USA blacklist Xiaomi and other companies from China

Frankfurt, Düsseldorf After Huawei, the Chinese technology group Xiaomi has also been sanctioned by the US government. The US Department of Defense lists the Beijing company on a list of “Communist-Chinese military companies”. The Xiaomi share then sagged on the Hong Kong Stock Exchange by more than ten percent. It also went downhill for papers from suppliers.

However, the sanctions against Xiaomi do not go as far as in the case of Huawei. While the US government has largely cut off the network equipment supplier from suppliers, Xiaomi initially asked US investors to sell their shares by November at the latest. In addition to Xiaomi, eight other Chinese companies are on the list (PDF document). The move is one of the last steps taken by US President Donald Trump.

A Xiaomi spokesman contradicted the assessment of the US authorities to the Handelsblatt. “The company is not affiliated with, nor is it owned or controlled by the Chinese military,” he said.

The company is preparing countermeasures, the spokesman announced, without giving any further details. Xiaomi expanded to Germany at the end of 2019 and opened a flagship store in Düsseldorf last summer.

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The Chinese government condemned the US actions. “The Chinese side will take necessary measures to protect the interests of Chinese companies,” said a Foreign Ministry spokesman.

Over the years, Trump has portrayed China as the greatest international threat to the USA and, among other things, claimed during the election campaign without any evidence that his competitor Joe Biden had been bought by Beijing. His government took action against various Chinese companies.

The hardest hit was Huawei. The network equipment supplier and smartphone manufacturer lost access to US technology – on account of the allegation that the Chinese government could force it into far-reaching cooperation. Huawei rejects this.

Before the sanctions, Huawei started to jump to the top of the world market in smartphone sales. Since the US bans, however, the group has not been able to sell any new models with pre-installed Google services. But these are extremely important for buyers in the West. Sales of smartphones in China remained unaffected, but Xiaomi has recently established itself as number three in the market after Samsung and Apple.

The U.S. Department of Commerce also blacklisted China’s third-largest state-owned oil company, CNOOC, which makes it harder for U.S. firms to do business with the company. As early as December, the USA had imposed restrictions on 60 other Chinese companies.

Xiaomi grew up selling cheap but technically sophisticated smartphones on the Internet. The company now also has all kinds of networked devices on offer, from televisions to rice cookers.

Effects for international investors

The fact that US investors will no longer be allowed to invest in the company’s securities in future means a major turning point for international investors. The share had risen by over 26 percent since mid-November, and by over 130 percent since January 2020. Now the upward trend should at least be dampened.

Trump’s actions also have consequences for investors outside the US. So-called ADRs, with which investors abroad can trade Xiaomi securities, have meanwhile collapsed by over ten percent. These American Depositary Receipts are US dollar-denominated share certificates or depository receipts that represent a certain number of shares in a foreign company and that can be traded on US stock exchanges in their place.

In addition, the shares of major Xiaomi suppliers also lost on Friday: FIH Mobile, a company that helps assemble smartphones, fell by almost 14 percent after a strong rally in recent days. The shares of the supplier Largan Precision, Sunny Optical Technology and AAC Technologies Holdings also fell. According to loan dealers, spreads on Xiaomi’s dollar bonds increased by as much as 60 basis points on Friday.

Financial analysts on site were surprised by the decision. Kevin Chen of the Hong Kong securities trading firm China Merchants Securities described the news as “very surprising”. Many investors should now reap profits from last year’s rally, according to Chen. Nevertheless, he explains that the downturns on the stock market could be “short-lived” and that no fundamental damage should arise for Xiaomi.

Trump had also tried since the summer to force a sale of at least the US business of the popular video app Tiktok to American investors. However, the Chinese government torpedoed the plans with export restrictions on software. Regardless of this fiasco, however, Trump’s government began to force eight more apps out of the US market in early January, including the payment services Alipay and Wechat Pay, which are popular in China.

In the closing stages of Trump’s term in office, his government made several major decisions in foreign policy that set Biden in front of a fait accompli. A few days ago, for example, Cuba was put back on the US terrorist list. In Yemen, the US government targeted the Houthi rebels, an ally of Iran in the civil war country. Washington had previously recognized Morocco’s sovereignty over the Western Sahara, surprisingly.
With agency material

More: China is increasingly decoupling from the global economy – these are the consequences for European companies

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China is increasingly decoupling from the global economy

Beijing, Berlin, Düsseldorf Mostly once a year, China’s head of state and party leader Xi Jinping gives a speech to high-ranking ministry and provincial leaders at the Central University of the Communist Party, which sets the course for the year. But this time it had a special meaning. Because the five-year plan is currently being finalized, which should set the course for the economy in the People’s Republic from March to 2025.

