News round-up, July 13, 2023
Editorial…
Vietnam holds a significant place in Marguerite Duras's soul...
Vietnam, particularly Saigon, has garnered considerable acclaim among readers for its depiction of love and sensuality in Marguerite Duras' renowned literary work, "The Lover." As we get immersed in a captivating narrative that elicits deep-seated emotions, it is common to disregard the historical context against which the story unfolds. During her time in Saigon, Marguerite developed a deep affection for Huynh Thuy Le, the son of a prosperous Chinese businessman. Despite the significant age difference of twelve years, they met on a ferry that connected Saigon and the Mekong Delta. Over time, their relationship evolved into a romantic one.
The iconic photograph titled "Kim Phuc, The Girl in the Picture" also takes us back to the historical context of the Mekong Delta conflict, a pivotal event that precipitated the Vietnam War.
But Vietnam's history, characterized by a lot of love and hardships, has witnessed remarkable progress in both economic and social spheres in recent decades. Vietnam, initially one of the most impoverished nations in the mid-1980s, successfully attained lower middle-income status in 2010 as a result of a comprehensive economic transformation.
The transformation was initiated by the 1986 "Doi Moi" reforms, which involved the dismantling of the predominantly planned economy, the opening up of the country to international markets and trade, and the implementation of pro-business reforms. These reforms were implemented alongside a comprehensive social agenda, spearheaded by the expansion of education and electricity, with the aim of promoting inclusivity for all.
Vietnam has demonstrated noteworthy advancements in its pursuit of the Sustainable Development Goals (SDGs), consistently ranking in the top quartile of SDG performance among emerging market economies for most indicators. Education has been a national priority since the implementation of Doi Moi, with an increasing focus on enhancing its quality. The literacy rate for children aged 15 and above was recorded at 95 percent in 2016, indicating a high level of educational attainment. Additionally, most children in the primary school age group are currently enrolled in educational institutions. Vietnam has successfully attained Millennium Development Goal (MDG) 5, which focuses on maternal health, and the nation is making ongoing advancements in the field of healthcare. Infrastructure development has been a crucial factor in Vietnam's economic growth, as evidenced by the substantial contribution of government capital spending, which has averaged nearly 8 percent of GDP per year. Additionally, state-owned enterprises have consistently invested around 5 percent of GDP annually, further bolstering the country's development. These investments have significantly contributed to the expansion of infrastructure stocks, thereby facilitating Vietnam's ability to provide essential infrastructure access to its rapidly expanding industrial and manufacturing sector.
Indeed, it can be argued that Marguerite Duras would be delighted to witness the essence of her beloved Vietnam encapsulated within the persona of Huynh Thuy Le. It is truly inspiring to witness the transformation of this deep affection into a driving force for constructive transformation and progress, ultimately benefiting the collective welfare.
Most read…
Biden’s economic dream is becoming reality — but how long can he sustain it?
Biden has navigated through two years of pitfalls and emerged with a rallying economy. The White House will take that for now.
Politico.com By ADAM CANCRYN, July 12, 2023
Sorry Russia, the Baltic Sea is now NATO’s lake
Expanding the alliance creates big problems for Russia.
POLITICO EU BY LAURA KAYALI, JULY 13, 2023 Oil prices rise on cooling US inflation, China trade data
Reuters By Jeslyn Lerh, July 13, 2023AES, PV Gas receive investment policy approval for LNG terminal project in central Vietnam
The venture will be managed by PV Gas and AES Corporation, and is slated to commence operations in 2027, boasting a capacity of 450 TBtu.
theinvestor.vn By Tri Duc, July 13, 2023 Xi Jinping Chokes Off Crucial Engine of China’s Economy
Foreign direct investment in China fell to $20 billion in the first quarter from $100 billion a year earlier, hurting an already struggling economy
WSJ By Lingling Wei, July 13, 2023
At the COA Spring Gala 2023, Andrés Gluski, the CEO & President of AES and Chairman of the Americas Society/Council of the Americas, presented President Lacalle Pou with the prestigious Gold Insigne. This award was given in recognition of President Lacalle Pou's outstanding leadership in successfully transforming Uruguay into a prominent technology and innovation hub, all while upholding a thriving democracy and robust economy.
