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US-China trade war tech sector impact

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China could potentially end up losing more than the U.S. from the ongoing trade tensions that are now spilling over into the technology sector, according to a Hong Kong-based investment services firm.

That is because major U.S. tech firms operating in China are already under pressure from President Donald Trump to shift their manufacturing businesses back to the United States, and create more jobs for the domestic economy, Gavin Parry, managing director of investment services firm Parry Global Group, told CNBC. He said that if such a shift happens, there would likely be job losses in China.

Earlier this week, Trump unveiled a list of Chinese imports his administration aims to target as part of a crackdown on what the president deems unfair trade practices. Sectors covered by the proposed tariffs include products used for robotics, information technology, communication technology and aerospace — which some economists note are areas that would benefit from China’s industrial upgrading plans.

“China’s actually got a fair amount to lose from an economic point of view, whereas most people are talking about the U.S. as the biggest loser coming out of the trade war,” Parry said.

One example Parry pointed to was Apple. The tech giant sources parts for its iPhone devices from various companies like South Korea’s Samsung Electronics and SK Hynix. Those components are then assembled together by firms like Taiwan’s Foxconn.

Much of that iPhone assembly happens in China. According to a report from state-owned newspaper China Daily last year, data indicated that nearly half of the iPhones were manufactured at Foxconn’s Zhengzhou plant in Central China. The report said that there were 94 iPhone production lines operated by 350,000 workers at the plant. So, if Apple and Foxconn were to potentially shift some of those production lines to the U.S., it could result in job losses in Zhengzhou.

In January, Apple announced investments to support the American economy — that included predictions that the company would contribute about $350 billion to the domestic economy and create around 20,000 jobs over the next five years, as well as to support innovation among domestic manufacturers.

Beyond Apple, Parry said the Trump administration could offer tax concessions and other incentives to push more U.S. tech firms to bring their operations back stateside. That would, theoretically, boost the domestic economy while the import tariffs could continue to put pressure on China. Parry added that Beijing still needs value-added jobs that many U.S. firms in the country offer, to increase the purchasing power and grow the middle class in China.

“It would cause ripples in China,” he said. “Not huge ones but enough for Trump to turn around and say let’s talk broadly. It gives him some kind of (room for) negotiations.”

The office of the U.S. Trade Representative said this week that the tariff targets were developed using a computer algorithm designed to choose products that would inflict maximum pain on Chinese exporters but limit the damage to U.S. consumers, according to a Reuters report.

The tariff list proposed by the U.S. focuses on technology parts and components — such as printed circuit assemblies, transistors and semiconductor devices — instead of finished goods like mobile phones or computers, according to Ma Tieying, an economist at Singapore’s DBS Bank.

“China’s (information and communication technology) exports to the U.S. largely consist of finished goods, especially relatively low value-added computers and consumer electronics,” Ma said in a recent note. “Most of these products are not directly targeted by the U.S. in the tariff list.”

That means U.S. consumers may not experience a significant rise in the price of imported electronics goods from China.

Parry said that ultimately, both Washington and Beijing will sit down to work out existing trade disputes — and the recent moves announcing tit-for-tat measures were just to strengthen their respective hands. On Wednesday, China announced additional tariffs on 106 U.S. products, including soybeans, cars, aerospace and defense. One commentator told CNBC that Beijing’s decision to target soybeans is a political maneuver designed to hit Trump’s support base.

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NASA is launching a 4G mobile network on the moon

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Night time photograph of a waxing gibbous Moon, taken on November 14, 2013.

Chris Rutter | Digital Camera Magazine | Getty Images

LONDON — Just as 5G arrives on planet Earth, its predecessor is heading to the moon.

NASA has selected Nokia to build the first-ever 4G mobile network on Earth’s natural satellite, the Finnish telecommunications firm announced Monday.

The company’s U.S. industrial research arm, Bell Labs, is offering up its equipment to NASA to help build out the lunar network, with the aim of launching it in late 2022.

