Trumped Up? The $250 Billion in U.S.-China Trade Deals May Not Tally
By Yoko Kubota and Eva Dou
BEIJING--On the surface, deals worth $12 billion for Qualcomm Inc. to sell chips to three Chinese smartphone brands look like a win for America Inc. during President Donald Trump's visit here.
But there is a catch to the Qualcomm deals and many of the other agreements involving companies such as Boeing Co. and General Electric Co., announced at Mr. Trump's summit with President Xi Jinping this week. Many in the $250 billion haul aren't full contracts. Announcing them gave both governments a big headline number to cheer about but, as some business groups said, without addressing harder-to-resolve problems in U.S.-China trade.
In Qualcomm's case, the nonbinding, intended orders by smartphone maker Xiaomi Corp. and the Oppo and Vivo brands owned by Guangdong's BBK Electronics span over three years and are basically on par with existing orders, according to a person familiar with the deal. A Qualcomm spokeswoman declined to comment on whether the deals went beyond expected orders.
The biggest deal, an $83.7 billion Chinese direct-investment plan, didn't even involve a U.S. company: state-owned China Energy Investment Corp. signed a preliminary agreement to invest in shale gas and chemical manufacturing in West Virginia. That headline figure would be invested over the course of 20 years.
The second-largest figure--$43 billion--was an estimate of construction costs for an Alaska natural-gas project, with the investment breakdown between the U.S. and Chinese companies still under negotiation. Alaska Gasline Development Corp. President Keith Meyer said he expects the pipeline to earn $8 billion to $10 billion in revenue a year beginning in 2024 or 2025, but that a final agreement with China Petroleum & Chemical Corp., known as Sinopec, will be negotiated next year.
"The deal is politically expedient, yet its nonbinding nature gives Sinopec the flexibility to quietly back away from the deal down the line, " said Hugo Brennan, an Asia analyst at consulting firm Verisk Maplecroft. AGDC didn't immediately respond to that characterization, and Sinopec declined to comment on it.
In another heralded deal, Chicago-based Boeing Co. said it would supply 300 aircraft, worth about $37 billion, to state-run aircraft-leasing company China Aviation Supplies Holding Co.
Boeing has a backlog of more than 1,000 orders from unidentified buyers, many of which are believed to be from China, according to aviation intelligence company FlightGlobal, suggesting that the orders unveiled during Mr. Trump's visit may not necessarily be new.