A White House that has bet President Joe Biden’s political future on the economy’s resilience — so much so that they’re branding it with the president’s name — got the latest encouraging sign Wednesday that its strategy is paying off. | Evan Vucci/AP Photo/ Editing by Germán & Co
Biden’s economic dream is becoming reality — but how long can he sustain it?
Biden has navigated through two years of pitfalls and emerged with a rallying economy. The White House will take that for now.
Politico.com By ADAM CANCRYN, July 12, 2023“Now he just needs to figure out how to keep it that way…
A White House that has bet Biden’s political future on the economy’s resilience — so much so that they’re branding it with the president’s name — got the latest encouraging sign Wednesday that its strategy is paying off, with new data showing a sharper than expected slowdown in consumer costs.
The measure is a major reversal of fortune for Biden, after two years battling soaring inflation and accusations his agenda had contributed to the pain. But it’s just the latest in a string of economic developments that’s bolstered the administration’s confidence it can set the U.S. on a glide path without first plunging it into a downturn.
“Despite repeated forecasts that recession is just around the corner, the U.S. recovery is solid,” National Economic Council Director Lael Brainard said in a speech at the Economic Club of New York shortly after the inflation data came out Wednesday. “The economy is defying predictions that inflation would not fall absent significant job destruction.”
Yet even as fears of a disastrous recession fade, Biden and his allies are already turning their attention toward a range of smaller obstacles that threaten to dampen the White House’s political narrative. There remains a wariness within the ranks that taking a full victory lap on the economy could invite political troubles down the road — and that the administration lacks the tools to deal with a serious setback should one occur between now and the election in 16 months.
“Good news is good news for the White House at this point,” said Tobin Marcus, a former economic adviser to Biden. “It doesn’t rule out the possibility that things do go rougher than they hope.”
The administration is bracing for the mass resumption of student loan payments this fall, which could send a financial shock through millions of households that have benefited from the three-year reprieve. Congressional Republicans, meanwhile, are already signaling plans to wage a budget battle likely to shut down the government and further shake the nation’s political stability. And then there’s the Federal Reserve, which remains determined to hike interest rates in pursuit of lowering inflation to 2 percent, despite warnings it could end up tipping the U.S. into recession.
“Do we want to sacrifice the economy to the altar of the 2 percent inflation rate?” Mark Zandi, chief economist for Moody’s Analytics, said earlier this week. On Wednesday, he tweeted that the latest inflation report served as more reason to “rethink” the Fed’s strategy.
Biden allies insist those are each manageable elements on their own. But the White House is already struggling to convince Americans that the economy is, in fact, good at a time when all the major indicators are moving in the right direction. And together, those looming hurdles represent a reminder that Biden and his team can only exercise so much control over the economy’s path in the run-up to 2024.
“There’s going to be cooling because economies just cool down — they can’t grow endlessly,” said one economic adviser to the White House, who was granted anonymity to speak freely. “The only thing I worry about is the shock that I can’t predict.”
Biden himself has shown some restraint in how he frames the economic recovery, even amid an extended road tour to claim credit for strengthening conditions across the country. In an otherwise triumphant June speech meant to formally outline his Bidenomics agenda, Biden closed by cautioning, “I’m not here to declare victory.”
He repeated the disclaimer in South Carolina last week, warning that “we have a lot more work to do.”
Inside the administration, aides described their focus more on alleviating voters’ existing misgivings about the state of the economy rather than promising a rosy future. The White House has long harbored deep frustrations with media coverage that officials view as obsessed with the threat of recession, even as the underlying data showed consistent signs of strength — a dynamic they blame in part for the public’s dim view of how Biden has handled the economy.
“We have heard doomsayers saying a recession is around the corner for more than a year,” said one White House official, who was granted anonymity to describe the outlook inside the building. “Obviously, there will always be bumps on the road, but we have dealt with unexpected bumps and our economic recovery has powered through.”
