China Puts Off Licenses for US Companies Amid Tariff Battle

September 11, 2018 Updated: September 12, 2018

BEIJING—Amid a worsening tariff battle, China is putting off accepting license applications from American companies in financial services and other industries, an official of a business group said on Sept. 11.

The disclosure is the first public confirmation of U.S. companies’ fears that their operations in China or access to its markets might be disrupted by the battle over Beijing’s intellectual property theft—which the U.S. administration is targeting through its tariffs.

China is running out of American imports for penalties in response to U.S. President Donald Trump’s tariff hikes, which has prompted worries that Chinese regulators might target operations of U.S. companies.

The license delay applies to industries Beijing has promised to open to foreign competitors, according to Jacob Parker, vice president for China operations of the U.S.-China Business Council (USCBC). The group represents some 200 American companies that do business with China.

In meetings over the past three weeks, Chinese officials told USCBC representatives they are putting off accepting applications “until the trajectory of the U.S.-China relationship improves and stabilizes,” Parker said.

Beijing matched Trump’s earlier tariff increase on $50 billion of imports but is running out of American goods for retaliation due to their lopsided trade balance. China bought American goods worth about $1 for every $3 of goods it exported to the United States.

Trump is poised to decide whether to raise duties on $200 billion of Chinese goods. Beijing has issued a $60 billion list of goods for retaliatory tariffs.

Economists have warned Beijing might target service industries such as engineering or logistics, in which the United States runs a trade surplus with China.

The Chinese government said in June it would impose unspecified “comprehensive measures” if necessary. That left U.S. companies on edge about whether Beijing will use its heavily regulated economy to disrupt their operations by withholding licenses or launching tax, anti-monopoly, or other investigations.

Chinese leaders rejected Trump’s demand to roll back official industry plans such as “Made in China 2025,” which calls for state-led creation of global champions in robotics, artificial intelligence, and other technologies.

Washington, Europe, and other trading partners say China’s plans violate Beijing’s market-opening commitments.

Chinese negotiators agreed in May to narrow their multibillion-dollar trade surplus with the United States by purchasing more American soybeans and other products. Beijing scrapped that deal after Trump’s first tariff increase went ahead July 6.

In addition to rolling back industry plans, the Trump administration wants Beijing to reduce the privileges of state-owned companies and eliminate requirements for foreign companies to hand over technology to Chinese partners.

In their meetings with the USCBC, Chinese officials expressed willingness to buy more American exports but “showed no appetite at all” to talk about industry reform, technology policy, or other U.S. priorities, Parker said.

“I don’t consider that to be very positive for any kind of negotiated outcome in the short term or medium term,” he said.

Chinese regulators have shown their willingness to attack foreign companies in disputes with other governments.

Last year, Beijing destroyed South Korean retailer Lotte’s business in China after it provided land on its golf courses in South Korea to host the United States’ anti-missile defense system. The THAAD system, meant to be a countermeasure against North Korean nuclear testing, greatly offended Beijing, which claimed that it could be used by American forces to spy into Chinese airspace.

Beijing closed most of Lotte’s 99 supermarkets and other outlets in China. In August, Lotte sold its China operations and left the Chinese market, citing poor sales.

By Joe McDonald

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