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US firms invest in China amid rising tensions

Sayed Kamaluddin | Published: May 23, 2016 20:12:21 | Updated: October 24, 2017 22:13:12


Apple and 28 other US enterprises have announced their decision to invest in China to the tune of over $5.14 billion on May 13 and 14 respectively. Apple, the major American technology company, of course, has reasons to be more upbeat about investing in China and enlarge its footprint.
Apple has achieved more success than any other major American technology firms in China and during the last fiscal year it sold $59 billion worth of its products there. It naturally wants to seize the opportunity when an opportunity knocks at its doors.
In fact, the lightening speed at which the latest deal was clinched has surprised analysts. For example, the deal with the Chinese ride-hailing service giant Didi Chuxing was concluded in about three week's time, which is extraordinary.
Earlier in April, Apple's CEO Timothy D. Cook first time met the top executives of ride-hailing giant Didi to discuss how they could work together. On  May 14, Cook announced the $1.0-billion investment deal - said to be one of Apple's largest-ever investment - which experts believe can enhance Didi's competitiveness in the country's cut-throat transportation market. 
Incidentally, the day before Apple's decision, a delegation of China's southern Guangdong Province signed 28 cooperation projects worth $4.14 billion with US enterprises.
RISING SOUTH CHINA SEA TENSIONS: Meanwhile, these developments coincided with the annual Pentagon report alleging that Beijing had been building up military facilities on reefs and islets in a bid to assert its claims to the contested waters of the South China Sea.
The Pentagon on May 13 accused Beijing of building up military facilities on reefs and islets in a bid to assert its claims to the contested waters of the South China Sea. In its annual report to the US Congress, the Pentagon said that China's military has also been using "coercive tactics" to foster tensions with its neighbours but will ensure that they don't snowball into outright conflict.    
Next day China's defence ministry spokesman Yang Yujun hitting back at the United States said that the Pentagon report had "deliberately distorted China's defence policies." He said: "It is the United States that has been flexing muscles by frequently sending military aircrafts and warships to the region," official news agency Xinhua reported.      
Yang charged that the Pentagon report "severely damaged mutual trust between the two sides" and accused the US of being behind the "militarisation in the South China Sea."
SOOTHING INVESTMENT DEALS: Coming back to the Apple and other economic deals, Didi stated in a statement that Apple can help it build up its ride-sharing platform, which handles more than 11 million rides-a-day and serves around 300 million users all over China. Company website says it dominates over 80 per cent of China's private car-hailing market and operates in around 400 cities in the country with its 14 million registered drivers offering services.
Apple CEO Timothy Cook said in an interview with Reuters: "We are making the investment for a number of strategic reasons, including a chance to learn more about certain segments of the China market."  
Reports say, Didi, which has previously raised several billion dollars, will be valued at about $26 billion after this investment, making it one of China's most valuable startups and among one of the world's largest "unicorn" startups valued at more than $1.0 billion. 
Apple's iPhone sales in China fell 26 per cent from a year earlier in the quarter that ended in March, and market analysts said that by investing in China Apple wants to reassure investors to show its confidence in the country - the world's second largest market for its iPhones.
WIN-WIN SITUATION: The move is considered by both the parties as a win-win situation. China's Global Times reported, apart from the infusion of a $billion in cash, Didi can get advanced technology from Apple. Big data is another major reason for Didi to cooperate with Apple, Jia Xinguang, standing director with China Automobile Dealers Association, a Beijing-based industry association, said.
"Didi can get access to hundreds of millions of potential consumers who use iPhones," he said. "Moreover, Didi can analyse consumers' travel habits through their on-line behaviour gathered from iPhones so to adjust its business strategy." 
Didi has expanded its business all over the world by forming coalitions with Lyft Inc in the US, Ola in India and GrabTaxi in Southeast Asia. Experts say Didi can accelerate its globalisation by cooperating with Apple, the world's most established mobile phone maker. 
Jia Xinguang was also quoted as saying: "Apple paves the way for its automobiles business in China in the future by cooperating with Didi, which can help Apple get a clear picture of China's transportation market thanks to Didi's huge data of passenger flow". The cooperation can help Apple to expand its Apple Pay business in China, a service Apply launched in February in the country, he added.
Apple has long been exploring building a self-driving car, in competition with Google's well-known efforts, and it has a team of over 1,000 employees on this project.
BOOSTING GUANGDONG-US TIES: China's southern Guangdong province, one of the country's fast developing regions, has increased its businesses and investment with the US manifold. For example, trade between the Chinese province and the United States totalled $128.3 billion in 2015, accounting for 12.55 per cent of the province's total foreign trade. It is to be noted that by the end of 2015, Guangdong province had set up 555 companies in the United States with contractual investment of $3.7 billion and actual investment of more than $2.1 billion.
According to Xinhua news agency, a delegation of China's southern Guangdong Province signed 28 cooperation projects worth $4.14 billion dollars with US enterprises earlier in April. More than 200 U.S. enterprises and 85 companies from Guangdong Province participated in the China (Guangdong)-U.S. (New York) Economic and Trade Cooperation Conference in which the projects were clinched.
Hu Chunhua, a member of the Political Bureau of the Communist Party of China (CPC) Central Committee and secretary of the Guangdong Provincial CPC Committee, and Patrick Santillo, deputy assistant secretary of commerce for China at the U.S. Department of Commerce, were among the participants.
Hu put forward ways to strengthen bilateral economic and trade cooperation, including expanding two-way investment and bilateral trade, deepening cooperation in technological innovation, tourism and cultural exchanges and establishing long-term mechanisms for such cooperation.
Chinese Ambassador to the US Cui Tiankai, said in the conference that local cooperation is an important part and a cornerstone of the China-U.S. relations, as well as the most direct way to benefit the people. The Chinese delegation also held similar economic and trade cooperation conferences in Detroit and Boston the same week.
SENSELESS SABRE-RATTLING: Contrasting these developments, French news agency AFP reported from Brussels on May 19 that NATO foreign ministers were reportedly finalising the group's military build-up since the end of the Cold War to counter  what they presume as a "more aggressive and unpredictable" Russia under tough-talking strongman President Vladimir Putin. The two-day meeting discussed "all the important issues" for the preparation of what they called a "landmark summit" in Poland to be held in July.
In the scheduled July summit, the NATO leaders would formally endorse revamping more troops in the eastern European member states as part of what they called to finalise a "deter dialogue" strategy meant to reassure allies that they won't be left in the lurch in case the Ukraine crisis is repeated.
It is difficult to believe that at a time when the world is passing through a very difficult global economic slowdown, the US-led NATO powers are concentrating their energy and attention to sabre-rattling instead of putting their heads together to overcome the crisis by revamping global economy and concentrate more on preserving peace and unity.
sayed.kamaluddin@gmail.com

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