The administration has sought to smooth out some of the impending bumps that it can predict. After the Supreme Court struck down Biden’s bid to cancel billions of dollars in student debt, the White House rolled out a new strategy that will ease repayment penalties for financially vulnerable borrowers over the next year.
The “on ramp” policy won’t avert the anticipated drop in borrowers’ spending that could ripple through the economy and slow its progress. But it could help spread some of the impact over several months, rather than having it hit all at once.
“The hardship for households in some cases is going to be very real,” Marcus said. “Macroeconomically, I don’t see that being the thing that tips us into recession.”
Biden has also begun taking aim at individual Republicans over economic issues. Having navigated a potentially disastrous debt ceiling showdown, he is now moving to insulate himself from the political fallout of a potential government shutdown. In particular, the White House has been highlighting GOP lawmakers who opposed his policies — even as they tout the ways in which their districts have benefited from them.
Biden: I compromised on the budget, not debt ceiling
But beyond that bully pulpit, Biden has few major levers remaining to stabilize the economy if it falters more significantly, especially as much of the pandemic aid that proved a critical financial cushion over the last few years expires.
Though the White House has steered clear of commenting on the Fed, aides and allies have kept close watch on a rate-hiking campaign many privately worry will go too far in its bid to lower inflation.
There’s also some trepidation over how much longer the economy can keep up its pace, and whether even small signs of cooling around this time next year could unravel all the work officials are doing now to sell voters on Biden’s economic record.
But for now, Biden has navigated through two years of pitfalls and emerged with a strengthening economy in hand. Voters may say they don’t yet feel it. Still, it’s a frame the White House is increasingly willing to embrace — for as long as it lasts.
“The story of almost every recession in modern American history is something bad happened, and it was something bad we didn’t see coming,” said Justin Wolfers, an economist at the University of Michigan. “What could happen between now and 2024? A shit-ton of bad things. You know what else could happen? Good things.”
…”I had the privilege of attending the AmChamChile meeting with former President Lagos and gaining valuable insights into his experience in the negotiations of the Chile-US Trade and Development Agreement. It is truly remarkable to think that two decades have already passed since those negotiations concluded. I would like to express my sincere gratitude to AmChamChile for generously sharing their invaluable insights and knowledge with us. Thank once again.
Javier Dib
Chief Executive Officer (CEO) of AES Andes
JAS 39 Gripen fighter aircraft of the Swedish Air Force is pictured during Arctic Challenge Exercise 23 live air operations drill in Pirkkala near Tampere, Finland on May 31, 2023 | Kalle Parkinen/AFP/Editing by Germán & CoSorry Russia, the Baltic Sea is now NATO’s lake
Expanding the alliance creates big problems for Russia.
POLITICO EU BY LAURA KAYALI, JULY 13, 2023 VILNIUS — A resurgent NATO is set to tighten its grip on the Baltic Sea, complicating a vital transit route for Vladimir Putin’s navy in Russia’s backyard.
This week’s alliance summit in Vilnius was Finland’s first as a NATO member. On the summit’s eve, Turkey agreed to back Sweden’s bid to join — paving the way for a strategic shift in a region Moscow once dominated.
“[Sweden and Finland] make NATO much more geographically coherent. The Baltic Sea becomes a NATO lake, which is generally useful, also because of the Arctic’s increased importance,” said Ulrike Franke, a senior fellow at the European Council on Foreign Relations.
NATO has steadily increased its control of the Baltic Sea — a crucial maritime gateway for the Russian fleet which has bases near St. Petersburg and in the heavily militarized Kaliningrad exclave. During the Cold War, only Denmark and Germany at the far western edge of the Baltic were in the alliance. Poland joining NATO in 1999 and the three Baltic republics in 2004 put most of the sea’s southern shore under alliance control.
Finland and Sweden in NATO will close the vise on the sea from the north, leaving Russia with limited access. Both countries dropped their long-standing neutrality — in Sweden’s case dating back centuries — and last May applied to join the alliance in the wake of Russia’s full-scale invasion of Ukraine.
That means significantly expanding NATO’s border with Russia, strengthening defense in Northern Europe and making the alliance’s deterrence more credible.
