Thursday, November 9, 2017

Breaking Down the $250 Billion China Deals Trump Got for America - Bloomberg

Breaking Down the $250 Billion China Deals Trump Got for America
By Bruce Einhorn
November 9, 2017
How does $250 billion in deals get sliced?
The White House has unveiled a slew of agreements with China as President Donald Trump seeks to address an imbalance in trade. While Commerce Secretary Wilbur Ross boasted a total of $250 billion in business deals, it’s unclear how one gets to that figure. Many of them weren’t broken out into separate valuations, while a large number were in the form of nonbinding memoranda of understanding or involved agreements with existing Chinese partners.
For those keeping score, the energy and transportation sectors appear to be winners. One of the biggest announcements is an agreement by companies including China Petrochemical Corp. to help develop a $43 billion liquefied natural gas project in Alaska. Boeing Co. snagged an aircraft order valued at some $37 billion -- although it isn’t immediately clear how much of that is new. Still, the wave of deals signaled an increase in trade for products from helicopters to beef.
Here are highlights of what’s been disclosed so far:
Energy
Alaska Gasline Development Corp.: a joint agreement to advance a liquefied natural gas project in Alaska, involving the state of Alaska, Sinopec, China Investment Corp. and Bank of China Ltd. The project has been in discussion for years, and Alaska Gasline applied for federal approval for the development in April. Exxon Mobil Corp., ConocoPhillips, BP Plc and TransCanada Corp. have been involved in the effort, but have distanced themselves since estimating in 2012 that it would cost as much as $65 billion and take more than a decade to construct.
Air Products & Chemicals Inc.: the industrial gases company and state-owned Yankuang Group Co. intend to form a joint venture to build and operate an air separation, gasification and syngas clean-up system for a $3.5 billion coal-to-syngas production facility. Air Products is currently a supplier to the first phase of the project. Earlier this year, Air Products scrapped its plan to acquire China’s Yingde Gases Group Co. after a private-equity firm swooped in.
Transportation
Boeing: China Aviation Supplies Holding Co. agreed to buy 300 aircraft worth about $37 billion before discounts that are customary in the industry for large orders. Boeing didn’t disclose how many are new orders. The state has previously placed large orders through a centralized buyer before dividing them up among its airlines and leasing companies. Chinese airlines have been on a plane-buying spree amid a projection for the country to overtake the U.S. as the largest air-travel market possibly in as soon as in five years.
General Electric Co.: Juneyao Airlines ordered GEnx engines for its Boeing 787 fleet and ICBC Leasing ordered LEAP-1B engines for Boeing 737 MAX aircraft. The list prices for the two deals totaled $2.5 billion. GE also said it signed a cooperation agreement with China Datang Group to provide the Chinese company with gas turbines and other products and services.
Honeywell International Inc.: contract with Spring Airlines Co., the Chinese budget carrier that flies over 130 routes with a fleet of Airbus A320 planes. The U.S. company is a supplier for the C919, a new single-aisle plane being produced by state-owned Commercial Aircraft Corp. of China Ltd.
Bell Helicopter: the subsidiary of Textron Inc. signed an agreement to sell 50 of its helicopters to Reignwood International Investment Group Co. The company had already ordered 60 choppers, according to Bell Helicopter.
Ford Motor Co.: Ford gave financial details of an electric-vehicle alliance with China’s Anhui Zotye Automobile Co. that was first announced in August. The companies will invest 5 billion yuan ($754 million) to develop the cars they’ll sell under a new brand unique to the Chinese market. Ford has said at least 70 percent of its own Ford-brand vehicles sold in China will offer electric or hybrid propulsion by 2025.
Agriculture
Beef and Pork: JD.com Inc. agreed to buy $1.2 billion of beef from the Montana Stock Growers Association and pork from Smithfield Foods Inc. over the next three years, as part of a deal by the Chinese online retailer to import $2 billion of U.S. goods over that period.
The beef portion, about $200 million, would signal a big increase in the appetite for red meat among Chinese consumers, as shipments remain low due to the limited supply that meets requirements. According to China’s Customs General Administration, the country imported 2.3 billion yuan of beef last year.
The pork deal may not be much help creating jobs at Smithfield’s U.S. factories: The company can’t sell made-in-America sausage, ham and bacon to Chinese consumers because China prohibits imports of processed meat, CEO Kenneth Sullivan said in an interview in March. Smithfield parent WH Group opened an 800 million-yuan factory in central China in 2015 to produce American-style packaged meat products.
Archer-Daniels-Midland Co.: memorandum of understanding with state-owned COFCO Group for the export of U.S. soybeans into China.
Financial
Goldman Sachs Group Inc.: China’s sovereign wealth fund and Goldman Sachs announced a fund to help invest as much as $5 billion in American companies that have existing or potential business connections with China. State-backed China Investment Corp.’s role in the fund could complicate investments in American companies, after the Trump administration in September rejected a China-led takeover of a U.S. chipmaker on national-security grounds. Moreover, Goldman Sachs may only be able to contribute 3 percent of the fund because of U.S. rules regarding banks’ private-equity investments.
Technology
Qualcomm Inc.: non-binding MOUs with Chinese smartphone vendors Xiaomi, Oppo and Vivo - all of them current customers - to sell approximately $12 billion in semiconductors over three years. The San Diego-based chip company’s China sales of $14.6 billion accounted for 65 percent of its revenue for the fiscal year ended Sept. 24.
Industrial
DowDuPont Inc.: memorandum of understanding between Dow Chemical and Beijing Mobike Technology Co. to cooperate on developing lighter-weight and more environmentally friendly bicycles. The two companies began working together last year, the official China Daily reported Tuesday.
Caterpillar Inc.: cooperative framework agreement with newly formed China Energy Investment Corp. -- a combination of Shenhua Group Corp., the nation’s largest coal miner, and China Guodian Corp., one of its top-five power generators. The pact “outlines future agreements” for sales and rentals of Caterpillar mining equipment and other products and services, the U.S. company said in a statement.
Honeywell International: an MOU with Oriental Energy Co. to cooperate on five propane dehydrogenation projects in Chinese cities. Honeywell announced in May that two Oriental Energy subsidiaries had licensed its technology to begin producing propylene.
— With assistance by Hui Li, Dong Lyu, Peter Martin, Yan Zhang, Haze Fan, and Ramsey Al-Rikabi

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