By SARAH REHBERG
As the U.S. prepares for a shift in China strategy during the Trump Administration, corporate America is likewise reassessing its relationship with the geopolitical giant. From General Motors’ $5 billion write-down to IBM’s decision to move R&D out of the country, corporations are waking up to the investment risk posed by China – but they are years too late.
From voting our shares to direct appeals to companies’ CEOs, we at Strive have demanded corporate America protect American investors from the challenges posed by the Chinese Communist Party. While companies are now heeding our call as the next trade war brews, a long road lies ahead.
Since the company’s inception, we have led the charge to mitigate China risk. When Starbucks vowed in 2022 to open a new store in China every nine hours for the next three years, Strive warned Starbucks against this move, highlighting the material risks to shareholders.
Fast forward to Starbucks’ latest earnings call, where new Starbucks CEO Brian Niccol addressed its disappointing fourth-quarter results, reporting a dip in earnings and revenue, which included a 14% sales decline in China. What was their solution? According to Starbucks, the “best path to growth” in the region may be through local partnerships; a model McDonald’s has adopted, which carries its own risks.
Since day one, Strive has been clear that China risk is investment risk. As we warned in our white paper on China risk in the fall of 2023, “The CCP dictates the terms on which American companies can operate, including imposing forced technology transfers, censorship policies, regulatory policies, sanctions, and tariffs that harm long-term shareholder value.”
Other investors are now belatedly looking to follow our lead. This fall, BlackRock CEO Larry Fink finally sounded the alarm on China. Warning companies to “re-evaluate” their ties to the country due to its support of Russia’s invasion of Ukraine – and after years of pinning his own company’s future on business opportunities in the communist country (BlackRock letter; FT article) – Fink called on companies to begin examining their Chinese business dealings as they would any other potential business risk.
Weeks later, McKinsey axed projects associated with Chinese local government clients. In doing so, the U.S.-based consulting firm reportedly cut nearly 500 jobs from its China unit, signaling a shift away from the country after 30 years building its presence there. And on November 7, shoemaker Steve Madden announced its plan to reduce its China imports as much as 45 percent to avoid likely tariffs under a second Trump term.
While we welcomes corporate America’s emerging concern regarding the changing geopolitical landscape in China, such risk mitigation measures are long overdue and are just scratching the surface of what needs to be done.
Aside from China’s egregious censorship policies, heavy-handed corporate regulations, and intellectual property theft, the cost of doing business with China is increasing as the West continues to decouple. Under the Trump Administration, reformed landscapes in trade, tech, and Taiwan may further squeeze an already strained Chinese economy.
Preparations for the new administration are already underway within the U.S. semiconductor industry, which is particularly exposed to national security risks. California-based companies Applied Materials and Lam Research are slashing Chinese vendors from their supply chains.
With the looming shift in the U.S.-China relationship, companies must do more than simply outwardly acknowledge such risks; they owe it to shareholders to fully and transparently disclose their China operations to paint an accurate picture of their risk exposure.
This past proxy season, Strive voted for a shareholder proposal at McDonald’s that sought an assessment on how the company maintains its reputation, viability, and profitability given its partnerships with Chinese state-owned entities. According to the proponent, “the Company is more than just a restaurant operator in the country; McDonald’s is in a minority partnership (48%-52%) with Chinese state-owned CITIC Capital,” presenting additional financial and operational risks to the fast-food giant.
As investors demand ‘ex-China’ strategies, conversations surrounding these risks should not exclusively occur behind closed doors among corporate insiders. Shareholders deserve full disclosure of whether their money is being used to drive their company deeper into an increasingly precarious Chinese market.
This article was originally published by RealClearMarkets and made available via RealClearWire.
The PRC was good business – until it wasn’t. Who knew?
Just think, we could have had a Communist Chinese-owned pipeline right here in Alaska. Thanks to the woke bargaining skills of Bill Walker. Old Bill even learned how to stand up straight when dealing with the Chinese. It was a good thing that Byron Mallot came along and ruined Bill’s little fake pipeline deal. Thank you, Byron. You actually helped keep Alaska in our hands.
Who would have thought Byron’s innocent little fetish would have been so helpful against what may have become Alaska’s biggest and worst nightmare?
In Byron’s defense she was almost 18…in his mind.
ALL the girls in Mallot’s feeble little mind were under 18. And Bill Walker didn’t care. It was Walker’s wife who ruined Mallot’s pedophile party.
Walker Mallott et al were/are awful! :0)
Walker Mallott et al were/are awful! :0)
Micky D. got pangolin burgers?
Anyone doing business in a communist country is a,shortsighted fool. Ax spoon as you have it working, they will expropriate it for ” the People” and you lose your money, time and effort to some Party boss who wants to live a,bit better than The People he falsely claims to work for. He’s just ripping youand them off.
It remains to be seen if corporate America actually does wake up. As long as there are hedge funds and the like out there, that only have their own personal wallet in sight, there will be limited waking up.
Next, can you do a story on how many Chinese own mining permits in Alaska?
What are the CCP ties to Berkshire Hathaway?
How much farmland does the CCP own in the U. S.?
What about the 130 acres next to our Air Force training facility in TX that was just purchased by a Chinese billionaire?
Or John’s Hopkins Medical being owned by the Chinese?
How many medical centers in the U.S. are owned by the CCP?
How many Chinese nationals have entered our country during Biden’s 4 years of open borders?
How many Chinese spies are currently enrolled in our universities all over the country?
Too late. First America sends its manufacturing jobs to China all for in the name of cheap labor costs. Now that China knows how to manufacture, and produce and sell at home they’re talking about moving the manufacturing out of China. America pretty much helped built up China. Or people who belong to secret societies helped built up China. Now they’ve got to try to contain China. This is where we are at today. This is Trump’s mission 50 years later. And building a global economy was never a good idea to begin with, Freemasons. Now chess is being played. But I don’t know if China wants to play it or not. Probably.
Started with Nixon, I remember when our neocon globalists were going to spread “democracy” and “free” enterprise by stripping out our industry, and the jobs that one man could earn enough to raise a family, and the woman could raise and teach the kids on one income, from the Midwest to the PRC and Taiwan.
The scheme was going to exploit their slave labor and reduce costs to the commoners. It was and remains popular with the both “Republicans” and Democrats.
The industry and jobs are gone, both parents have to work, and receive child care assistance to barely make it, along with the kids being dumbed down and introduced to sick moral behavior at day cares and public schools.
The globalists made vast fortunes, and bought the politicians to create a totalitarian state here, our society disintegrated, and the Chinese became the #1 economy.
China retains a most favored nation trade status and the incompetents in the Pentagon, State Department and the armaments companies want to start a war using a dilapidated navy against an “enemy” on a continent an ocean away, when they haven’t won any of dozens of them against 3rd world tribal societies the last 80 years.
Instead of rebuilding our industry, and energy sectors first, their itching to shut down trade for most everything we depend on and disrupt ocean trade routes.
As though anyone alive today in our country has experienced a “free” enterprise economy or a functioning representative government in their lifetime.
I’ll guarantee you all one thing if you want something Fu—-d up just turn it over to our federal government. They are so good at failure It’s astonishing.our federal government has only one job and that’s protecting us about boarders and they can’t even accomplish that. The states need to manage themselves entirely. The states know what they need.