Opinion- Decoupling of China and the West

August 21, 2020

With the clear decoupling now taking place between China, and the US and West, how will this impact the world, trade between the East and West, going into the decade if the 2020s - and recruitment in Hong Kong and Asia?


Several large government moves in the West have shaken the previously growing relationship between the West and China and set international relations on - what we believe - is a fresh course. Two of the most high-profile surprises were the US banning TikTok and WeChat in America, and the British government making a shock turnaround to say that the UK would not proceed with Huawei equipment to build their new 5G telecoms network. There have also been similar decisions made in Australia, India, and other parts of the world.  


Now, of course, this is not one-sided. China has already been notable for banning many Western big tech brands, for its own security reasons- Google and Facebook have now been banned for over a decade. A more recent ban also forbids the use of any US software or hardware across any government office in the country.


So far, so damaging to diplomatic relations. But will these trade moves and bans lead to a more fundamental 'conscious uncoupling' between East and West, or will the 2020 COVID-timed trade tensions dissipate in favor of a renewed commitment to global trade? After all, with the UK now having split from the EU, and the US resetting old trade agreements and alliances, there is everything to play for in the form of fresh trade deals to benefit all, and opportunities for broader strategic relationships that could reshape alliances.


However, market analysts believe that a battle of strategic oneupmanship looks set to take the lead over logical trade decision-making, at least in the near future. Geopolitical tensions are running high in a world still reeling from COVID, and governments seem less inclined to play ball with each other in the current climate.


China and US Cold War in progress

China and the US had been deepening their trade ties for the previous four decades. Yet, with the US presidential election of Donald Trump, the trade relationship is rapidly unraveling. Many believe that the nations will realize the error of this course of action - but at Silicon Valley Associates Recruitment, we suspect it may become another type of 'new normal', especially if the current generation of leaders are re-elected or remain in power.


Washington now has a bipartisan mandate to get tough on China. The Senate passed a law that would force Chinese firms to delist from America's stock exchanges if they didn't make their books public to US regulatory bodies. And in Beijing, there is a political drive to assert sovereignty - rather than seeking to maintain relations with the US and to benefit from the mutual business.


This started with finance and technology and is now shifting to consumer goods and manufacturing. These shifts aren't just limited to the US either; with supply chains and laws changing in Europe and affecting its multinationals across all industries. Broader hostilities are being blamed by both sides. The Chinese point to Trump's use of Tariffs. America says that China has been blocking its internet platforms for years. Tensions are mounting and both sides now seem to be locked.


This change is being forced by a change in the way that China and the US view the relationship. The new world seems to be prioritizing politics and international rivalry - even if it comes at the cost of economic gain and trade. And for America, the risks are that loyal and lucrative Chinese customers will reject 'foreign' brands. A situation that started with seemingly small jibes and measures is now becoming a rapidly escalating commerce war, with neither side prepared to back down or negotiate.


Whether or not this situation would improve if Biden / Democrats win the presidential race is to be seen, but we suspect that harsher US political and consumer sentiment towards China is here to stay.


There is a cold war emerging between China and the USA and big businesses may find themselves unable to stay out of it. The past few years of global trade have been built on the shoulders of opening markets, cooperative trade arrangements, e-commerce enabled business models and mutually beneficial trade arrangements that prioritize global economic gain - but there is no guarantee that this will continue.

 

Divorces on the rise

This situation isn't simply limited to America either. The UK decided to cut Huawei out of its 5G telecoms market. HSBC - which makes 80% of its profits in the Asian markets - has been dragged into a legal process of giving evidence against Huawei in the American courts.


The UK's next moves become particularly interesting - having now completed its own decoupling from the EU, and in the process of establishing new trade talks to establish its own 'new normal' in the post Brexit, the post-COVID world - with its ever-moving goalposts and changing markets.


The EU has similarly driven multiple new laws widely seen as trying to discourage and decelerate US 'Big Tech' within its borders, new recent assertions including the Digital Tax (Amazon), Tax Evasion (Apple), Data Protection compliance (Facebook), and investigations into anti-competitive practices and monopoly (Google).


Countries such as Australia would become interesting case studies; with entrenched trading links to China and yet being part of the British commonwealth, it too is going through a major reversal with its largest trade partner.


Again, there would be all to play for in this global trade war.

 

Our View

At Silicon Valley Associates Recruitment, we suspect that the US and Chinese markets will separate into two extremely large and parallel trade worlds, with very little cross-border trade encouraged - or seen - between the two trade bodies, which would see the strides of globalization take significant steps backward.


How does this impact Jobs and exciting Career Opportunities in Hong Kong and China? We remain positive and think candidates will continue to see exciting multinational opportunities locally in the years to come. However, it is undeniable these will increasingly become few and far between. Employment or business opportunities with firms from the US, UK, and Australia will decrease significantly, and the work and hiring landscape will be increasingly in local, or Chinese, or Asian businesses.


Neutral grounds, such as Europe, South East Asia (especially Singapore), the Middle East, and Africa would potentially see real opportunities with this situation, however. These regions would become the prime targets for trade by these two heavily competing nations - Chinese pioneers in the red corner and the US enterprises in the blue, both seeking to create profitable alliances that cement their revenue, footprint, and power in the new world order.


Contrary to the current trend of virtual, remote work and business, Silicon Valley Associate's strategy for this new world is to continue to establish physical local offices and experts in the geographies we aim to serve. By having local experts in Hong Kong, or major cities in China or the US, a local team would allow us to satisfy our customers increasingly more local demands. In the upcoming multinational battlegrounds such as Singapore / South East Asia, mainland Europe, or the Middle East, a local SVA team has two major advantages- firstly to sufficiently serve the local demands, and secondly, to be ready to assist the oncoming wave of pioneering US and Chinese enterprises looking to trade an compete in these regions over the next decade.

 

 

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Silicon Valley Associates is ideally positioned to support the continual demand from tech companies and IT Departments looking to hire in Hong Kong, Asia, and Worldwide. Please let us know if you would further advise on the above topic or your hiring needs

 

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