“The Baltic states were worried about being a little isolated,” said Camille Grand, a former NATO assistant secretary-general. “One could imagine that Sweden and Finland would not have let them down, but access to ports and airports was not 100 percent guaranteed.”
Sweden and Finland joining also means expanding the alliance’s presence in the Arctic, a region increasingly strategic to both Russia and China.
Moscow isn’t pleased…
“It’s extremely important to realize under the current conditions that the Russian military infrastructure has never shifted towards Western Europe, it has always moved in the opposite direction,” Kremlin spokesperson Dmitry Peskov said. “It’s certainly regrettable that the Europeans fail to realize this mistake.”
Sweden’s accession to the alliance would “definitely be negative,” he added.
Hard power
On Tuesday, NATO allies agreed to implement renewed regional defense plans. Sweden and Finland’s presence as members will be fully reflected in the alliance’s plans, exercises and targets, NATO Secretary-General Jens Stoltenberg said at a press conference.
The two Nordic countries will help make the “magical promise” of Article 5 more effective, according to Kristine Berzina, managing director for the German Marshall Fund’s Geostrategy North. Under Article 5 — NATO’s cornerstone — an armed attack against one or more members is considered an attack on all.
NATO Secretary General Jens Stoltenberg at the start of a meeting with NATO’s Indo-Pacific partners during the NATO summit, in Vilnius on July 12 | Pool photo by Jacques Witt via Getty images
The addition of the well-equipped Swedish and Finnish militaries will make it much more difficult for Russia to stage any attacks in the region.
“You need to have enough in place that, in case of a Crimea or a Ukrainian scenario, there’s actual ability to defend territory,” Berzina said. “With Finland and Sweden in, and [the Swedish Baltic island of] Gotland so close to Kaliningrad, in case of highly unlikely yet possible aggression from Russia, Russia cannot use the sea to its strategic advantage as it could right now.”
On the ground, this means more information sharing, more joint exercises and planning, and more military integration.
For example, a Finnish fighter jet flying near the Russian border can collect data and communicate with the Norwegians, who can then ask for more intel or ask the plane to fly elsewhere, said Charly Salonius-Pasternak, a leading researcher at the Finnish Institute of International Affairs.
Before NATO membership, “you could do it technically but, politically, you couldn’t plan to do that,” he said.
Soldiers, submarines, 5G
While benefitting from NATO’s protection, Stockholm and Helsinki will also bring assets to the table in terms of air defense, land forces and naval capabilities.
“The two countries are already interoperable with NATO, operate NATO-standard weapons systems, and participated in NATO exercise missions, which is one of the reasons why they were able to get in so quickly,” said Grand, adding that Helsinki and Stockholm won’t be “free riders” in the alliance.
Unlike most European countries, Finland didn’t stop spending money on the military after the Cold War ended.
According to Finnish media, Helsinki has one of the largest artillery arsenals and land forces in Europe — ranking ahead of heavyweights such as France, Germany and the U.K. Finland recently renewed its air fleet and is expected to have 64 U.S.-made F-35 fighter jets by 2026.
Sweden reinstated conscription in 2017, which applies to both men and women.
Stockholm did decrease defense spending in the 1990s and 2000s, but started ramping up again in recent years. However, it doesn’t expect to hit NATO’s 2 percent of GDP target until 2026.
Stockholm’s strength is in its navy, which is well-calibrated for the Baltic Sea. The Swedish air force is equipped with locally developed Saab JAS 39 Gripen fighters — designed to respond to a Russian attack and seen as a possible weapon that could be donated to Ukraine.
Beyond weaponry, Sweden and Finland can also help NATO with 5G, the fifth-generation of telecoms infrastructure, Grand said.
The two Nordic countries “bring know-how in an important technology and are trusted partners in the deployment of 5G for military needs,” he explained. Finland’s Nokia, Sweden’s Ericsson and China’s Huawei dominate the 5G civil market.
The two nations’ advanced military and technological capabilities come from being outside of NATO, Berzina said.
“They’re good at everything,” she said, “because they were by themselves.”
