STEVE INSKEEP, HOST:
Now, in the days before the U.S.-China Summit, each country threw a few elbows at the other. Rather than building up goodwill, they seemed to be seeking leverage. So we called Dan Wang, a Chinese economist with the Eurasia Group. We found her in transit at an airport in London and she talked us through each side's moves, starting with this - China told foreign firms they will be punished if they back away from China. What does that mean in practical terms?
DAN WANG: It basically means they cannot be too compliant with the American demand.
INSKEEP: The U.S. has pressured companies to rely less on China.
WANG: But from the China side, this is no longer tolerable. And I can see more of action from the China side to put pressure directly on those companies when it comes to how they manage their supply chains and capital investment.
INSKEEP: China also blocked Meta - the U.S. company, of course - from acquiring an AI firm from China. What does that say about future deals?
WANG: This is quite chilling, especially for the AI startups in China, because previously, the common practice was that the U.S. investors would have to seed money in Chinese startups. And then they use Chinese data, Chinese talent, Chinese resources. And then the access strategy is to be bought out by a American investor or American IT company, exactly the Meta case. But as soon as China has rolled out this veto for the Meta deal, that basically means in the future, Chinese AI companies has to take a side early on. And the talents and capital for the AI research and AI companies can no longer be - freely flow between the two countries.
INSKEEP: It sounds like China imposed a cost on itself as well as keeping control of its AI. Is that right?
WANG: Oh, exactly. It's kind of like the mirror image of President Trump putting tariffs on Chinese exports. It's hurting the U.S. as well.
INSKEEP: China also told its companies to ignore U.S. sanctions. Can they do that?
WANG: Unfortunately, companies cannot ignore the U.S. sanctions, and China cannot punish every company that is complying with the U.S. requirements. What's going on right now is that China is maximizing its pressure on those companies in the hope that they might be able to lobby the U.S. government to step back in a number of the restrictions for Chinese market, and also especially in terms of high-tech sectors.
INSKEEP: The U.S. took a mirror-image move against China. It sanctioned nine Hong Kong and mainland Chinese companies for allegedly aiding Iran's military. What's the practical effect of that?
WANG: That is a direct response for China's move. So it looks like both sides are trying to generate a mini crisis leading up to the summit. They're maximizing their leverage, essentially. I don't see this damaging the Chinese economy or normal businesses of those companies on the sanction list, but it will create more of a hurdle when it comes to reaching a good agreement between China and the U.S.
INSKEEP: As I'm sure you know, there's also been talk of more Chinese investment in the United States as part of some potential agreement. Can you imagine that happening? And if so, where would the money go?
WANG: Chinese companies really welcome this idea. But from the Chinese government side, they do not want technology transfer in some of the leading sectors that China has. So now the areas in discussion are in the new energy supply chain, the EV and the battery technology. I don't see that happening, mainly because of the pushback from the U.S. side. But if there can be some limited deal between CATL and Ford, it's going to be a very positive sign, actually, for the future talks between the two countries.
INSKEEP: Why would there be pushback from the U.S. side of the idea of Chinese investment in battery technology for Ford automobiles?
WANG: It looks like that the U.S. government doesn't want to have a high presence of Chinese technology, especially the green technology. It is not in line with President Trump's long-term plan. So I don't see that President Trump wants to see this, although, for technology and auto sector in the U.S., they very much needed Chinese technology badly.
INSKEEP: It sounds like from your perspective, you're expecting a very brief summit, which it will be, a little bit of ceremony and not much in the way of substance.
WANG: I can't imagine a substantial deal coming out from that short period of time. And among all those American presidents' visits in China, he seems to be the one in the biggest rush - not visiting other cities, not visiting Chinese manufacturers. So I think for both sides, the understanding - they seem to be on the same page - that they want to contain this conflict, and they would want to have this trade truce to last as long as possible.
INSKEEP: Dan Wang, it's a pleasure talking with you. Thanks for joining us while you're traveling.
WANG: Thank you for having me. Transcript provided by NPR, Copyright NPR.
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