As the trade war rages between the United States and China, each side uses different techniques to harm the other. The Chinese way of putting obstacles in the way for American businesses is called “silent treatment” by the Wall Street Journal and is discreet but very effective.
On the American side, many measures were taken against Chinese companies, which led in particular to sanctions against Huawei, but also to multiple virtual bans of TikTok on American soil. Recently it is the electronic chip manufacturer Semiconductor Manufacturing International Corp. which was blacklisted by Donald Trump. The president also signed a decree earlier this year banning eight additional motions from the Middle Kingdom.
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But what is happening on the Chinese side? It seems that the tactics used by the authorities are much more discreet, but equally devastating: they disagree with transactions or takeovers of American companies that involve Chinese companies. The latest victims of this practice are Cisco Systems and Applied Materials. Cisco’s agreement to buy Acacia Communications for $ 2.6 billion is jeopardized. The latter claim that they did not receive approval from the Chinese government. Cisco must now obtain a warrant to prevent this agreement from being terminated.
Applied Materials raised the price of its acquisition of Kokusai Electrics, the deal closed in 2019, by more than $ 1 billion. The cause ? The Chinese authorities have not given their consent, and the value of Kokusai has increased significantly during that time. Giants Qualcomm and Nvidia have had similar adventures: the former had to wait more than a month to be approved to buy Mellanox, while the latter had to abandon its acquisition of NXP Semiconductors because the Chinese government did not give the green light.
This attrition technique can have several consequences for American companies: either they abandon the acquisition, which results in a significant loss of time and investment, or they pay much more than expected because the companies do – they want to increase in value over time. .. And that won’t necessarily work with the Biden administration. Indeed, the Democrat has said that he plans to put pressure on China in a different way than Donald Trump: with the allies of the United States.