Image: Germán & CoCooperate with objective and ethical thinking…
A view of the Johan Sverdrup oilfield in the North Sea, January 7, 2020. Carina Johansen/NTB Scanpix/via REUTERS/File Photo/Editing by Germán & CoOil prices rise on cooling US inflation, China trade data
Reuters By Jeslyn Lerh, July 13, 2023SINGAPORE, July 13 (Reuters) - Oil prices climbed on Thursday after U.S. inflation and economic data sparked hopes that the Federal Reserve may have fewer interest rate hikes in store and Chinese trade figures showed monthly oil imports were the second-highest on record in June.
Brent crude futures gained 21 cents, or 0.3%, to $80.32 per barrel by 0630 GMT, while U.S. West Texas Intermediate crude futures were up 13 cents, or 0.2%, at $75.88.
U.S. data on Wednesday showed consumer prices rose modestly in June, registering the smallest annual increase in more than two years. Markets expect one more interest rate rise, but oil traders hope that may be it because higher rates can slow economic growth and reduce oil demand.
"The lower-than-expected read in U.S. inflation suggests that the tightening cycle from the Fed so far is having its desired effect in moderating pricing pressures," said Yeap Jun Rong, market strategist at IG, adding this had provided a "risk-on" environment for oil prices.
"Some catch-up gains seem to be at play, with the lacklustre U.S. dollar and some follow-through in China's stimulus hopes lately providing the catalysts for bearish sentiments to unwind," Yeap said.
Meanwhile, China's crude imports in June totalled 52.06 million metric tons, or 12.67 million barrels per day (bpd), jumping 45.3% on the year and hitting its second highest monthly figure on record, customs data released on Thursday showed.
Crude oil imports for January-June were up 11.7% at 282.1 million metric tons, while refined oil products exports for January-June were up 44.7% at 31.31 million metric tons, customs data showed.
However, sluggish global economic growth, slowing world trade and investment and geopolitical risks continue to impact China's trade, Lv Daliang, a General Administration of Customs spokesperson, said on Thursday.
Another factor capping price gains was a U.S. Energy Information Administration report of a much bigger-than-expected U.S. crude stock build of nearly 6 million barrels last week.
Gasoline inventories remained largely unchanged at 219.5 million barrels during the Fourth of July holiday week, a situation that is "almost unheard of," said Phil Flynn, an analyst at Price Futures group.
Analysts had expected a big drawdown of gasoline stocks as drivers took to the roads for holiday travel.
Reporting by Jeslyn Lerh in Singapore; Additional reporting by Laura Sanicola in Washington; Editing by Jamie Freed and Jacqueline Wong
Seaboard: pioneers in power generation in the country…
…“More than 32 years ago, back in January 1990, Seaboard began operations as the first independent power producer (IPP) in the Dominican Republic. They became pioneers in the electricity market by way of the commercial operations of Estrella del Norte, a 40MW floating power generation plant and the first of three built for Seaboard by Wärtsilä.
AES executive vice president and chief operating officer Bernerd Da Santos and AES Vietnam president Joseph Uddo discuss the Son My projects with Binh Thuan province's authorities in February 2023. Photo courtesy of the company. /Editing by Germán & CoAES, PV Gas receive investment policy approval for LNG terminal project in central Vietnam
The venture will be managed by PV Gas and AES Corporation, and is slated to commence operations in 2027, boasting a capacity of 450 TBtu.
theinvestor.vn By Tri Duc, July 13, 2023 A joint venture between American energy firm AES Corporation and Petrovietnam subsidiary PV Gas was granted investment policy approval for its $1.4 billion Son My LNG Terminal project by authorities in Binh Thuan province on Tuesday.
The terminal, to be built by the Son My LNG Terminal Project Company in the south-central province, will have an installed capacity of 450 TBtu and is expected to begin commercial operations in 2027, AES said in a release.
Plans for the Son My LNG Terminal in Binh Thuan province, south-central Vietnam. Photo courtesy of PV Gas.“The investment policy approval for Son My LNG Terminal is a significant milestone that enables us to move forward with the development of this critical infrastructure project," said Joseph Uddo, president of AES Vietnam.
