How U.S. Businesses Can Keep Trans-Pacific Operations Strong During COVID-19

Categories: Business In China, Legal Updates | By Peter Pang

China and the United States mutually benefit from their deeply intertwined relationships. The strong economic connection between the U.S. and China creates a natural incentive to keep trans-Pacific operations strong despite the challenges presented by the coronavirus pandemic.

China’s COVID-19 Response Proves Effective

When coronavirus first hit, the Chinese economy took a massive blow to productivity. Beyond the local impacts to the workforce, suppliers saw a decrease in demand because of a lower global consumption rate. This translated to a drop in private sector investments. However, the economic recovery in China has been remarkable. China’s response to the coronavirus outbreak was to stall economic activity to halt the spread of COVID-19. This strategy proved effective, and now the country is working carefully to mitigate further spread as businesses open back up. Thanks to these vital containment measures, the Chinese industrial sector is thriving once again.

In today’s global economy, strong international business requires effective coordination and good leadership to rise to the challenges presented by COVID-19. As figureheads in international business across the United States and China navigate the slew of changes and challenges posed by the coronavirus pandemic, they are finding new ways to keep economic activities strong. Leaders in both the public and the private sector are managing travel, trade of critical and public goods, and information sharing in novel ways. As they do, doing business in China continues to be a profitable move for U.S. shareholders, investors, and businesses.

Despite Uncertainties, Trade Remains Strong

Historically, the United States and China have had diplomatic ties that have led to a mutually beneficial relationship. Forecasts and interests regarding the importance of trans-Pacific business relationships have been positive and optimistic. This is a reflection of how similar U.S. and Chinese businesses see the significance of trade, investments, and social and cultural exchanges. This has created grounds for building binding commonalities between the countries, such as the value of market-based economic development policies. Such policies have opened international trade significantly, which has translated to an increase in international business as well as China’s standards of living, improved social infrastructure, travel, and openness to foreign relations.

Trade relations between the U.S. and China are mutually beneficial. Both countries have a reform-driven approach that has led to overall global growth even through the 2008-2010 economic recession. While political tensions have been high between the nations at times, short term economic damage is not a threat for international business. Interruptions in economic relations are usually mitigated quickly and smoothly. This is especially true when relations are facilitated by qualified representatives who enable transparent communication.

Despite the hardships facing the world, relations between U.S. and Chinese business remain positive and operational. The economic fallout from the coronavirus pandemic continues to ebb and flow, but China is looking at a strong recovery as imports increase as its economy restarts. Beijing is looking to ramp up imports from the United States, as a recent trade deal included a 2-year pledge to buy $200 billion worth of U.S. exports. China has also listed 79 new tariff exemptions for United States products. However, uncertainties remain, and international business relationships are responding to this risk.

COVID-19 and The “New Normal” for International Business

COVID-19 has affected businesses economy-wide. This is true with respect to all operations – design, production, manufacturing, distribution, and others. Some economic sectors have been impacted more than others, and some are even looking at a financial upside thanks to an increase in demand for certain products. Masks, ventilators, respirators, and other medical supplies are being traded faster than ever. Likewise, shipping demand has skyrocketed. This has put additional pressure on other parts of the supply chain that many companies are rising to meet.

Both the United States and China have been eager to coordinate a response to the crises that normalizes operations and trade relations. Beijing has taken a leading role in providing material assistance to other counties and help organize a response. Although the world economy is still far from resuming business-as-usual, there are early signs of a strong recovery that indicates businesses can return to operations under a “new normal” guided by prioritizing public health and safety.

Maintaining a Productive, Positive, and Compliant Work Environment During the Pandemic

As the pandemic continues, business and industry are looking to public regulations as a guide for maintaining a positive and productive work environment. As they evolve and adapt to the changing times, businesses are turning to Chinese lawyers in the U.S. and in China to ensure they maintain safe compliance while still preserving their economic activities.

Chinese law invites many opportunities for international business and foreign trade. American banks, investment firms, and financial service companies have been turning to China as new and profitable market. The United States imported $539.5 billion in goods from China in 2018, which has helped support a large population of workers. Likewise, China has provided a source of affordable labor and products for U.S. and international suppliers. To capture the greatest value from the mutual benefits of international trade and foreign relations, China prides itself on being a leading member of the international community. As such, the nation has grown more open to a greater level of social, economic, and political influence on domestic business activity. Thus, effective international business in this nation involves integration and observance of international as well as local laws, norms, and procedures.

