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The Economics of Information in the Global Economic Life on the example of the USA – China trade war

Authors:
  • Poznan University of Economics and Business

Abstract

The trade war between the USA and China is one of the effects of a redefinition of the role of individual states in the world economic life. As part of this world, countries have fully become actors of global competition. The key factor in building countries’ position is their ability to shape their own competitiveness. That, in turn, is affected by information asymmetry, the effects of which are also visible at the international level. Here, too, the phenomena of moral hazard, adverse selection, signaling or auto-selection can be identified. Coun- tries have developed the tools for elimination and stimulation of the negative effects of information asymmetry. The most important of them is reputation which is the basis for building country’s credibility among others participants in economic practice. As noted by C. Shapiro, reputation is important only in markets with imperfect information. According to that statement, it can be concluded that the growing interest of scientists in the issues of state’s reputation confirms the important role of imperfect information in the international environment. The aim of this study was to define the role of reputation in reducing information asymmetry in the global market. In the first part the basic phenomena of information asym- metry in the international environment were presented. Next, the role of global reputation in shaping the mechanisms of weakening the effects of information asymmetry was dis- cussed. In turn, in the following sections the role of policy and diplomacy in shaping trust in the government and demand for products from a given country, based on the example of the trade war between the US and China, was presented. Theoretic deliberations in this publication are based on the Polish-language publication Ekonomia informacji w globalnym życiu gospodarczym (‘The economics of information in a global economic life’) from 2020. In the presented work they constitute the basis for the analysis based on a practical application in- cluding an overview of the global consequences of the trade war between the US and China.
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THE ECONOMICS
OF INFORMATION
Theory and practice
research editor
Przemysław Deszczyński
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The economics of information
Theory and practice
POZNAŃSKIE TOWARZYSTWO PRZYJACIÓŁ NAUK
The economics of information
Theory and practice
research editor
Przemysław Deszczyński
Poznań 2020
WYDAWNICTWO POZNAŃSKIEGO TOWARZYSTWA PRZYJACIÓŁ NAUK
THE POZNAŃ SOCIETY FOR THE ADVANCEMENT
OF ARTS AND SCIENCES
http://ptpn.poznan.pl/en/ dystrybucja@ptpn.poznan.pl
EDITOR-IN-CHIEF THE PTPN PUBLISHING
Jakub Kępiński
REVIEW:
dr hab. Monika Kaczmarek-Śliwińska
Publication co-nanced by the Poznań University of Economics and Business.
Copyright © for the English edition by Poznańskie Towarzystwo Przyjaciół Nauk
and Authors
Published by Wydawnictwo Poznańskiego Towarzystwa Przyjaciół Nauk
All rights reserved.
Copying, processing and distributing this material for any purpose and form
without the written consent of the Authors and the Publisher is forbidden.
Cover design and DTP: Prelite
Born-digital, First Edition, Poznań 2020
ISBN 978-83-7654-489-2
Table of Contents
Introduction (Przemysław Deszczyński)
I. Conteptualization of the Term ‘Economics of Information’
(Przemysław Deszczyński)
Introduction
1.1. The genesis of the economics of information
1.2. The concept of the economics of information
1.3. Research methods of the economics of information
Conclusion
II. The Economics of Information in Internal Communication
of the Social Media Era (Jacek Trębecki)
Introduction
2.1. The essence and specicity of internal communication
2.2. The value of information in internal communication
2.3. Traditional and modern tools of internal communication
Conclusion
III. Changes in Access to Information in Crisis Situations
(Waldemar Rydzak)
Introduction
3.1. The role of information in economy
3.2. Quality of information – chances and threats
3.3. Changes in the formation and circulation of information
the importance of AI
3.4. Stakeholders’ access to information in crisis situations
Conclusion
11
13
13
17
19
24
27
28
29
30
36
39
40
45
47
49
55
IV. The Economics of Information as an Instrument
of Legitimation of the European Union (Filip Kaczmarek)
Introduction
4.1. The term ‘cost of non-Europe’
4.2. The role of ‘cost of non-Europe’ in legitimizing
the European Union
Conclusion
V. Brexit and the economics of information (Aleksandra Rabczun)
Introduction
5.1. The Genesis of Brexit
5.2. The role of the economics of information
in the referendum campaign
5.3. The role of the economics of information in Brexit negotiations
Conclusion
VI. The Economics of Information in German Public Space
(Izabela Janicka)
Introduction
6.1. Information as a commodity
6.2. The value of communication in German democracy
6.3. Information economics in German politics
6.4. Information economics in German media
6.5. Information economics and social perception
Conclusion
VII. The Economics of Information in the Global Economic
Life on the example of the USA – China trade war
(Marcin Leszczyński)
Introduction
7.1. The economics of information in the international environment
7.2. Reputation as a tool of eliminating negative effects of information
asymmetry in the international environment
59
60
64
67
75
75
79
84
89
95
96
97
100
102
104
107
111
112
113
7.3. The trade war between the USA and Chinathe genesis
of the conict
7.4. Information economics on the example of the trade war between
the USA and China
7.5. Global reputation of the USA and China
7.6. Trust in the American and Chinese business
Conclusion
VIII. Information, Welfare and Migrations – Practical Remarks
in the Context of the Economics of Information
(Katarzyna Świerczyńska)
Introduction
8.1. Differentiation in a level of prosperity as a cause of migration
8.2. Information and communication technology access
in sub-Saharan Africa
8.3. Emigration from sub-Saharan countries vs. the migration crisis
Conclusion
115
117
118
119
121
127
129
134
138
143
111
VII
The Economics of Information in the Global Economic Life
on the example of the USA-China trade war
(MARCIN LESZCZYŃSKI)
Introduction