Under its Artemis program, NASA plans to send astronauts to the moon by 2024 — for the first time in five decades — followed by a “sustainable” human presence by 2028.

The U.S. space agency has chosen Elon Musk’s SpaceX, Jeff Bezos’ Blue Origin and Dynetics, a lesser-known company, to develop the human landers that will land astronauts on the moon.

Nokia said its 4G network will allow astronauts to carry out a number of activities including making voice and video calls, sending important data and deploying payloads. It plans to eventually launch 5G on the moon as well.

NASA said in a blog post that it granted Nokia $14.1 million for the project, one of the agency’s various so-called “tipping point” investments focused on lunar exploration.

“The system could support lunar surface communications at greater distances, increased speeds, and provide more reliability than current standards,” NASA said of the proposed cellular network.

The deal is a win for Nokia, which has been competing with China’s Huawei and Sweden’s Ericsson for lucrative 5G contracts. It also comes as major carriers try to convince people to switch to 5G, which promises much faster download speeds and lower latency. Apple recently revealed the iPhone 12, its first phone range to support 5G.

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Active funds are not being muscled out by ETFs, Refinitiv expert says

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ETFs are traded on exchanges, so they can be bought and sold like stocks through a brokerage.

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Although exchange-traded funds are growing in popularity, they are not yet making meaningful incursions into the territory of actively-managed funds, according to Refinitive’s Head of Lipper EMEA Research, Detlef Glow.

Money market funds — which usually invest in low-risk, liquid assets like short-term bonds — were the best-sellers over the year to date, with inflows of 211.3 billion euros ($248.4 billion), according to Refinitiv’s European Fund Industry Review. Meanwhile, funds focused on global equities were the most popular among long-term investors, with the sector seeing inflows of 62.8 billion euros.

ETFs have enjoyed inflows of 48.5 billion euros so far in 2020, and Glow highlighted that their popularity has been growing across all types of investors. ETFs are collections of securities that track an underlying index, while mutual funds are actively managed and buy or sell assets strategically in a bid to beat the market and deliver profit to investors.

However, Glow told CNBC’s “Squawk Box Europe” on Monday that despite popular belief, ETFs were not materially affecting demand for active investment funds.

“If you look at the general assets under management number, we have got 11.1 trillion (euros) invested in mutual funds, this is 92.7% of the market, and we have got only 0.87 trillion invested in ETFs, which is 7.3% of the market,” Glow said.

He noted that in terms of flows, things looked a bit better for ETFs, with 45.8 billion euros of total inflows, or 15%, going into ETFs and the remaining 85% going into mutual funds.

“This 15% is roughly the average we saw over the last few years, so from my point of view, there is no reason to be majorly concerned about ETFs when it comes to net sales,” Glow said.

Total assets under management slipped

The report noted that the fund industry had been hit hard at the beginning of the pandemic, posting net outflows of 125.9 billion euros in the first quarter of 2020.

The strong fiscal and monetary policy response from governments and central banks around the world, and subsequent normalization of markets, led investors back into ETFs and mutual funds in the second and third quarters and brought total net inflows to 297.1 billion euros by the end of September.

“We see that European investors put their money on the sideline by buying into money-market Europe, money-market U.S. dollars, as well as money-market pound sterling,” Glow told CNBC on Monday.

“But we also see that they are buying into diversified products, i.e. Equity Global as well as in specific themes like information technology and healthcare.”

However, Refinitiv found that total assets under management across the region’s fund industry slipped from 12.3 trillion euros in Dec. 2019 to 12 trillion euros in Sept. 2020, which it attributed in large part to the performance of underlying markets, which saw a 531 billion euro decline.

The report identified BlackRock as the best-selling fund promotor over the period, with net sales of 68.3 billion euros, followed by JPMorgan at 56.9 billion euros and Goldman Sachs at 23.3 billion euros.

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Why tech IPOs are flourishing in the U.S. and China — but not Europe

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