China has been successfully controlling the coronavirus outbreak by imposing strict precautions. These requirements have changed working environments, particularly with respect to the integration of technological solutions for encouraging social distancing. The nation has also prioritized access to information, which helps workers adapt to these difficult times. As China continues to pass and enforce domestic regulations on its domestic workforce, U.S. and other international businesses are turning to attorneys that maintain a presence in both nations to bridge potential gaps in this constantly-shifting legal landscape.

Building a Stronger Global Economy Through Cooperation

No other country has an infrastructure, tax rates, or logistical system quite like China’s. The nation has also been leveraging its strong centralized system of governance to bolster the supply global public goods and help coordinate the global response to the pandemic and engaged in a diplomatic campaign to share information and lessons learned from the nation’s experience with the coronavirus. By leveraging its strengths in these sectors, China maintains a powerful position in global trade and will likely be among the first nations to recover from the impacts of the pandemic.

The U.S. and China have already laid the groundwork for stronger economic cooperation with Phase 1 of a historical trade deal executed in January 2020. The deal will cut some tariffs the U.S. has imposed on Chinese goods in exchange for China’s pledge to purchase more American goods and services. Over the next two years, the deal directly benefits many U.S. businesses, particularly:

  • Agricultural suppliers exporting oilseeds, meats, cereals, cotton, seafood, and other valuable commodities to China;
  • Energy companies, including petroleum oil, coal, methanol, liquified natural gas, and others;
  • The service sector, particularly educational-related travel, insurance, telecom, cloud computing services, and financial services; as well as
  • Manufacturers of industrial equipment, electric equipment, pharmaceutical products, vehicles, and optical instruments.

The deal also requires China to acknowledge the United States’ intellectual property practices, which opens up an entirely new field of trans-Pacific regulatory compliance.

The trade relationship between the U.S. and China is predicted to grow significantly as the nations work on more permanent bilateral agreements in the coming years. China remains the United States’ largest trade partner. Although the world has seen temporary economic hardships, China as a global manufacturing hub will prioritize reopening the supply of intermediate and finished goods. And with the United States economy – especially small businesses – relying heavily on the products received from China, the United States is eager to begin normal trading again with China.

Together, the United States and China will find a way to remedy the unprecedented challenges posed by the coronavirus pandemic. However, doing so requires U.S. and Chinese organizations to work together. Effective and strategic cooperation will lead to more viable political decisions that will offer benefits for both nations’ economies and the world. Between the United States passing economic stimulus packages and China’s reopening of its economy, trade is resuming. Still, cooperation is key to ensuring trans-Pacific business leaders are able to rebuild global operations in the wake of the pandemic.

Maintaining a Trusted Facilitator for Trans-Pacific Businesses Operations

New and forthcoming trade policies between the U.S. and China include a suite of procedural rules that can be confusing, particularly in these uncertain times. Compounded upon domestic regulations designed to fight the spread of COVID-19, businesses are increasingly turning to Chinese attorneys to help them navigate a shifting international landscape. The services available through multinational law firms that maintain close-knit relationships between U.S. and Chinese attorneys in their employment will help businesses limit risks of hardship during these uncertain times.

When conducting business and investments in China, having a knowledgeable and skilled Chinese attorney can lend a significant advantage. At the same time, American attorneys can help bridge cultural and communication gaps that can interfere with trade. Thus, having a lawyer with both U.S. and Chinese offices during these strained times for businesses is the best option for most organizations with trans-Pacific operations. Working with a boutique multinational law firm is one of the best ways business leaders can equip themselves for success in these rapidly-changing times.

Peter C. Pang* is Chairman and Managing Partner of IPO PANG XINGPU LAW FIRM., His expertise includes corporate law and formation, franchising – inbound and outbound, mergers and acquisitions, real estate acquisitions, private placement, technology transfer, joint venture formation and business alliances, and trade secrets and intellectual property protection. Mr. Pang’s over 35 years of law practice in the People’s Republic of China and the United States places him amongst a handful of US-China lawyers with Asian International Expertise and in-depth appreciation for both the Western and Asian cultural and business differences and sensitivities. Mr. Pang is an attorney who “not only knows, but knows how” to close a deal, litigate vigorously and represent clients zealously. We don’t sell time, we sell solutions.
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