"With more than 12 years of operations in Vietnam, AES is committed to accelerating the future of energy through important projects like this. We are pleased to receive approval from the Binh Thuan People’s Committee and excited to partner with PV Gas on this strategic project that will contribute to Vietnam’s energy transition and economic growth,” he added.
U.S. Ambassador to Vietnam Marc E. Knapper said:
“The Son My project will bring energy security to Vietnam in the transition to cleaner sources of energy. I am happy to see a world class U.S. company like AES as a partner of choice for PV Gas and the Government of Vietnam.”
The Son My LNG terminal project, together with AES’s 2.2 GW Son My 2 combined cycle gas turbine (CCGT), represents a multibillion-dollar investment. Son My 2 CCGT, which received investment policy approval earlier this year, will bring safe and reliable energy to power growth in Vietnam while supporting the transition to cleaner and greener technologies.
The Son My LNG Terminal project has received investment policy approval from authorities in Binh Thuan province. The joint venture between AES Corporation and PV Gas will oversee the $1.4 billion project, which will have an installed capacity of 450 TBtu and begin commercial operations in 2027. AES Vietnam's President, Joseph Uddo, referred to the approval as a "significant milestone" and highlighted that the project will contribute to Vietnam's energy transition and economic growth. The project, along with AES's Son My 2 combined cycle gas turbine, represents a substantial investment aimed at supporting the adoption of cleaner and greener technologies.
A national-security campaign led by Xi has hit Western management consultants, auditors and other firms GREG BAKER/AGENCE FRANCE-PRESSE/Editing by Germán & CoXi Jinping Chokes Off Crucial Engine of China’s Economy
Foreign direct investment in China fell to $20 billion in the first quarter from $100 billion a year earlier, hurting an already struggling economy
WSJ By Lingling Wei, July 13, 2023Desperate for capital and with their economies struggling, China’s cities are wooing Western businesses with previously unavailable goodies. Beijing has labeled 2023 the “Year of Investing in China” and local officials have embarked on promotional tours overseas to drum up interest from investors.
That effort is running headlong into President Xi Jinping’s national-security agenda, with its focus on fending off perceived foreign threats. That has made any Chinese investment a potential minefield for foreign firms.
A Xi-led campaign this year has hit Western management consultants, auditors and other firms with a wave of raids, investigations and detentions. Meanwhile, an expanded anti-espionage law has added to foreign executives’ worry that conducting routine business activities in China, such as market research, could be construed as spying.
The perception that doing business in China has become much riskier is choking the flow of capital into an economy already struggling with weak private investment and consumption, as well as soaring youth unemployment.
Foreign direct investment in China fell to $20 billion in the first quarter of this year, compared with $100 billion in last year’s first quarter, according to an analysis of government figures by analyst Mark Witzke at research firm Rhodium Group.
Goldman Sachs economists predict outflows from China this year will cancel out investment going into the country, a stunning change for a country that over the past four decades has consistently seen more money coming in than going out.
China’s growth, which in recent decades has been fueled by the country’s opening to the West, depends on foreign investment and expertise to boost innovation and productivity.
For Chinese leaders, keeping pressure on foreign firms while simultaneously trying to get them to invest is becoming an evermore precarious balancing act, which threatens to deprive the country of the capital, technologies, ideas and management skills that have helped power China’s rise.
Distressed cities
The tug of war is leaving financially distressed cities and townships across China in the lurch. Mired in debt and struggling to create jobs after three years of Covid-19 restrictions, many are in dire need of capital.
Local governments spent more last year than the year before, according to official statistics, triggered mainly by an 18% jump in health expenses used to cover Covid testing and related costs. Meanwhile, their income dropped, mainly because of a 23% year-over-year plunge in revenue from land sales to developers, a funding source on which local authorities long relied. Localities have borrowed more than they could afford, with debts owed directly by local governments amounting to 120% of their revenue.
Many officials say their traditional strategies for attracting foreign investment have foundered.
A trade official in Chengdu, the capital of southwestern Sichuan province, recently embarked on an investment-promotion trip to Europe. He returned empty-handed. “In my 20 years of trying to get investments from Europe, this was the first time we didn’t get to sign even one memorandum of understanding,” the official said.
