Keeping Up with the Trade War Between the US and China
How Global Firms Tap Their Local Customers to Innovate
Keju’s Echo in Modernity – HKBU School of Business’s Research Wins Major Award
HKBU MSc in Finance (Fintech & Financial Analytics) Ranked World’s Top 63 by Financial Times 2024
Ju. J., Ma
Wang
& Zhu X.
Trade wars and industrial policy competitions: Understanding the US-China economic conflicts” Journal of Monetary Economics Volume 141, January 2024, Pages 42-58
As we are in the mist of a new American election which may well usher Donald Trump back to the White House, now is an opportune time to revisit one of President Trump’s marquee policies: the imposition of trade sanctions against China. In a recent paper, a team of researchers explore what has become the starting point of a new era of economic decoupling and industrial re-shoring.
With the rapid surge of Chinese exports to the USA following its accession to the WTO, numerous voices in the US started complaining, especially as many industries moved production to China. Claiming to address these unfair trade practices, the Trump administration initiated five rounds of tariffs starting in 2018. Adopting a “tit-fortat” approach, China retaliated, resulting in both nations imposing tariffs on each other far surpassing the “Most Favored Nation” levels set by the WTO. To the surprise of many, President Biden left these tariffs in place. Why?
That’s because the real reason behind the tariffs boils down to China’s industrial policy. In addition to noting that the Trump tariffs were initiated citing concerns over China’s ambitious ‘‘Made in China 2025’’ Project – “MIC 2025” which subsidises China’s tech sector –the researchers also point to President Biden’s ‘‘CHIPS and Science Act’’ – which aims at fostering America’s semiconductor industry – along with laws to support the U.S.’s move to cleaner energy and electric car production in support of this narrative. Moreover, a closer look at the Trump-era tariffs show that they did not initially target the goods that the U.S. imports most from China –
such as phones and computers – while failing to reduce the US-China trade deficit and the bleeding of U.S. manufacturing jobs. Meanwhile, the first wave of tariffs on MIC 2025 products averaged 12.07%, compared to only 1.71% on other goods.
This shows that the economic tussle between the US and China is not a typical trade spat, but a showdown over industrial policies. This shift became even more evident as the Biden administration opted to build its own subsidy regime instead of pushing for the removal of subsidies.
Given that both nations aim to back what they see as key industries for the future, how can they achieve their goals with minimal downsides? First off, the researchers found that the ideal subsidy level for China’s MIC 2025 sectors would be 7.96% of sales, as this rate would boost welfare in both China and the US. They also establish that a full trade war would entail US tariffs of 13.2% on MIC 2025 products and retaliatory Chinese tariffs of 20+%, which would negatively affect both sides. Ideally, the “right” policy mix for the US would blend tariffs of just 5.57% on MIC 2025 goods and a subsidy rate of 9.59% for its own high-tech sectors. In any event, since competition between the US and China appears inevitable, competing via industrial policies
rather than resorting to tariffs would be preferable, as it would create fewer trade distortions and, consequently, generate higher welfare for both nations.
As campaign rhetoric heats up, let’s cross our fingers that both Trump and Biden stay focused on bolstering US industries rather than recklessly slapping tariffs on the products we all like to buy for cheap!
Dr. Zi WANG Associate Professor Department
How Global Firms Tap Their Local Customers to Innovate
Zhang, T.J., Wang, D. T., Tse, C. H. & Tse, S. Y. “Enhancing subsidiary innovation capability through customer involvement in new product development: A contingent knowledge source perspective ” Journal of Product Innovation Management 2024;41:86–111. DOI: 10.1111/ jpim.12700
Have you ever been frustrated by a suitcase with a lock on the wrong side or a software program with an infuriating help function, thinking you could have come up with a better design? Well, you may soon have your chance to make your views count. As multinational enterprises (MNEs) strive for global market dominance, their success hinges on their ability to develop new products. With subsidiaries spanning numerous countries, MNEs are uniquely poised to drive innovation. Seeking to harness the creative potential of their international branches, these corporations are increasingly leveraging an unexpected asset: their customers. A recent study explores how MNEs can convert local insights into groundbreaking innovations tailored for diverse foreign markets.
Gradually extending their reach beyond domestic borders, multinational enterprises (MNEs) such as Microsoft and General Electric increasingly engage local customers in product development. This can be achieved by incorporating customer representatives into their New Product Development (NPD) teams or by asking them to submit their designs via crowdsourcing. While it’s intuitive to think that customer input can spark creativity, improve product performance, and enhance value, this approach also introduces complexities in knowledge management and can potentially undermine organizational flexibility. So how can foreign subsidiaries harness customer involvement to help drive new product development?
After analysing data from 230 wholly owned foreign subsidiaries of MNEs operating in China’s business-toconsumer sectors and actively involved in NPD, one conclusion is clear: customers can indeed add significant value to the development of new products, whether as a source of information (CIS) or as co-developers (CIC). Still, findings reveal that CIC appears more influential than CIS in bolstering a subsidiary’s innovation capability. Furthermore, the efficacy of customer
involvement in shaping innovation capability depends on whether knowledge originates from headquarters or resides with local partners. Specifically, CIS, by adding to the broader strategic insights of the MNE, is more effective when product development depends on knowledge transfer from headquarters. Conversely, CIC tends to work better when success comes from harnessing the knowledge of local customers.