Foreign company representatives may not have liked what Xi said behind closed doors earlier this week. “The most essential feature of building a new development pattern is to achieve a high level of self-sufficiency and self-improvement,” says Xi. ”

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US stock exchange NYSE does not block Chinese telecom companies after all

Trader an der New York Stock Exchange

The shares of the three initially excluded companies rose after the withdrawal of the NYSE on the Hong Kong stock exchange by up to 8.5 percent.

(Photo: Reuters)

New York The US stock exchange operator New York Stock Exchange (NYSE) has withdrawn its plans to exclude three state-owned Chinese telephone companies from stock trading. After further consultations with the relevant supervisory authorities, China Mobile, China Telecom and China Unicom are likely to stay, the NYSE announced on Monday. She did not give any further details.

The NYSE had only announced the lock on Thursday and referred to a US government decree from November. In November, the government banned investments in a total of 31 companies that they claim are controlled by the Chinese military.

After the decision in New York, the share prices of the three companies on the Hong Kong Stock Exchange rose by more than five percent each on Tuesday. Investors who sold the shares of the telecommunications company in the US on Monday were thus caught on the wrong foot.

A Jefferies Financial Group analyst called the turnaround “bizarre”. Jackson Wong, Director of Asset Management at Amber Hill Capital in Hong Kong, called the NYSE’s decision “quite unexpected”.

With the NYSE unclear as to why the NYSE changed course, investors speculated whether this was merely due to the stock market’s initial misinterpretation of the executive order or more general geopolitical implications.

US government officials accuse the Chinese Communist Party of exploiting US citizens’ access to US technology and investments to strengthen the country’s military. The Chinese government, on the other hand, accuses the US of using the national security argument as a pretext to discriminate against Chinese companies in competition.

More: Read here why the optimism remains unbroken on Wall Street.

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The stock exchange begins with the deletion of three Chinese companies

View of the New York Stock Exchange

Shares in Chinese companies are no longer allowed to be traded.

(Photo: AP)

New York The New York Stock Exchange has initiated the delisting of three Chinese companies with state participation. As of January 11, the shares of the telecommunications companies China Telecom, China Mobile and China Unicorn can no longer be traded on the New York Stock Exchange (NYSE), the exchange operator announced on Friday.

According to the New York Stock Exchange, the three companies have too close ties to the Chinese military. They are therefore “no longer suitable”. The Chinese companies initially did not comment. They are also listed on the Hong Kong stock exchange and generate only a very small part of their sales in the USA.

Nevertheless, this measure has a symbolic effect beyond Wall Street. In November, US President Donald Trump banned Americans from investing in Chinese companies that support the military there. To this end, he presented a list of companies whose stock ownership is prohibited for US persons or companies. This included, for example, aviation groups, tech companies and even companies from the telecommunications sector.

Trump justifies the ban by saying that these companies offer the Chinese military access to new technologies, which in turn would enable China to behave more aggressively. The People’s Republic is increasingly using the American chapter to advance the development and modernization of its military, secret service and other security apparatus, it said in the relevant decree.

Trump had taken strict action against Chinese companies several times in the past. For example, the government imposed a chip embargo on the successful technology company and smartphone provider Huawei. The risk that China could launch cyber attacks via Huawei technology in critical infrastructures such as the ultra-fast 5G network is too great.

More: US stock market: optimism on Wall Street remains unbroken

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European stock exchanges under pressure on New Year’s Eve

London Stock Exchange

In London, the leading index “Footsie” fell 1.7 percent with very low sales.

(Photo: Reuters)

Paris, London The European stock markets went out of trading on New Year’s Eve with price losses. The EuroStoxx 50, the leading index in the Eurozone, closed on Thursday, 0.53 percent lower at 3552.64 points. In Paris, the Cac 40 fell 0.86 percent to 5551.41 points. The London FTSE 100 was down 1.45 percent to 6460.52 points. In London and Paris there was only a shortened trade. The stock exchanges in Frankfurt and Rome remained closed.

The French luxury goods group Kering achieved the most significant price gains. The share gained 1.09 percent. The French engine manufacturer and technology group Safran recorded the greatest losses. The share fell 2.56 percent.

The French spirits manufacturers Pernod Ricard and Remy Cointreau each lost around 1.5 percent in Paris, while the shares of Airbus lost 0.6 percent. The background to this is the announcement of further punitive tariffs by the USA for products from Europe in connection with the dispute over subsidies for the aircraft manufacturers Airbus and Boeing. The papers of the French insurer Axa lost almost one percent. The company is selling its Greece business to Italian rival Generali for € 165 million.
The trading volume was very thin before the turn of the year. Most of the market participants had already closed their books for this year. Only a few investors took the opportunity to adjust some custody account positions.

