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Death by paperwork: Rates are not China's only trading weapon




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                  China's President Xi Jinping was able to weigh options on how to back a US decision to increase existing tariffs and impose new sanctions on the entire remaining Chinese Importing Jason Lee / AFP / Getty Images </p>
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Trading

How China Can Cause Pain for US Businesses Without Indicating Tariffs

Beijing could take a death by a regulatory approach that makes it almost impossible for American Businesses operate on one of the world's valuable consumer markets. Actions include tighter customs procedures, new paperwork requirements, and additional business license controls. examine visa, making it harder for American bus

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Another way Beijing could harm the United States, is by appealing to Chinese patriotism by pushing people to boycott American products and leading brands like Apple.

These are not just speculative ideas. Both Chinese state media and social media show a population ready to fight with its leaders in the economic war against President Donald Trump and the United States.

"Any concise reading of social media and public comment in China today shows clearly that nationalist civil society pressure in China is building fast," said Craig Allen, president of the US China Business Council.

Allen, whose group represents large US companies operating in China, said the Chinese government has been trying to insure US investors that their interests should be protected and there has been no obvious cases of retaliation.

"Let's hope it will be that way," he said. "We should all be extremely careful about touching the anti-American mood on the world's second largest market."

But if the trade struggle grows, China could quickly exploit many of these non-tariff actions in an attempt to leverage. China has far fewer imports from the United States to hit the duty relative to the amount of goods that China exports to the United States

Dear rhetoric from Chinese officials in recent days has suggested that Beijing could weigh its chances of beating to a decision by the United States to increase existing tariffs and impose new sanctions on all remaining Chinese imports.

Chinese President Xi Jinping warned in a speech Wednesday that a civilization that forces itself to another would be "stupid" and "catastrophic".

A Chinese Foreign Minister spokesman said China would "fight to the end."

"It has always been their secret weapon, so-called non-trade barriers," said Michael Pillsbury, a foreign adviser to Trump on China issues. "The non-trade barriers are where you can really inflict damage."

China's central government may have an interest in trying to keep non-tariff responses under its control for now. Boycotts and similar mass movements against US companies would not only harm Chinese business interests, but could quickly turn into social turmoil directed at the government, said Deborah Elms, CEO of the Asian Trade Center in Singapore.

"This would play with fire," she said.

Instead, the Chinese government could lift "qualitative" actions that can remain firmly under control. It could include tightening of customs inspections, delaying regulatory approvals, invalid patents, and other actions taken from a playbook that Beijing has consistently invoked in years past.

China could also try to interfere with US supply chains. For example, it could inspect the Apple iPhone vendor Foxcon's production facility and find violations to justify shutting them down for three months.

"Given the speed that Starbucks expands in China, my guess is that the Chinese government will discover something that's not quite right," Elms said.

Beijing could also try to undermine the impact of US duties by slipping the value of its currency even though it could cause major problems that it might want to avoid.

"These are not surgical tools," Elms said. "If I want to inspect a company's paperwork, I can control it pretty well. When you begin to trade in currency, it affects the whole economy."

For US companies, the calculation has changed as many companies now see China's growing middle class and 1 , 4 billion Consumers as their primary market, where they now build and sell products.

With a middle class of 300 million people and growing, multinational corporations such as Boeing and General Motors see futures closer to China – where demand for aircraft and cars is expected to exceed the US over the coming years.

It is unclear whether the pain of US companies in China will revive with a president whose ultimate goal may be to uncouple US and Chinese economies.

"I don't think [Trump] would like to hear directly from all of Dennis Muilenburg's world," said a former senior US official posted in China, referring to Boeing's CEO. "If enough of them call it, it may be his attention."


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