North Head’s Director of Public Affairs, Mike Dennison examines the GR challenges posed by recent changes in US-China relations

The recent souring of US-China relations that started with the breakdown of talks in early May will potentially have long-term implications for international companies operating in and with China.

Government relations professionals need to develop proactive, creative solutions that are built on cross-company consensus and matched with extensive stakeholder engagement to counter these trends.

The situation remains unpredictable, but there are signs that positions in the US and China are hardening. Both are blaming the other for the breakdown in talks. Most recently, the State Council’s White Paper on China’s position on the trade consultation, released June 2, argues the US government is “solely and entirely” responsible for the setback. Even if a trade truce or deal is reached when presidents Xi and Trump meet at the G20 later this month, confrontation will continue across a broad spectrum of issues including technology, security, and international governance.

A crucial development for MNCs has been the introduction of restrictions on specific companies, in the name of national security. The US has restricted Huawei’s ability to do business with American companies; China’s forthcoming “unreliable entity list” seems designed to respond in kind to those measures (details are soon to be released). The spillover of sanctions on specific businesses will not be neatly contained, as companies and organizations take swift, sweeping steps to avoid being caught on the wrong side of one or both legal systems. The exclusion – which has since been reversed – of Huawei employees from the Institute of Electrical and Electronics Engineers’ peer review process, is case in point. The ban may have been lifted, but the damage to the relationship between the institute and Chinese professionals in that sector will linger.

Multinational companies may too become caught between these two competing, contradictory compliance systems. If sustained, the escalating actions by both governments could reach a point where third country companies have to decide whether to comply with one of the two protagonists, at the expense of the other. Finding solutions to these issues would require a knowledge-based approach, backed up by thorough research and built on consensus across business regions and units.

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