The lessons for firms are clear: integrating internal and external knowledge with customer involvement is crucial for boosting innovation in foreign subsidiaries. Customer
involvement strategies should be tailored based on the source of knowledge. When knowledge primarily originates from headquarters, a CIS-driven approach is optimal. Conversely, when local partner knowledge is paramount, CIC should be employed to make customers true partners in product development. Striking this balance is essential, as it ensures alignment with both headquarters’ insights and local expertise, ultimately maximising the subsidiary’s innovation capabilities.
To fully leverage customer involvement, MNE subsidiaries must create incentives and coordination frameworks that foster meaningful customer engagement, since there are limits to the usefulness
of focus groups and passive information sharing. This entails developing sophisticated knowledgesharing platforms tailored to foster actual collaboration over time. A flexible approach to customer involvement, aligned with core knowledge sources, will empower subsidiaries to enhance their capabilities and strategically navigate their relationships, ultimately boosting innovation.
So the next time you have a brilliant idea to improve a product, just call the company! Maybe they’ll want you to help.
Dr. Danny WANG Associate Head (Research) Department of Management, Marketing, and Information Systems
The HKBU School of Business has marked another milestone in the realm of impactful research. The beacon of this achievement, Dr. Ting CHEN, Associate Professor and Associate Head (Research) of the Department of Accountancy, Economics and Finance, has been bestowed with the prestigious Youth Achievement (Hong Kong and Macao) Award. This accolade is part of the 9th Higher Education Outstanding Scientific Research Achievement Awards (Humanities and Social Sciences), a distinguished honour conferred by the Ministry of Education (MOE).
The award was given in recognition of the research project titled “Long Live Keju! The Persistent Effects of China’s Civil Examination System”. This project was a collaborative effort with Prof. Chicheng MA and Prof. James Kai-sing KUNG of the University of Hong Kong. It explores the historical civil examination system (keju) of China and its enduring influence on modern economic development.
The Higher Education Scientific Research Outstanding Achievement Awards (Humanities and Social Sciences) were established by the Ministry of Education to acknowledge the exceptional contributions made across national universities. These awards, which are given every three years, include categories for scholarly articles, consulting service reports, popular science works, and youth achievement awards. Since its inception in 1995, it has become one of the most respected and influential awards in the fields of humanities and social sciences in China.
The HKBU School of Business is proud to announce that its Masters of Science in Finance (Fintech & Financial Analytics) programme has been ranked 63rd by the Financial Times in their latest Masters in Finance (pre-experience) 2024 Ranking. This marks a significant accomplishment and recognition of our programme’s commitment to facilitating successful career advancement for our students.
Prof. Aris STOURAITIS, Director of the Master of Science in Finance (Fintech & Financial Analytics) programme, expressed delight at this inaugural success and is dedicated to further enhancing the quality of the programme based on the insights from the ranking.
The Masters in Finance (pre-experience) Ranking by the Financial Times utilised data from business schools and alumni who graduated in 2021, evaluating criteria including salary enhancement, career progression, and diversity. The ranking results also revealed that Masters in Finance graduates in the finance sector received the highest average starting salaries at $80,000, while those in non-financial sectors earned the least, with an average of $55,000. The top earners were those in private equity, venture capital, and hedge funds, earning an average of $120,000.
Prof. Christy M. K. CHEUNG
Chair Professor Department of Management, Marketing and Information Systems
Doxing on Social Networking Sites: An Extension of the Social Cognitive Theory of Moral Thought and Action
Journal of the Association for Information Systems
https://aisel.aisnet.org/jais_preprints/147
Understanding the Dynamic and Episodic Nature of Technostressors and Their Effects on Cyberdeviance: A Daily Field Investigation
Information Systems Research
https://doi.org/10.1287/isre.2020.0273
Dr. Jian ZHANG
Assistant Professor Department of Accountancy, Economics and Finance
Fixing the Core, Earnings Management, and Sustainable Emergence From Financial Distress: Evidence From China's Special Treatment System
Journal of Accounting, Auditing & Finance
https://doi.org/10.1177/0148558X211051169
Date Speaker
Topic
24-28 Oct 2024
BNU-HKBU United International College, Zhuhai, China
Co-hosted with BNU-HKBU UIC
Prof. Atreyi KANKANHALLI
National University of Singapore
Prof. Carol HSU
The University of Sydney
Prof. Guoqing CHEN Tsinghua University
Mr. YIM Kwok Woon, Jack
Solutions Architech, Huawei Cloud
The 24th International Conference on Electronic Business
4 Oct 2024
16:00-17:30 Zoom
Co-hosted with NTU, NYU-Shanghai, Sinica, and SMU
Prof. Piero GOTTARDI University of Essex
Capital Structure and Hedging Demand with Incomplete Markets
The Research Espresso, a bimonthly e-publication covering everything you need to know about the latest research developments at the HKBU School of Business, focuses on four key areas: Research Insights (the main research topic of the month), Research Excellence (recognition of faculty members’ research achievements), News (research-related updates), and Seminars (sharing research skills and knowledge).
The idea is to provide business practitioners with the most recent research findings from the School‘s faculty. We want to build links between research and practice and to ensure that the School's research has business and societal impact.
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