More: Investors see this potential on Europe’s stock exchanges.

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USA announces further punitive tariffs on products from Germany

Lufthansa Airbus A320

The Franco-German aircraft manufacturer Airbus and its US competitor Boeing are said to have received subsidies from their governments.

(Photo: dpa)

Washington In the dispute over subsidies for the aviation industry between the USA and the EU, Washington has announced additional punitive tariffs on products from Germany and France. Aircraft components from both countries, certain wines as well as certain cognacs and other alcoholic beverages are affected, the US trade representative said on Wednesday (local time).

In response, the aircraft manufacturer Airbus called on the European Union to act. Airbus trusts that Europe will respond appropriately to the US initiative and defend its interests, the group announced on Thursday. This also concerns the interests of all companies and industries from Europe that are affected by the unjustified and counterproductive tariffs of the USA.

The EU Commission said it regretted the announcement from Washington. With the unilateral action, the United States disrupted the ongoing negotiations to settle the subsidy conflict, a spokesman said. The EU will contact the new US administration as soon as possible to continue negotiations and find a permanent solution to the dispute.

In November, the European Union announced additional taxes on certain US products. This was preceded by a decision by the arbitrators of the World Trade Organization, according to which the EU is allowed to impose punitive tariffs on US imports amounting to almost four billion dollars (3.4 billion euros) per year because of illegal subsidies for the aircraft manufacturer Boeing.

The US government has now accused Brussels of taking unfair decisions when imposing the tariffs, which is why its own measures have to be adjusted. For example, the EU based its decision on punitive tariffs on the trade volume of the 27 EU states excluding Great Britain, which has resulted in higher retaliatory measures against the USA. “The EU must take action to redress this injustice,” said the Trade Representative.

The EU hopes that Donald Trump’s successor in the White House, Democrat Joe Biden, will agree to talks about a settlement of the subsidy dispute that has been going on for years.

More: EU welcomes Joe Biden with new punitive tariffs.

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US Congress does not want sanctions against Berlin

Laying ship for pipeline construction

In the future, 55 billion cubic meters of natural gas will be pumped from Russia directly to Germany every year through the two 1200-kilometer pipelines of Nord Stream 2.

(Photo: dpa)

Washington In the dispute over the German-Russian Baltic Sea pipeline Nord Stream 2, the US Congress wants to rule out sanctions against the governments and authorities of European partner states such as Germany. However, the threatened punitive measures are to be expanded against companies involved in the project.

This emerges from the draft law package on the US defense budget, which Democrats and Republicans agreed in both chambers in the US Congress on Thursday (local time). Accordingly, sanctions against companies should only be allowed to be imposed after potentially affected governments of EU member states, Switzerland, Norway and Great Britain have been consulted.

It was known so far that both the House of Representatives and the Senate – the two chambers in the US Congress – wanted to tighten sanctions against the companies involved in the pipeline. In the two draft bills that have now been merged for the defense budget package, there was previously no mention that European partners would have to be consulted or that sanctions against governments or authorities in Europe would not be permissible. After being passed by both chambers, US President Donald Trump has to sign the law for it to come into force.

Construction work on Nord Stream 2 was halted almost a year ago after the US enacted a sanctions law (Peesa) against the special ships laying the pipes. The two Swiss laying vessels were withdrawn. Russian President Vladimir Putin announced that he would complete the work independently – regardless of foreign partners.

According to the sanctions, persons concerned may be banned from entering the USA. Any data subject or company property in the United States can be frozen.

graphic

In October, the US State Department published new guidelines that the provision of certain services and facilities to the lay vessels could also be penalized. The new US draft law (Peesca) now provides for a further tightening of the punitive measures.

More entrepreneurs are in their sights

Accordingly, companies that provide ships for other activities in connection with laying work are also to be penalized. This could include digging trenches for the pipeline.

Companies that insure affected ships or make their port facilities available to them are also threatened with sanctions. The same goes for companies that certify the pipeline so that it can go live.

It has now been added to the draft that the US Secretary of State must consult with the governments of these countries before imposing sanctions on companies from EU member states, Switzerland, Norway and Great Britain. In his report to Congress – which is the basis for the imposition of sanctions – the minister must state any concerns raised by these governments. It also states that sanctions are not applicable against the listed European governments and their entities.

