First FedEx, now Ford Motors' JV; China continues clampdown on US companies

The fine adds to Ford's woes in China as sales at its Changan venture dropped 54% in 2018

China fined Ford Motor Co.’s main joint venture in the country for antitrust violations, marking the latest action toward a US company as tensions between the two nations escalate.

Changan Ford Automobile Co. will be fined 162.8 million yuan ($23.6 million) for restricting retailers’ sale prices in the southwestern city of Chongqing since 2013, according to a statement on the State Administration for Market Regulation’s website. The fine amount is equivalent to 4 per cent of Changan Ford’s annual sales in Chongqing.

The announcement comes just days after China said that it’s investigating FedEx Corp. for “wrongful” deliveries, a move framed by the state news agency as a warning by Beijing after the Trump administration declared a ban on business with telecommunications giant Huawei Technologies Co. China has also threatened to blacklist foreign firms that damage domestic companies’ interests and on Tuesday warned its citizens against travel to the US.

Though China didn’t spell out any links between the fine and the US tensions, "it’s hard to see it as not related," said Andrew Polk, co-founder of research firm Trivium China in Beijing. "At this stage I think our baseline assumption should be that there are no coincidences."

Ford said in a statement that it respects China’s decision and that the venture will regulate operations in the country. Representatives at Changan weren’t immediately available to comment.

With the spat over trade and technology escalating, more companies risk being caught up. China is drawing up a list of what it called “unreliable entities,” opening the door to target a broad swath of the global tech industry, from US giants like Alphabet Inc.’s Google, Qualcomm Inc. and Intel Corp. to non-American suppliers that have cut off Huawei, such as Toshiba Corp. and SoftBank Group’s ARM Holdings.

A Chinese official said on Sunday that the government is firmly against the US’ “long-arm” jurisdiction on Huawei, while downplaying concerns that the planned list of unreliable entities will be used to target foreign companies as a retaliation tool in the trade war.

It’s not the first time China has hit out at an American automaker amid geopolitical tensions. In 2016, China slapped a 201 million yuan fine on General Motors Co.'s venture with SAIC Motor Corp. for antitrust violations. At the time, China-US relations were strained after President-elect Donald Trump proposed tariffs on Chinese goods, questioned the One-China policy regarding Taiwan and accused the country of stealing an American naval drone in international waters in the South China Sea.

The fine adds to Ford’s woes in China as sales at its Changan venture dropped 54 per cent in 2018. But going after carmakers makes it potentially awkward for China as foreign auto-makers typically team up with a local partner.

After a months-long ceasefire, Trump reignited the trade war by accusing China of reneging on commitments. He’s since slapped tariffs on more Chinese products and intensified the crackdown on Huawei. The escalation risks provoking China to use other tools of pressure at its disposal, from boycotts to regulatory pushback for American companies active in the world’s biggest consumer market.
 

As to FedEx, which is based in Memphis, Tennessee, it had already felt the impact of China’s slowing economy due to trade tensions and apologized for what it described as errors involving Huawei packages. China’s biggest tech company said it’s reviewing its relationship with the US delivery service. Two packages containing documents being shipped to Huawei in China from Japan were diverted to the US without authorization, Reuters reported.

China opened a probe because FedEx violated Chinese laws and regulations and harmed customers by misdirecting packages, the officials Xinhua news agency reported. Vice Commerce Minister Wang Shouwen said Sunday that “there’s no grounds to blame China” for starting the investigation into FedEx. China Central Television said in a commentary the probe will be a warning to other foreign companies and individuals “that violate Chinese laws and regulations.”

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