A senior official in a county of southern Guangdong province, which earlier this year set a goal of attracting nearly $300 billion in investment in the next five years, told a visiting American trade group recently that the county would reward any U.S. corporate “decision maker” investing there 10% of the value of the promised deal, according to people briefed on the matter.
The trade group turned down the county official’s offer, which in the U.S. would constitute an illegal bribe, the people said. The Guangdong government didn’t respond to requests for comment.
Business pause
Recent surveys by business groups in China have shown American, German and other European companies pausing expansion or reducing investment in China. Crane, a large U.S. maker of vending machines and other industrial products that has been manufacturing in China since the 1990s, has sharply scaled back its investments in the country partly because of increased policy uncertainty, according to people close to the firm. Crane, based in Stamford, Conn., didn’t respond to questions.
Sean Stein, chairman of the American Chamber of Commerce in Shanghai and a former U.S. Consul General in the city, said the recent pressure on U.S. consulting firms risks “cutting off the eyes and ears of foreign businesses.”
Treasury Secretary Janet Yellen objected to China’s treatment of U.S. companies when she met with senior officials in Beijing last week. Commerce Secretary Gina Raimondo is also expected to raise the issue for her coming trip to China.
In the seaport city of Ningbo in Zhejiang province, local officials held a “Investing in Zhejiang” forum, where they touted a checklist of initiatives they could offer foreign investors, from building better roads and pipes to offering tax incentives and subsidies for purchases of high-end equipment.
“The message is that we’re really open for business,” said Cameron Johnson, a partner at TidalWave Solutions, a U.S. consultant and one of the half-dozen Westerners who attended the event in May.
At the same time, uncertainty over policies from Beijing has created paralysis in global corporate boardrooms, he said. “What’s the government’s real focus?” said Johnson, an American who has spent more than two decades in China. “Can there be more clarity or guidance on policy so foreign businesses can develop a road map to comply?”
Mixed messages
Pixelworks, a Portland, Ore., designer and producer of chips used in videos and other electronic display devices, has been welcomed with open arms by local officials in Shanghai, where its China operation is based. They are especially supportive of efforts by Pixelworks’ CEO Todd DeBonis to get the company’s Chinese subsidiary listed on Shanghai’s STAR board, the country’s equivalent to the Nasdaq.
“We’re going all-in in China,” DeBonis said, adding that most of Pixelworks’ research and development talent is based in China, and that is where the firm derives most of its revenue.
Despite the local support, Pixelworks is facing pressure from China’s central government to reconfigure its Chinese subsidiary to make sure it is independent from the company’s American operations. That is the kind of requirement increasingly imposed on foreign companies as part of Beijing’s national-security agenda, business consultants and lawyers advising multinational companies say.
For Pixelworks, that means the company has had to essentially split itself in two, with its China operation separated from its U.S. parent firm, to get Chinese regulators to approve its initial-public-offering application.
Over the past 2½ years, Pixelworks has undergone a painstaking process aimed at making its Chinese subsidiary independent from the U.S. parent. As part of that effort, Pixelworks has transferred the intellectual property specific to its China operation from the U.S. parent to the China entity—a move intended to ensure the security of those patents and trademarks against any potential U.S. sanctions that could make them off limits to China’s markets.
To comply with Chinese security concerns, Pixelworks recently moved 15 employees who worked on projects for the U.S. parent to a separate floor of its office tower. Those employees, all Chinese nationals, have their own office networks that are completely separate from Pixelworks’ China operations, and confine their work to U.S. projects.
In late June, several officials from China’s Commerce Ministry in Beijing visited Pixelworks’ offices to “better understand” its businesses and the company’s progress in separating its China operation, said DeBonis, who at the time was attending a U.S.-China forum and fly-fishing in Montana and was informed of the visit by his China staffers.
DeBonis said Pixelworks’ China operation aims to submit its IPO application to Chinese regulators later this year. To be approved, it will need to convince Beijing it has bulletproofed its intellectual property against any potential U.S. sanctions.
“They won’t approve your application unless you mitigate the risks to Chinese shareholders,” DeBonis said.