U.S. Extends Olive Branch to China, Easing Trade Tensions

Corporate America and the U.S. government alike have placed China in their sights, giving the markets hope that the tensions created by an otherwise escalating trade war will ease. In fact, a trio of separate developments between the United States and China are unfolding at the moment in a sign of easing regulatory restrictions and trade tariffs that have threatened to stifle China’s exports and suppress corporate America’s growth plans.

Perhaps the most surprising among the developments is President Trump’s decision to rescue telecom play ZTE Corp in the wake of a US ban that hurt the company’s business. Meanwhile, electric car maker Tesla and the No. 1 US bank by assets JPMorgan have similarly set their sights on expansion into China, though each company plans to take a different tack.

ZTE Corp

Even as the U.S. and Chinese governments are tussling over trade, President Trump said in a tweet that he’s working alongside China’s government to help telecom play ZTE to “get back into business, fast,” pointing to jobs lost as the catalyst for the cooperation.

ZTE had been crippled by a decision by the US government banning the sale of components by U.S. businesses to China’s industry. The US Commerce Department last month singled out ZTE, calling on corporate America to refrain from exports to the telecom company, a decision it’s now seemingly looking to undo. The change of heart comes amid thawing relations between the United States and North Korea, the latter of which the phone maker was accused of ignoring US sanctions against.

Tesla Footprint

Meanwhile, the wheels are in motion for Tesla’s shift eastward into Shanghai, according to reports. While many businesses opt to form a partnership with a local entity when gaining a foothold in a new region, Tesla appears to be going it alone in an attempt to keep its internal technology close to the vest. In doing so, the company is willing to inherit a 25% import duty on foreign cars.

The Palo Alto, Calif.-based electric vehicle maker is eyeing Shanghai for its maiden international factory and has reportedly filed the paperwork to set up shop there. Tesla’s Hong Kong subsidiary is named as the only owner of the new business, which quashes the possibility of a local partner surfacing.

Tesla had hoped to unveil its Shanghai expansion sooner, but there were regulatory hurdles blocking the company from operating independently in the region. China’s government in a sign of goodwill removed cumbersome joint-venture standards that have paved the way for Tesla’s expansion.

JPMorgan Partnership

JPMorgan is close to making history as the first U.S. bank to take a majority ownership in a wealth management partnership whose customers are Chinese investors.

JPMorgan’s asset management division is looking to lift its ownership stake in China International Fund Management, a joint venture it entered in the early 2000’s, by 2 percentage points to 51%. The majority position is possible thanks to Beijing’s relaxed rules surrounding international ownership of domestic financial companies.

In a separate development, JPMorgan’s Hong Kong subsidiary is seeking the regulatory green light for control of a joint venture brokerage business in China, following in the footsteps of HSBC. This would reflect the second time around for JPMorgan’s brokerage business in China after the U.S. bank left a local partnership in 2016. JPMorgan CEO Jamie Dimon said in a statement that the bank intends to “bring the full force of JPMorgan Chase and our resources to the country.”

These advancements seemed to pave the way for gains on Wall Street, with all three of the major US indices trading comfortably in the green.

Featured image courtesy of Shutterstock. 

Gerelyn has been covering ICOs and the cryptocurrency market since mid-2017. She's also reported on fintech more broadly in addition to asset management, having previously specialized in institutional investing. She owns some BTC and ETH.