As China and US open trade doors, American IT industry still left knocking

Progress could come however in final round of talks on 100-day plan expected over the summer, observer says

PUBLISHED : Sunday, 14 May, 2017, 12:16am
UPDATED : Sunday, 14 May, 2017, 12:16am

The newly cut trade deal between the US and China did not include America’s information technology industry, denying it any further access to the world’s second-largest economy.

The big winners instead under the agreement, announced on Thursday, were US agricultural and financial sectors. American beef, liquefied natural gas, and credit rating and electronic payment services will all have a shot at a greater presence in China.

The Information Technology and Innovation Foundation, an industry think tank, was critical of the deal, saying it “opens up Chinese markets for some commodity-based and finance industries in return for giving China free rein to use its massive foreign reserves to buy up American companies in advanced industries”.

Those industries include computing, aerospace, semiconductor manufacturing, automaking, internet services, clean energy, cloud computing, the foundation’s president, Robert Atkinson, said in a statement released on Friday.

China poses a threat to US dominance in semiconductor industry

During his testimony to the US House Foreign Affairs Committee on April 26, Atkinson said the “current and emerging challenge will be around advanced industries that the United States currently leads or holds strong global positions in, because those are the industries China is now targeting for dominance”.

“We urge the [Trump] administration to demand real changes in Chinese policies related to America’s advanced industries,” Atkinson said. “That should start with the first meeting of the Comprehensive Economic Dialogue in the summer of 2017.”

The dialogue, tentatively scheduled to take place in Washington in July, is aimed at reducing the bilateral trade deficit and expanding market access on each side, the final stage of wider negotiations under the so-called 100-day plan agreed by China’s President Xi Jinping and US President Trump at their summit in early April.

Scott Kennedy, an expert on Chinese political economy at the Centre for Strategic and International Studies, said addressing obstacles in market access for American IT companies was “absolutely” part of the 100-day plan talks.

“It’s something the US raised,” Kennedy said. “We should expect some amount of progress by mid-July.”

High hopes for clearer US stand on hi-tech investment in China ahead of Xi-Trump summit

Cloud service providers faced several barriers to doing business in China, such as the requirement that they operate through a local partner, Kennedy said.

IBM and a division of the Chinese conglomerate Wanda Group announced in March they were forming a new company to bring more IBM cloud services to China, Fortune reported. The new entity – Wanda Cloud Company – would go live next year, an IBM spokeswoman said.

Kennedy also said there were limitations on data flows in and out of China. “These obstacles have been erected in the name of national security, but commercial cloud services pose no threat to China’s national security.”

But in the US, Chinese internet giant Tencent was permitted to operate cloud services without endangering US national security, Kennedy said.

According to Rhodium Group, a New York-based research firm, investment by Chinese companies in the American IT market amounted to about US$10.9 billion from 1990 to 2105, while US companies invested nearly three times that amount in China’s IT market during the same period.