China Brief: 19-25 February 2019

A2 Global's China Brief contains assessments of events and policies that may impact commercial interests, personnel and assets throughout Greater China. This edition includes progress in trade talks between the U.S. and China, a U.S. biotechnology firm's halting of business with Xinjiang, a temporary Tibet travel ban for foreigners and the Chinese government's plans for integrating the special administrative regions. 

China & United States - Trump delays latest tariffs, raising hopes of end to trade war 

China - Political risk: Medium - U.S. biotech company to stop selling equipment to build Uyghur DNA database 

China - Security risk: Medium- Foreign tourists banned from Tibet as uprising anniversary approaches

Hong Kong - Travel risk: Low - Beijing unveils plans for further integration of special administrative regions into mainland

China & United States – Trump delays latest tariffs, raising hopes of end to trade war

25 February: The U.S. is to delay imposing further trade tariffs on China, President Donald Trump announced on 24 February. An increase of up to 25 per cent in duties on USD200 billion worth on certain Chinese goods was due to be introduced on 1 March. Trump said both sides had made ‘substantial progress’ in trade talks and revealed that he was planning a summit with Chinese President Xi Jinping in the southern U.S. state of Florida. China’s official news agency Xinhua stated that progress had been made on issues including intellectual property protection, technology transfer, and agricultural produce.

Why it matters: Trump’s announcement, following positive signals emerging from recent talks in the U.S. capital Washington, D.C. indicates that both sides are seeking to de-escalate the ongoing trade war. Existing tariffs remain in place. Businesses whose supply chains or customers link the U.S. and China should closely monitor announcements from Beijing and Washington and be prepared to amend strategic planning to reflect a further de-escalation in the trade war.

China – U.S. biotech company to stop selling equipment to build Uyghur DNA database

CHINA – Political risk: Medium

22 February: U.S. biotechnology company Thermo Fisher Scientific is to stop selling China equipment used to create a DNA database of the country’s Uyghur minority in the western region of Xinjiang, it was reported on 22 February. Thermo Fisher Scientific cited violations of its code of ethics as the reason for its decision, in a statement issued on 20 February.

Why it matters: Thermo Fisher Scientific’s announcement follows criticism of China’s practices in Xinjiang, extensive media coverage of a Dutch cyber-security specialist’s 15 February discovery of a Chinese facial recognition technology company’s database tracking Uyghurs’ movements, as well as increased efforts by members of the U.S. government to raise the importance of this issue. The capturing of genetic information yielded by biotechnology equipment reportedly forms a cornerstone of China’s data collection process in the region. A2 Global reiterates its advice reminding foreign businesses operating in Xinjiang to be aware of the potential reputational damage of working with the government or local partners.

China - Foreign tourists banned from Tibet as uprising anniversary approaches 

CHINA – Security risk: Medium

21 February: On 20 February, Chinese travel agencies confirmed that foreigners are being barred entry into Tibet up until 1 April. The time period includes a series of politically sensitive anniversaries with regards to the region’s relationship to Beijing.

Why it matters: China’s central government has a fraught relationship with Tibet, characterised by separatist protests and government clampdowns on these. The 60th anniversary of of Tibet’s 1959 uprising against Chinese rule, which resulted in the Dalai Lama’s flight to India, is on 10 March. Though foreigners require a special entry permit in addition to their Chinese visa to enter the region, Tibet remains a popular tourist destination. A2 Global notes that businesses with operations in Tibet will have to accommodate the temporary travel ban and should factor into operations the postponement of visits by foreign staff. Furthermore, businesses in Tibet should be aware of the heightened security risks within this time and ensure that their local staff and assets are secured in the event of violent protests, especially around 10 March.

Hong Kong – Travel risk: Low – Beijing unveils plans for further integration of special administrative regions into mainland

HONG KONG – Travel risk: Low

19 February: China’s State Council, the country’s de facto cabinet, on 18 February published its long-awaited plans for the integration of the special administrative regions of Hong Kong and Macau with the mainland. The so-called Greater Bay Area development is based around 11 major cities in the Pearl River Delta, encompassing much of China’s southern Guangdong province with Hong Kong and Macau through physical infrastructure and administrative initiatives and reforms. The region covers 56,500km/sq, has a population of 70 million, extensive manufacturing and service sectors and a combined gross domestic product of about RMB10 trillion yuan (USD1.48 trillion).

Why it matters: The 18 February formal announcement of the plan has added to existing concerns in Hong Kong and Macau over their continued status as semi-autonomous entities. Hong Kong’s so-called ‘localists’ – in effect separatist – movement that adopted a lower profile following the territory’s government ban on one of its main parties in 2018 has become more active recently. China’s announcement can be expected to bolster support for its efforts. On 17 February, hundreds of localist activists marched to a Hong Kong public hospital to highlight their claim that the large number of migrants from China were overwhelming the public health system. An earlier protest had called for an end to the policy that enables 150 mainland residents to settle in Hong Kong each day – with 700,000 having done so over the past decade. A2 Global warns that similar protests can be expected in the future, creating the potential for confrontation with the local administration many now view as more prepared to acquiesce to the demands of the Chinese government than meet the needs of Hong Kong residents.