The dragon is angry.
Barely 24 hours after announcing the establishment of an “unreliable entities” list aimed at punishing companies complicit in the Trump administration’s efforts to cripple Huawei, China has announced an investigation into FedEx.
The official announcement of the entities list included a few specifics, although the language appeared to be intentionally vague to allow Beijing wide discretion in choosing its targets. ‘Unreliable entities”, China said, are “foreign business organizations or individuals that do not abide by market rules and deviate from the spirit of the contract, and impose non-commercial blockades on Chinese enterprises, which seriously damage [their] legitimate rights and interests.”
Read more: America The ‘Unreliable Entity’ Prompts China To Establish Corporate Blacklist
So, essentially, it’s a corporate blacklist. Commentators immediately warned that Beijing would likely target companies associated with the Huawei ban.
On Monday, Huawei accused FedEx of rerouting a couple of packages headed to company addresses in Asia and sending them to the US instead. FedEx, Huawei claimed, tried to do something similar with two additional parcels. The company even gave Reuters the tracking records. The wayward packages incident apparently occurred last week.
“Huawei told Reuters… that FedEx diverted two packages sent from Japan and addressed to Huawei in China to the United States, and attempted to divert two more packages sent from Vietnam to Huawei offices elsewhere in Asia, all without authorization”, Reuters said.
Huawei wasn’t amused. “The recent experiences where important commercial documents sent via FedEx were not delivered to their destination, and instead were either diverted to, or were requested to be diverted to, FedEx in the United States, undermines our confidence”, a company spokesman said. “We will now have to review our logistics and document delivery support requirements as a direct result.”
FedEx played down the incident, calling it an “error”. The company was not compelled to divert the parcels by a third party, a spokeswoman said. “This is an isolated issue limited to a very small number of packages”, she claimed, although the two packages in question were held up on “exception” status.
FedEx would later apologize. “We value all our customers who hand more than 15 million packages per day to us for delivery”, the company wrote on Sina Weibo, adding that it’s sorry for the “mistransportation” and reiterating that “no external parties” were involved. “External parties” of course meant the US government.
Well, apology not accepted.
“The relevant state departments decided to open a case investigation of the US Federal Express [which] is suspected of harming the legitimate rights and interests of Chinese users”, Xinhua said on Saturday. “Recently, FedEx… did not deliver the express mail by name, seriously damag[ing] the legitimate rights and interests of users”, Xinhua continued, noting that this is a “violation of China’s express industry regulations.”
If you’re wondering whether this means FedEx has the dubious distinction of being the first company on China’s “unreliable entities” list, the answer appears to be yes.
“Now that China has established a list of unreliable entities, the investigation into FedEx will be a warning to other foreign companies and individuals that violate Chinese laws and regulations”, China Central Television said, in an evening statement. “China welcomes foreign companies on condition that they abide by China’s law, regulation, market rules and the spirit of contract, and can’t harm Chinese customers’ legitimate rights”.
Apparently, Beijing has written a white paper documenting its position on trade with the US and somebody is going to hold a press conference on Sunday in Beijing to discuss these matters further. Vice Commerce Minister Wang Shouwen will take some questions at the event.
You’ll note that this is absolutely not what FedEx needs right now. The stock fell 18% in May and Q4 2018 was the worst quarter for the company since 1987.
This is a sign of things to come. Beijing will doubtlessly insist that China would rather not have to resort to these kinds of tactics, but it looks like it’s too late. Trump crossed the Rubicon with the Huawei ban and planned moves against Hikvision and others suggest the administration intends to use national security and ostensible appeals to human rights in an effort to undercut China’s global economic ambitions and secure trade concessions.
Beijing has now had enough.
You’d be remiss not to note that the tariffs on Mexico paradoxically strengthen China’s hand by allowing Beijing to paint itself as the victim of a rogue administration in Washington that negotiates in bad faith. China can now point to the USMCA and Trump’s Mexico tariffs as proof that even striking a deal with the US president isn’t enough to placate him.
The only saving grace is that China didn’t announce this when markets were open.
The Dragon has been amazingly gentle so far. A lot of generic drugs are manufactured in China. If they really wanted to play hardball…Well, it gives pause to all the people who think deficit countries have leverage over surplus countries and that trade wars are easy to win…
I am shocked to learn that trade wars are hard to win!!! How could we have possibly known this?
Where is the critical coverage of the disingenuous negotiations by the chinese? What is the explanation for them pulling their concessions so late in the process? It certainly wasn’t because Xi just found out about it or after reconsidering he decided it was too much to give. Their motivations in all this will always remain a mystery
Xi will hit Us right in the Trump soft spot. The economy stupid will continually be toyed with until Xi gets what he wants.
The “Art of the Steal, Baby”.
Another fine example of how trump keeps getting ahead. His opponents continue to sink to his level and prove that they can be just as stupid as him. This fedex thing is nonsense. Looks like some kind of mix up with shipments, not some attempt to confiscate some documents from huawei. I’m sure many packages are delivered to huawei every day without incident. Mistakes happen, even for fedex. Our company had package “diverted” or misdelivered over the years. Out of tens of thousands of deliveries, probably less than .001%, it happens…this is intentionally making a mountain out of a molehill to be a pain in the ass and show that they intend to make life miserable for american companies
correct. that’s the whole point. china isn’t trying to hide that. in fact, they are the opposite of trying to hide it. part of the strategy here is underscore how absurd this whole thing is and to show trump just how absurd it can get. and the thing you have to remember is, trump may have a lot of aces up his sleeve (thanks to the strength of the country, not to his own negotiating skills), but if China were to blacklist Apple overnight, it would crash the damn S&P the next day.
Thing is, that news was exposed by social media. Then the Chinese government was forced or obliged to do some reaction. Lots of things have been quickly resolved just because circling around the social media. Also, it is much more suspicious when the US media acting so quietly at the meantime.
Look, corporate America — with the backing of Wall Street and the business press — moved speedily and with determination to arbitrage their labor costs by moving supply chains to China, Mexico, Pakistan, etc. looks like that game is about to end. Lot of shit is going to end with it. Luxe condo development in NYC, for starters. let the games begin.
Fedex headquarters : Tennessee – better target.