By John D. McKinnon and Lingling Wei
U.S. companies whose fortunes are linked to China are pushing
back against the Trump administration's plans to restrict business
transactions involving the WeChat app from Tencent Holdings Ltd.,
saying it could undermine their competitiveness in the world's
second-biggest economy.
More than a dozen major U.S. multinational companies raised
concerns in a call with White House officials Tuesday about the
potentially broad scope and impact of Mr. Trump's executive order
targeting WeChat, set to take effect late next month.
Apple Inc., Ford Motor Co., Walmart Inc. and Walt Disney Co.
were among those participating in the call, according to people
familiar with the situation.
"For those who don't live in China, they don't understand how
vast the implications are if American companies aren't allowed to
use it," said Craig Allen, president of the U.S.-China Business
Council. "They are going to be held at a severe disadvantage to
every competitor," he added.
Other participants in the call Tuesday included Procter &
Gamble Co., Intel Corp., MetLife Inc., Goldman Sachs Group Inc.,
Morgan Stanley, United Parcel Service Inc., Merck & Co. Inc.
and Cargill Inc., according to the people.
The companies either declined to comment or didn't respond to
requests for comment. Their participation in the call with the
White House is another sign that deteriorating relations between
Washington and Beijing poses a threat to commercial relations
between the two nations.
The call between the companies and the White House was organized
by the U.S.-China Business Council, the U.S. Chamber of Commerce
and the Business Roundtable, the people said.
Organizers started the call by introducing participating
executives from the companies, which included those who deal with
international relations and trade.
A number of participants raised concern that the order's
language suggests it could be applied to U.S. businesses all over
the world, including in China, where WeChat is a dominant
commercial platform.
Some participants also raised concerns about lack of clarity
over whether the order applies to Tencent and its other platforms,
pointing to the potential problems the National Basketball
Association faces in its marketing deals with Tencent, which
streams NBA games in China.
NBA spokesman Mike Bass said the league is "awaiting further
clarity on the executive order."
Some participants questioned whether those deals could continue
in China under the order, the people said.
The WeChat app is used by more than 1.2 billion people globally
and is ubiquitous in China, where consumers, businesses and
government alike use it for mobile payments, messaging, e-commerce,
official communications and other functions. For anyone doing
business in China, including U.S. companies, it is also a vital
marketing hub to connect with consumers.
One aim of the call was to seek clarity on the precise meaning
of the executive order signed by Mr. Trump last week, according to
the people familiar with the matter. That order barred "any
transaction that is related to WeChat" by Americans but left
details of what is actually banned to the Commerce Department to be
worked out.
Companies are hoping the administration will narrow the order as
it is implemented over the coming weeks, according to the people
familiar.
Asked about Tuesday's conference call, a White House spokesman
issued a statement saying the administration "is committed to
protecting the American people from all cyber-related threats to
critical infrastructure, public health and safety, and our economic
and national security."
In announcing the action against Tencent, the Trump
administration said that WeChat captures "vast swaths of
information from its users," potentially exposing the personal
information of Americans and Chinese nationals living in the U.S.
to exploitation by China's ruling Communist Party.
The Trump administration announced a similar action against the
TikTok video-sharing app. TikTok's owner, Beijing-based ByteDance
Ltd., is in negotiations to sell its U.S. operations.
Both companies have said they protect the privacy of their
users. On an earnings call Wednesday, Tencent Chief Financial
Officer John Lo said the company believes Mr. Trump's order applies
only to the international version of WeChat and not its domestic
Chinese market.
"We are in the process of seeking further clarification from
relevant parties in the U.S.," Mr. Lo said.
Even so, U.S. companies are concerned the administration's
action could effectively cut them off from access to the lucrative
China market, for example by ending their ability to accept
payments or advertise on WeChat.
Apple is among the U.S. companies with the most at stake. Being
forced to remove the app from its devices could be devastating.
Analyst Ming-Chi Kuo at TF International Securities projected that
global iPhone shipments could fall by as much as 30%, if such a ban
goes into effect. Apple declined to comment.
Some U.S. entertainment and sports concerns, meanwhile, are
worried they could be cut off from Tencent's other digital
services.
Chinese Vice Premier Liu He, President Xi Jinping's chief trade
negotiator with Washington, is expected to bring up concerns over
the executive orders against WeChat and TikTok during talks with
U.S. Trade Representative Robert Lighthizer's team in the coming
days, according to people familiar with the matter.
The main thrust of the discussion is aimed at evaluating China's
compliance with a bilateral trade agreement signed in January. But
Mr. Liu, who has direct oversight over China's technology industry,
is planning to seek a "wish list" of sorts from the U.S. side to
try to address concerns over the Chinese companies, one of the
people said.
So far, Beijing has largely refrained from retaliating against
the U.S. sanctions. Still, China's Foreign Ministry has reacted
angrily to the U.S. restrictions on the use of WeChat and TikTok,
saying Washington is "carrying out political manipulation and
suppression."
The restraint partly reflects the limited presence of comparable
U.S. firms in China, making it hard for Beijing to hit back against
Washington eye for eye. Facebook Inc. for instance, has been
blocked by the Great Firewall since 2009. Alphabet Inc.'s Google
unit pulled its popular search engine out of the country a year
later.
Analysts say Beijing could bar Chinese companies from placing
ads on Facebook or Google, but such action would hurt these
companies' ability to expand overseas.
What's more, big U.S. corporations traditionally have been
Beijing's strongest supporters in Washington -- as the lobbying
against the WeChat ban demonstrates -- though their influence has
ebbed under the Trump administration. Previous lobbying by U.S.
chip makers led the administration to roll back or delay harsh
sanctions against Chinese telecom giant Huawei Technologies Co.
But navigating the political waters is particularly difficult
right now, given the looming U.S. presidential election Nov. 3.
"I think companies are worried about offending either Washington
or Beijing and to the extent possible want to keep out of the
crossfire," said Scott Kennedy, a China business expert at the
Center for Strategic and International Studies. "Also no one wants
to be seen as defending China's system of surveillance or
censorship or lack of reciprocity. So it is very difficult for
companies to come out and say the U.S. is in the wrong and China is
in the right."
As tensions between the two world powers intensify, many more
companies also find themselves caught up in the firefight.
According to a survey released Tuesday by the U.S.-China Business
Council, 86% of more than 100 member companies report that the
bilateral tensions have caused lost sales or otherwise impacted
their businesses in China. "We have been cut out of some bids
because we are a U.S. company," the report quotes one company as
saying.
At the same time, according to the survey, conducted in May and
June, 83% of the council's members counted China as either the top
or among the top five priorities for their global strategy.
Nearly 70% of respondents expressed optimism about the five-year
business outlook in China, and 87% said they have no plans to shift
production out of the country. However, in the
short-to-medium-term, U.S.-China tensions are leading some to
reduce or stop planned investment in China.
"U.S.-China trade and investment supports about 2.6 million
American jobs," said Mr. Allen of the U.S.-China Business Council.
"We need to sustain and grow those jobs in future years, while
finding ways to reduce conflict in other areas of the
relationship."
Write to John D. McKinnon at john.mckinnon@wsj.com and Lingling
Wei at lingling.wei@wsj.com
(END) Dow Jones Newswires
August 13, 2020 14:51 ET (18:51 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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