China Vows America Will Respond To TikTok Ban

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Trade tensions escalate between Washington and Beijing (Getty)

China vowed, today, Saturday, The United States of America In response to the ban on the application of “Tik Tok” for video recordings and “WeChat” for correspondence and social communication, announcing at the same time a mechanism to combat US sanctions, in a new escalation between The two largest economies In the world, what heralds the deepening global recession caused by the Coronavirus pandemic.

The Chinese Ministry of Commerce said, in a statement, that China will take the necessary measures to protect the rights and interests of its companies, stressing its strong opposition to the US decision to ban the two applications, starting from tomorrow evening, Sunday.

The ministry added, “In the absence of any evidence, the United States has repeatedly used state power against the two companies (which follow the two applications) for unjustified reasons, which seriously disrupted their normal commercial activities, undermined the confidence of international investors in the investment environment in the United States, and caused damage.” The natural global economic and trade system. “

The United States demanded an immediate cessation of what it called “acts of bullying” and the protection of international rules and order, noting that “if the United States continues to act as it desires, China will take necessary measures to protect the legitimate rights and interests of Chinese companies firmly.”

On Friday, the US Department of Commerce announced a ban on TikTok and WeChat on the grounds that they threaten US national security.

China, the second largest holder of US debt worth $ 1.074 trillion until last June

“The Chinese Communist Party has demonstrated the means and motives for using these applications to threaten national security, foreign policy and the US economy,” said Wilbur Ross, the US Secretary of Commerce, in a statement.

US President Donald Trump has previously said that the deadline for Chinese technology company ByteDance to sell the assets of its TikTok app in the United States will not be extended.

Trump said that the app “either closes or sells it” if no deal is reached before the deadline, which is September 20, adding, “There will be no extension to the deadline for Tik Tok.”

Today, Saturday, the Chinese Ministry of Commerce issued regulations for a list called “untrusted entities”, which target foreign companies that they say endanger their national sovereignty, security or development interests.

Companies on the list can be prevented from importing or exporting from China, and they may be prevented from investing in the country, while other measures include imposing fines, restrictions on the entry of employees to China, and canceling their work or residence permits.

China had previously pledged to draw up a list of companies that harm its interests, after the United States imposed sanctions on the Chinese telecommunications equipment company Huawei and placed it on a commercial blacklist.

Although China has announced the regulations, the list has not been published. And last May, the state-owned Global Times media newspaper said that China could put companies such as Apple, Qualcomm and Cisco technology on the list in response to US restrictions on Huawei.

Trade tensions are escalating between the United States and China, as US President Donald Trump resumed his efforts to pressure Chinese companies, which he started with the telecommunications and telephony company Huawei in 2018.

The Coronavirus pandemic has exacerbated the trade conflict between the two giants of the global economy, especially in light of the great pressure on Trump due to the downturn in the US economy.

China appears in a more powerful position, as the repercussions of the epidemic quickly encircled and returned the economy to the wheel of production, and it became the first economy to return to growth by about 3.2% in the second quarter of the year, compared to a contraction of 6.8% in the first quarter.

On the other hand, the US economy is exposed to the worst recession in the history of the United States. A report issued by the US Department of Commerce showed, at the end of last August, that the economy contracted during the second quarter of this year by 7.31%.

Earlier in September, the Congressional Budget Office expected that the federal budget would record a deficit of $ 3.3 trillion in the fiscal year 2020, which ends on September 30, more than three times the deficit recorded in 2019.

The Budget Office suggested that the debt, estimated as of early April, at $ 24 trillion, would exceed the size of the economy during the year 2021, the highest level since World War II.

While the Trump administration announced its intention to borrow three trillion dollars in the second quarter to face the repercussions of the outbreak of the virus, so that the total debt would jump to more than 27 trillion dollars, which may be a card in the hands of China to deal a strong blow to the United States, if it sells its bills and bonds. US Treasury (debt instruments), whether in response to targeting giant companies and undermining Chinese trade or jumping out of the rickety complex of the American economy.

In recent days, the Chinese hint of selling US Treasury bonds has returned to the fore again, as the state-backed Chinese newspaper, Global Times, quoted experts as saying that Beijing may gradually reduce its holdings of US Treasury bonds and bills.

And China, the second-largest non-US holder of Treasury bills and bonds worth $ 1.074 trillion as of last June, down from 1.083 trillion in May, according to the latest official data.

Shi Jin Yang, a professor at the Shanghai University of Finance and Economics, said, “China will gradually reduce its holdings of US debt to about 800 billion dollars under normal conditions,” and did not mention a detailed time frame for that.

“But of course, China might sell all of its US bonds in an extreme case, such as the military conflict,” Xi added, according to Reuters, quoted earlier this September, from the Chinese newspaper.

A reduction to $ 800 billion from the current level could mean a reduction in its holdings by more than 25%. Analysts say a large-scale Chinese sell-off, often referred to as the “nuclear option,” could trigger turmoil in global financial markets.

The government newspaper pointed to another reason for the sale, which is the potential risk of default in the United States, as the debt of the largest economy in the world has risen sharply to about the same size of gross domestic product, a level unprecedented since World War II, and far exceeding the internationally recognized safety line of 60 %, According to the Congressional Budget Office last Thursday.

China is heavily exposed to the dollar and its assets. China’s official foreign reserves stood at $ 3.154 trillion at the end of July.

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