US President Trump signed a memorandum on March 22, levying a 25% tariff on some 60 billion U.S. dollars of Chinese imports based on the results of the '301 investigation'. The new generation of information technology, aerospace equipment, new energy equipment, high-speed rail equipment, and biotechnology 1300 product categories such as medicines are expected to be affected by tariffs.
But looking at the raging tariff 'offensive', reading the 301 investigation report submitted to Trump by the U.S. Trade Representative Office (USTR) will find that the real intention of the United States is to postpone or even subvert China’s current core national policy of 'Made in China 2025'. Prevent technological progress in various frontier areas in China.
An important part of 'Made in China 2025' is to cooperate with foreign companies or acquire direct acquisitions to acquire core technologies to help China develop multinational companies with strong international competitiveness in various fields. In the 301 investigation report, It is precisely these companies that name 'criminals'.
The top ten key areas of 'Made in China 2025' were almost completely covered by the 301 survey (Source: People's Daily)
Louis Kuijs, head of Asia at Oxford Research Institute, an independent think-tank, pointed out in his research report that the imposition of punitive tariffs and restrictions on Chinese companies investing in the United States are all intended to combat China’s unfair technology and intellectual property practices in the eyes of the United States. In response to testimony by the Senate on the 22nd, Wright Heather stated that the ten key areas of China's manufacturing of 2025 will be listed as targets of tariff 'emphasis.'
Within 15 days after Trump signs the memorandum (that is, before April 7th), USTR will publish a detailed list of tariff commodities.
However, from our published 215-page report of 301 survey results, we can have a glimpse of which Chinese companies are considered by the United States as 'opposing':
01 Beautiful Group
Although China’s home appliance giant Midea Group is not state-owned, USTR believes that it holds a pivotal position in China’s establishment of an internationally competitive robot industry.
In 2016, Midea Group spent US$4.2 billion to acquire Kuka, Germany's top robot group, and USTR viewed the merger as an extension of the Chinese government’s “Going Global” and “One Belt One Road” development strategy. The US relies heavily on financing to support the merger and acquisition. Loans from state-owned policy banks, including China Export-Import Bank has provided 770 million euros (about 870 million U.S. dollars) in loans.
USTR also cited the comments of the China Export-Import Bank’s case concerning the US merger and acquisition of Kuka, saying that the case 'helps to optimize the layout of the domestic robot industry, promote the automation of production in multiple industries, and upgrade the level of China's intelligent manufacturing technology.'
02 China National Chemical Industry Group
China National Chemical Industry Group spent USD 44 billion to acquire the world's largest pesticide manufacturer in early 2016, and the third-largest seed producer Swiss Syngenta has attracted widespread attention from the industry and naturally attracted the attention of USTR.
USTR pointed out that this acquisition has enabled China National Chemical Corporation to acquire a series of patents for the registration of genetically modified crop seeds, in line with the Chinese government's policy of further guaranteeing food security and promoting agricultural modernization during the five-year plan.
The M&A case also received financing preferential treatment from state-owned policy banks. In the case of a debt ratio as high as 74.78% (2016 credit report), China National Chemical Industry Group still received huge financing from state-owned banks. USTR also emphasized that it was through mergers and acquisitions Da, China's state-owned company, China Chemical also controls Syngenta's entire branch in the United States, including '4000 employees, 33 research institutes, and 31 production and supply bases'.
After the merger and acquisition of Syngenta, China Chemical has become an international company comparable to the Dow, DuPont, Monsanto and other US pesticide giants, making it the largest potential target for Trump tariffs.
03 China Commercial Aircraft and AVIC
The practices adopted by China's two state-owned aerospace manufacturing groups, COMAC and AVIC, in the development of the China-made 'big plane' C919 are considered by USTR as 'compulsory technology transfer' by China and ' The model.
Boeing and Airbus have occupied half of the civil aviation market. The C919 was originally designed to compete for market share with similar aircraft Boeing 737 and Airbus A320. In the process of advancing this 'independent intellectual property' project, USTR pointed out that COMAC and AVIC have acquired upstream aircraft parts and avionics suppliers in the United States, or market access as a condition, 'performing' them to set up a joint venture company to establish a production line in China for technology transfer, so as to protect domestically produced large aircraft domestically. supply chain.
In fact, many C919 key components, including engines, turbines, and avionics, rely on COMAC's technical cooperation or joint venture with US giants General Electric, Honeywell, and Rockwell Collins.
04 Tsinghua Unisplendour Group
Tsinghua Unisplendour and its parent company, Tsinghua Holdings, are viewed by the USTR as typical in overseas acquisitions by China’s national policy-led companies.
USTR pointed out that in the capital structure of Tsinghua Unisplendour itself, there was an equity investment of 10 billion yuan (about 1.6 billion U.S. dollars) from the China National Integrated Circuit Industrial Investment Fund, which was a direct investment entity of the Ministry of Industry and Information Technology. In China, Tsinghua Unisplendour clearly stated that the Group's development strategy 'served the needs of national security' and adopted the 'International Acquisition + Local Innovation' development model.
In July 2015, Tsinghua Unisplendour tried to acquire Micron Technology, a memory chip manufacturer headquartered in Idaho, USA, for US$23 billion, but ultimately abandoned due to concerns that the US Overseas Investment Commission (CFIUS) may not approve the acquisition.
Tsinghua Unisplendour has also tried to acquire 15% of the U.S. hardware-driven industry giant Western Digital through its subsidiary, but finally announced its abandonment in February 2016. The reason cited was that CFIUS decided to review the transaction.
05 Huada Gene
Huada Gene, formerly known as Beijing Huada Gene Research Center, is currently the world's largest genome sequencing and research organization. It is widely favored by the investment community. Redwood China is the company's major investor.
However, USTR pointed out that in 2013, BGI invested US$117 million in the acquisition of Complete Genomics, a human genome sequencing company in the United States. This enabled it to acquire the core intellectual property and domestic production capabilities of the gene sequencer. These technologies are precisely the five-year plan of the Chinese government. Covered by the target.
In addition, the USTR also emphasized that BGI is the main target of China Development Bank's capital injection for the National Policy Bank. The Shenzhen government has listed BGI as a support target for various policies, including the development of international and domestic derivatives outsourcing industries. Complete Genomics, a subsidiary of Gene M&A, also received local government grants from the Finance Bureau of the Administrative Committee of the East Lake High-Tech Development Zone to build the company's local production base for the whole genome sequencer.