The US government had only made it clear last month that it wanted to stop the pipeline shortly before completion and increase the sanction pressure on the European companies involved. “This pipeline will not take place,” said a high-ranking US government representative at the time of the German Press Agency in Washington. The government has identified companies and people who face the first punitive measures. The new threats sparked outrage in German business and politics.

The US government official said that supporters of Nord Stream 2 should not hope that there will be a change of government in Washington. He pointed out that both Peesa and Peesca receive bipartisan support and provide for mandatory sanctions. “This means that the sanctions are implemented regardless of who is sitting in the Oval Office.”

In the future, 55 billion cubic meters of natural gas will be pumped from Russia to Germany every year through the two 1200-kilometer pipelines of Nord Stream 2 – bypassing Ukraine. The pipeline, which costs around 9.5 billion euros, is 94 percent ready.

However, the USA has been running a storm against this for years and justify this with the excessive dependence of its European partners on Russian gas. They are supported by Eastern European countries such as Poland and the Baltic countries. Critics accuse the US, on the other hand, of only wanting to sell their liquid gas better in Europe.

In Nord Stream 2 AG, based in Zug, Switzerland, the Russian company Gazprom is formally the sole shareholder. In addition, the German groups Wintershall Dea and Uniper as well as the Dutch-British Shell, Engie (formerly GDF Suez) from France and OMV from Austria are added as “supporters”. Nord Stream supervisory board chairman is former chancellor Gerhard Schröder (SPD), at Nord Stream 2 he is chairman of the board of directors.

More: Race against time: Nord Stream 2 is due to be completed on December 5th

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Honor: Huawei sells its smartphone brand

Shenzhen Under massive pressure from US sanctions, China’s telecom giant Huawei sold its smartphone brand Honor, making it independent. A consortium of 30 business partners is taking over the company, as Huawei announced in Shenzhen on Tuesday. No information was given about the amount of the deal. But experts estimate the value of Honor according to media reports at around 100 billion yuan, the equivalent of 12.8 billion euros. After the transaction, Huawei no longer holds shares in Honor and is no longer involved in management, the company announced.

“Huawei’s consumer business has recently been under massive pressure,” said the company, referring to the US sanctions. “The reason is that technical elements that are necessary for our smartphone business are not available in the long run.” For this reason, Huawei is selling the company to the Shenzhen Zhixin New Information Technology consortium to help Honor dealers and suppliers To “get through these troubled times”.

According to this information, Honor sells around 70 million smartphones a year – mostly phones in the lower and middle price range to younger customers. The brand had a market share in China of around 15 percent in the third quarter – just behind Huawei itself, as the “South China Morning Post” reported. The share of Huawei’s smartphone business was estimated at a quarter to a third.

“The Honor industrial supply chain took this step to ensure its own survival,” said Huawei. Up until now, Honor was dependent on Huawei’s technology, so the brand also suffered from US sanctions. Under new owners, the company can develop its products more flexibly and potentially also do business with the US chip manufacturer Qualcomm or Google, which Huawei is denied today because it is on a blacklist in the USA.

“Honor’s independence from Huawei is expected to ensure that“ the water continues to flow ”in Honor’s canals and save upstream and downstream suppliers,” the official Chinese news agency Xinhua quoted informed people familiar with the transaction. “If not handled properly, more than a million people could lose their jobs.”

The US sanctions make it difficult for Huawei to access American software and technology, even if they come from companies outside the US. Since Huawei has to make itself increasingly independent of US technology, the group also needs new capital, according to experts, which could come from the sale of the subsidiary. For Honor, however, independence also means that it now has to conduct its own research and development. According to media reports, the new owners are allegedly already thinking of going public in a few years

More: Android without Google services: The Mate 30 shows Huawei’s perplexity

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What lessons Germany can learn from the dispute

Peking The conflict between China and Australia escalated further on Monday. The reason was a tweet from the spokesman for the Chinese Foreign Ministry. He had tweeted a manipulated photo of an Australian soldier laughing holding a bloody blade to the neck of a girl in a headscarf. On the picture the line: “Don’t worry, we come to bring peace.”

“Shocked by the murder of Afghan civilians and prisoners by Australian soldiers,” wrote the Chinese Foreign Office spokesman for the picture.

Australia reacted indignantly. Prime Minister Scott Morrison asked Beijing to apologize. The tweet was “disgusting,” said Morrison to reporters in Canberra on Monday. “The Chinese government should be very ashamed of this contribution,” said Morrison. The tweet will reduce China’s reputation in the world.

What the dispute is about

For years there have been more and more differences between Australia and its most important export destination, China. Relationships already deteriorated in 2018 when Canberra excluded the Chinese IT company Huawei from building its 5G networks.

