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U.S. President Donald Trump and China’s President Xi Jinping Shake Hands, Dispute Between The Two Countries Tends To Resolve

We decided for optical reasons it just wouldn’t make sense to expose ourselves further to investors coming from a country where there is now so much by way of trade tensions and IP tensions.

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U.S. President Donald Trump and China's President Xi Jinping shake hands after making joint statements at the Great Hall of the People in Beijing, Nov. 9, 2017.

The trade dispute between the U.S. and China is disrupting Silicon Valley.

What had been a steady flow of Chinese money into tech firms appears to be slowing. Investors are concerned about the “headline risk” of doing business with Chinese investors.

And in some cases, U.S. startups are shunning Chinese investment.

These changes come after years of investment and collaboration between China and Silicon Valley. But the trade dispute, coupled with U.S. policymakers’ concerns about Chinese investments in sensitive technologies, such as artificial intelligence, have increased scrutiny of cross border deals on all sides.

A drop in investment

In 2018, Chinese firms invested more than $2 billion in U.S. technology firms, but that was a drop of nearly 80 percent from the year before, according to a Forbes report citing S&P Global Market Intelligence.

While Chinese investors took stakes in roughly the same number of U.S. tech deals — 80 compared to 89 in 2017 — that was off from the peak in 2016 when Chinese investors were part of 107 deals. Among the biggest recipients of Chinese investment in 2018 were Farasis Energy, a battery maker, and Epic Games, a gaming company, according to the Rhodium Group.

While deals continue to come together in 2019, the recent indictment of a Huawei executive has added to a new chill between the two regions, according to observers in Silicon Valley.

Acting Attorney General Matt Whitaker, center, with Commerce Secretary Wilbur Ross, left, and FBI Director Christopher Wray speak, Jan. 28, 2019, at the Justice Department in Washington during an announcement of an indictment on violations including bank and wire fraud of Chinese telecommunications companies including Huawei.
Acting Attorney General Matt Whitaker, center, with Commerce Secretary Wilbur Ross, left, and FBI Director Christopher Wray speak, Jan. 28, 2019, at the Justice Department in Washington during an announcement of an indictment on violations including bank and wire fraud of Chinese telecommunications companies including Huawei. VOA

A technology war

In China, the battle is seen as less about Huawei and its alleged wrongdoing and more as a proxy for a “technology war” between countries over technological supremacy.

“The Huawei incident seems like an action against an individual corporation, but it is actually bigger than this,” said Hu Xingdou, a Beijing-based scholar. “This is about one state’s technology war against another state, about which one will occupy the technology high ground in the future.”

One recent change in the U.S. has been the expansion of a government program that reviews foreign investment in areas deemed sensitive.

Despite the expanded U.S. regulatory reviews, Chinese investments in U.S. tech firms are mostly getting through, said Chuck Comey, a partner at Morrison Foerster, a law firm.

As for Chinese companies buying or merging with U.S. tech ones?

“It ain’t happening,” he said.

FILE - Google chief executive Sundar Pichai outlines a future rich with artificial intelligence at the Internet firm's annual developers gathering in the Silicon Valley city of Mountain View, Calif., May 18, 2016.
Google chief executive Sundar Pichai outlines a future rich with artificial intelligence at the Internet firm’s annual developers gathering in the Silicon Valley city of Mountain View, Calif., May 18, 2016. VOA

Saying ‘no’ to Chinese investment

The increased tensions have given investors — and even some potential recipients of investment — some pause. One U.S. company, which had accepted Chinese investment in the past, told Reuters that it declined investment from Chinese investors in its most recent round.

“We decided for optical reasons it just wouldn’t make sense to expose ourselves further to investors coming from a country where there is now so much by way of trade tensions and IP tensions,” said Carson Kahn, CEO of Volley, an artificial intelligence training firm.

Also Read: “What Happens Next? People Just Drink Themselves To Death?” : Russia’s Story

At a recent event in Silicon Valley about China and U.S. investments, speakers on a panel discussed how the geopolitical tensions affected their business. While several predicted that in the long run, the current friction between the two countries will have a minimal effect on cross-border business between China and Silicon Valley, there was a sense that an era has ended.

“We’ve kind of taken for granted,” said Kyle Lui, a partner at DCM, a global venture capital firm, “that the prior decade plus there’s been lots of strong collaboration between the U.S. and China.” (VOA)

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Trade War Between Washington and Beijing Effecting Farmers

Roger Lande says sometimes China does things “we don’t like,” but all relationships, with family, friends and business associates, have ups and downs.

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China, USA, Trade War
U.S. President Donald Trump and Chinese President Xi Jinping participate in a welcome ceremony at the Great Hall of the People in Beijing, China. VOA

The trade war between Washington and Beijing is hurting farmers who grow huge amounts of soybeans in Iowa for export to the massive Chinese market.

Farmers in Iowa hope that the strong commercial and close personal relationships that China and the U.S. farm state have nurtured for many years will help the two sides overcome complications like the record U.S. trade deficit with China.

Chinese President Xi Jinping has visited Iowa farmers repeatedly over the past couple of decades and former Iowa governor Terry Branstad is now the U.S. ambassador to Beijing.

The close ties have been strained by Washington’s allegations that China unfairly manipulates markets, steals American intellectual property, and creates bureaucratic obstacles to trade. China also accuses the United States of unfair practices.

FILE - Justin Roth holds a handful of soybeans at the Brooklyn Elevator in Brooklyn, Iowa, Nov. 21, 2018.
– Justin Roth holds a handful of soybeans at the Brooklyn Elevator in Brooklyn, Iowa, Nov. 21, 2018. (voa0

Tariff war

The United States imposed tariffs on Chinese exports, and Beijing retaliated with tariffs on American agricultural products.

That meant that Iowa soybeans were more expensive and less competitive on global markets.

Demand for U.S. soybeans — and prices paid to U.S. farmers — plunged $85 a metric ton.

An Iowa farmer who manages several farms, including 153 hectares of soybeans, says his profits fell 100 percent for 2018. David Miller is not happy to lose money but says without the tariffs, China would not pay any attention to the talks.

FILE - farmer Michael Petefish walks through his soybeans at his farm near Claremont in southern Minnesota.
– farmer Michael Petefish walks through his soybeans at his farm near Claremont in southern Minnesota.(VOA0

Needing each other

China really needs what Iowa produces, according to Grant Kimberley, the marketing manager for the Iowa Soybean Association, who has been to China more than 20 times.

“China needs soybeans … because their middle class has grown, and that means they are eating more protein in their diet, more meat, and if you have more meat production, you have to have more soybeans to feed those animals,” he said.

Kimberley’s family runs a 600 hectare farm, 48 kilometers from Des Moines, which was one of the places visited by Xi, who saw that it uses more advanced equipment and technology than is available to Chinese farmers.

The former director of Iowa’s department of natural resources, Roger Lande, and his wife, Sarah, have twice hosted Xi, at their home in the small town of Muscatine.

Also Read: Amidst Weakened Domestic Demand, China Expected To Report Slow Economic Growth

Roger Lande says sometimes China does things “we don’t like,” but all relationships, with family, friends and business associates, have ups and downs.

Kimberley is optimistic things will work out.

“Because that’s a long-standing relationship that’s been in place for 35 years,” he said. And “I think the overall underlying support and the people that are involved between the states and the province is still strong. And, and everybody recognizes that, over the long term, eventually this will get resolved,” he added. (VOA)