading industrial nation.

But behind the rapidly deteriorating trans-Pacific relationship is more than Trump’s search for a Covid culprit and more than the fear that Beijing could force the Hong Kong Special Administrative Region into his grasp. “The two nations no longer see each other just as competitors, but as something more harmful,” believes former US trade commissioner Charlene Barshefsky. Both sides would operate the economic decoupling from each other, she said on Bloomberg TV. China by establishing its own technology standards. America by reorganizing supply chains.

Tough course against the rival

In fact, the United States is taking increasingly tough action against its rival, even if it damages its own economy. In administration, the hardliners are in charge.

  • The competencies of the control authority CFIUS, which can stop security-related foreign takeovers, have been expanded. Last year, Chinese direct investment in the U.S. dropped to its lowest level since 2009.

  • The US government issued new ones in May Sanctions against the Chinese network supplier Huawei, which should make it more difficult to deliver US technology from third countries. One of Huawei’s most important chip suppliers, the Taiwanese company TSMC, immediately stopped working. “Survival is the key word for us right now,” admitted Huawei Chairman Guo Ping. Beijing should find it a special provocation that America’s long arm extends to Taiwan, which China fears to split off. TSMC has now announced plans to build a plant in the US state of Arizona. The site deal “strengthens US national security at a time when China is trying to dominate cutting-edge technology and control critical industries,” said Secretary of State Mike Pompeo.

  • Trump has torpedoed the $ 500 billion pension plan for American government employees (Thrift Savings Plan) to invest in Chinese stocks. The government has no formal say in the investment.

  • In the US administration, according to a Washington Post report, a while ago there were also games of thought about how to punish China or force financial compensation for the outbreak of the pandemic. The idea arose to cancel US debt to the emerging country.

  • Last week, the Department of Commerce blacklisted another 33 Chinese companies and organizations for human rights violations and security concerns, including artificial intelligence company NetPosa and anti-virus program provider Qihoo 360.

  • Both sides continue to officially maintain the trade agreement agreed in January. Given the economic crisis, Beijing his mega commitments to purchase agricultural products as well as oil and gas however can hardly keep. Trump has threatened that American-Chinese relations can also be cut off completely.

He talks to his counterpart Xi Jinping not anymore, he told Fox in mid-May.

What started as a trade war “has become a technology war and is now moving towards an investment war,” says trade expert Barshefsky. Chinese Foreign Minister Wang Yi warned at the weekend that US politics is pushing the two powers “to the brink of a new Cold War.”

And what do American citizens say?

Trump’s course of conflict, however, is not a mere solo attempt by the president. The law to tighten the stock exchange rules was passed in the Senate by a non-partisan majority and is also to be discussed in the House of Representatives. Two-thirds of Americans say in a recent poll by Pew that they have a negative view of China – an increase of almost 20 percentage points since Trump took office.

Under this president, the United States raised the volume of its criticism of China from 4 to 10, said Jude Blanchette from the Center for Strategic and International Studies (CSIS) in a radio interview. Should the Democrat Joe Biden the Presidential election in November win, he’ll probably turn the volume down to “8”. But there is an important difference: Biden will at least revive the dialogue with the allies and also Beijing in the traditional channels.

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