However, a push by Australia earlier this year escalated the situation: Canberra was the first country to call for an independent commission to investigate the origin of the coronavirus. Although other states later joined this demand, the Chinese government saw the Australian approach as an affront and has been covering the country with trade barriers for its products ever since.

Why the dispute is also relevant for Germany

The conflicts between Germany and China are also increasing. Berlin condemns Beijing’s actions in the Chinese special administrative region of Hong Kong and the violent human rights violations against the Muslim Uighur minority in the Chinese region of Xinjiang. In addition, the federal government is bothered by the still lacking fair market access conditions for German companies in China.

According to Hanns-Günther Hilpert, head of the Asia Research Group at the Berlin Foundation for Science and Politics (SWP), what is currently happening between Australia and China shows that a political confrontation with China could have painful economic consequences. “China shows brute determination in its readiness to use its own economic power for political purposes,” said Hilpert.

It was only at the end of November that Beijing imposed anti-dumping measures on Australian wine and imposed a tariff of more than 200 percent on wine imports. China is the largest export market for Australian wine. China has also threatened Germany with consequences for the German auto industry if Huawei is unable to equip the German 5G network.

What Germany can learn from the incident

Even if experts criticize China’s reaction, they see flaws in the Australian approach. James Laurenceson, professor of economics and director of the Australia-China Relations Institute (ACRI) at the University of Technology in Sydney, accuses Canberra of “clumsy diplomacy” in demanding an independent investigation into the origin of the coronavirus.

“Had Australia waited and worked on the European Union’s proposal, which was ultimately met with unanimous approval at the World Health Assembly (WHA),” said Laurenceson, “it could have achieved the same political goal without further straining relations with China.”

SWP Asia expert Hilpert also advises Germany and Europe to learn from the events. “If Germany and Europe do not want to be intimidated and continue to pursue their own interests vis-à-vis China, they should approach (necessary) confrontations or disputes with China carefully,” said Hilpert. That means: A dispute should not be started in order to please the public opinion critical of China.

Also, according to Hilpert, there shouldn’t be the impression that the USA is instrumentalizing one. Rather, it should be clearly communicated and also proven that it is a question of German or European interests and values ​​for which one stands up against China.

It is also important to conclude, according to Hilpert, that it is better not to be isolated from China. A common European stance is important. “When it comes to common interests, we should also look for solidarity with the USA and, if possible, with like-minded G20 countries,” said Hilpert.

More: What the new Asian free trade zone means for German companies

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China First becomes a political trap

Mercedes booth at the Beijing auto show

Australia is not necessarily the focus of German car manufacturers. And yet Mercedes, BMW and Volkswagen form a community of fate with Down Under. The pandemic has made them even more dependent on the sales market in China: German auto icons deliver almost 40 percent of their sales to China. Australia exports just as much of its exports to the vast Chinese market.

The Australians are experiencing the hard way what political and economic consequences this dependency can have. Beijing is turning dependency into a weapon in order to make Australia politically compliant and to muzzle the critics there.

Whether it is about Beijing’s responsibility for the outbreak of the corona pandemic, the ban on Chinese 5G technology or the disapproval of China’s claims to territory in the South China Sea – the authoritarian leadership in Beijing cannot bear so much independence from an economically dependent Australia.

By return of mail, China put up trade barriers against the importation of beef, barley and wine from the country. Its undiplomatic “wolf warriors” also sent a list of 14 complaints to Canberra, with which Beijing complained about the behavior of the Australian government, the local media and think tanks.

Again and again China has shown its economic power against Germany. For example, when Beijing forced the Daimler Group to kowtow because of the use of a Dalai Lama quote or when the Chinese ambassador openly threatened German car manufacturers with retaliation, the telecommunications equipment supplier Huawei should not be involved in setting up the German 5G mobile network.

USA is building an anti-China alliance

China, which otherwise likes to forbid interfering in its internal affairs, ignores these limits when it comes to asserting its own interests. So far, people in Berlin have taken note of this with a shake of the head rather than concern. However, the Australian example shows that economic dependence on China also has a dark side to Beijing’s power.

The US noticed this long ago. The Trump administration is trying to set up an informal international defense alliance against the Chinese economic warriors in its last few meters. The participating countries should support each other with economic sanctions by compensating for export losses or jointly imposing counter-sanctions.

That would be a good springboard for a transatlantic China strategy, which Europeans and Americans will have to talk about at the latest when the new Biden administration starts.

More: “China first”: German carmakers are insidiously dependent

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