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US-China tensions

China embarks on charm offensive toward Japanese companies

Amid tug of war with US, Beijing moves to secure supply chains

Chinese President Xi Jinping speaks to entrepreneurs at a meeting on July 21. (Xinhua photo via Chinese government website) 

BEIJING -- At a symposium with entrepreneurs in July, Chinese President Xi Jinping praised the founder of Japanese electronics company Panasonic as a visionary alongside the likes of Thomas Edison.

"Konosuke Matsushita was not only an authority on management, but an authority on innovation," the leader said at the event in Beijing.

A Panasonic representative was among the seven entrepreneurs allowed to share their opinions on the coronavirus-ravaged economy, signaling the importance the Chinese leadership bestows on the Osaka-based company. Matsushita met China's paramount leader Deng Xiaoping in 1978, and Panasonic launched its first joint venture in China in 1987.

The Chinese overtures come as Sino-American tensions expand from trade deficits to the battle over high-tech supremacy and, more dangerously, to control over the South China Sea.

Two days later, Xin Guobin, China's vice minister of industry and information technology, recommended to reporters that they visit Toyota Motor whenever they are in Japan.

"They continuously innovate," said of the automaker, "and continue to raise the quality of their product."

The showering of praise on Japanese companies looks to be part of a campaign.

As Beijing's leaders confront tensions with the U.S., their primary focus "is to build a Chinese supply chain that can't be blocked by Washington," an industry ministry source told Nikkei. "In that endeavor, it is crucial to cooperate with Japanese companies, who excel in manufacturing."

Japanese companies are a little overwhelmed.

"China has quickly rebounded from the coronavirus and is driving sales. We cannot talk about a growth strategy without China," a senior Beijing-based representative of a Japanese company said. "At the same time, we want to avoid being scrutinized by the U.S."

Another executive agreed. "We just don't want to stand out, even if the U.S. and China force us to chose sides."

Meanwhile, American and European companies continue their foray into China. In a video call with Shanghai Party Secretary Li Qiang earlier this year, Tesla CEO Elon Musk promised to expand investment in the city and accelerate localized production.

Intel Capital, the venture arm of U.S. chipmaker Intel, said in May that it had invested in three Chinese startups: Zhejiang Province biotech company KFBIO, Shandong Province electronic design automation business ProPlus Electronics and Spectrum Materials, a Fujian-based supplier of high-purity specialty gas and other materials.

Qualcomm Ventures, the venture capital unit of Qualcomm, also invested in three Chinese startups, according to CB Insights: Redtea Mobile, Tensor Technology and Dalongyun.

Qualcomm also settled with Chinese telecommunications equipment giant Huawei Technologies last month over a patent dispute.

Daimler chief Ola Kallenius and ABB Chairman Peter Voser have spoken separately via video call with Beijing Communist Party Secretary Cai Qi, a close aide to Xi. The German automaker said last month that it launched a far-reaching strategic partnership with Chinese battery cell manufacturer Farasis Energy, including taking an equity stake.

President Donald Trump's administration has voiced displeasure with Chinese investments by U.S. businesses. Major American tech companies have "allowed themselves to become pawns of Chinese influence," Attorney General William Barr said in a July speech.

But an executive at the China unit of an American company called it imperative to do business in both nations.

"At the end of the day, we think of our shareholders," this executive said. "We will avoid dealing with products and services that infringe on national security, calculate political risks and find a way to make profits in both countries."

A representative at a European company provided a similar perspective.

"We have experience of doing business with both sides during the Cold War," the representative said. "We will be pragmatic, maximizing our profit while adhering to laws and regulations."

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