The trade war between the USA and China is one of the effects of a redenition of the
role of individual states in the world economic life. As part of this world, countries have
fully become actors of global competition. The key factor in building countries’ position
is their ability to shape their own competitiveness. That, in turn, is affected by information
asymmetry, the effects of which are also visible at the international level. Here, too, the
phenomena of moral hazard, adverse selection, signaling or auto-selection can be identied. Coun-
tries have developed the tools for elimination and stimulation of the negative effects of
information asymmetry. The most important of them is reputation which is the basis for
building country’s credibility among others participants in economic practice. As noted by
C. Shapiro, reputation is important only in markets with imperfect information. According
to that statement, it can be concluded that the growing interest of scientists in the issues of
states reputation conrms the important role of imperfect information in the international
environment.
The aim of this study was to dene the role of reputation in reducing information
asymmetry in the global market. In the rst part the basic phenomena of information asym-
metry in the international environment were presented. Next, the role of global reputation
in shaping the mechanisms of weakening the effects of information asymmetry was dis-
cussed. In turn, in the following sections the role of policy and diplomacy in shaping trust
in the government and demand for products from a given country, based on the example
of the trade war between the US and China, was presented. Theoretic deliberations in this
publication are based on the Polish-language publication Ekonomia informacji w globalnym życiu
gospodarczym (‘The economics of information in a global economic life’) from 2020. In the
presented work they constitute the basis for the analysis based on a practical application in-
cluding an overview of the global consequences of the trade war between the US and China.
112
VII. The Economics of Information in the Global Economic Life
7.1. The economics of information in the international environment
Information economics has its theoretical base in undermining the paradigm of perfect
information (Deszczyński, 2020). Information economics in economic processes comes
down to the situation in which the parties to the transaction do not have complete in-
formation that would allow for a proper assessment of the risk. In the theory of infor-
mation economics, these cases have been described in the seller-buyer, insurer-insured,
employer-employee, or lender-borrower relationships. In a situation where one party to
the transaction has more knowledge about their own sills, the probability of default or
the quality of the product sold, a phenomenon known as moral hazard may arise (Arrow,
1963; Akerlof, 1970). The mechanism that describes wider the consequences of moral
hazard is adverse selection. G. Akerlof (1970) presented this problem, inter alia, on the ex-
ample of the insurance market. The literature also describes mechanisms that allow for
the elimination of information asymmetry, which include signaling (Spence, 1973) and
auto-selection, also referred to as screening (Rothschild, Stiglitz, 1976). M. Spence in 1973 an-
alyzed the role of information asymmetry in a labor market. The concept of auto-selection,
in turn, can be related to the research of M. Rothschild and J. Stiglitz (1976) who transfer
this mechanism into the insurance market.
The above mechanisms can also be identied at the state level. B. Herzog (2014)
divides countries into those with solid and those with weak macroeconomic foundations,
and their governments into those committed to pursuing a policy that maintain good
foundations and those that bluff. In this situation, the bond yields of countries with
similar macroeconomic fundamentals will be similar. However, governments are more
knowledgeable than investors about what they will do in the future, which encourages
the emergence of moral hazard. In this situation, countries that pursue a policy aimed at
maintaining a solid macroeconomic foundation are not willing to pay investors the same
amounts as blufng governments, which leads them to believe that risk premium is over-
stated. A consequence of this status quo is the search for alternative sources of nancing
and a decline in the supply of good quality bonds (Herzog, 2014).
A. Drazen (1997) indicates that signaling can be used to assess when the type is un-
known. He also adds that investors’ inference is intuitive, because the effects of state-led
initiatives are not always predictable (Drazen, 1997). B. Herzog writes that these mecha-
nisms can be analyzed from the perspective of the state’s participation in intergovernmen-
tal organizations and the resulting consequences. In the case of euro area countries it is, for
113
Reputation as a tool of eliminating negative effects of information asymmetry
example, the European Stability Mechanism. In turn, in the European Union there is a talk
about the excessive decit procedure. Additionally, B. Herzog identies introducing by states
internal independent nancial institutions and automatic budgetary rules (Herzog, 2014).
J.T. Dalton and T. Goksel (2009) examine information asymmetry through the lens
of international trade. In their study, they analyze the mechanism of importing to the
American market Japanese and French cars, the popularity of which has increased after
the oil crises. The researchers show the impact of information asymmetry on the deci-
sions of importers and take into account the time factor that relates to the process of
learning and obtaining information about exporters and their products (Dalton, Goksel,
2009). The presented regularity refers to the country of origin effect identied in the 1960s by
R.D. Schooler (Schooler, 1965). Research on this issue in the context of the economics
of information was also conducted by Y. Shi and A. Ono (2015). Analyzing the market
of used cars and wines, they found that the country of origin can be a signal to the con-
sumer and can inuence his purchase decision.
7.2. Reputation as a tool of eliminating negative effects of information
asymmetry in the international environment
The actions of individuals carry information, and these lead to changes in the behavior
and functioning of the behavior and functioning of the market (Stiglitz, 2002). Individ-
uals do not act only through the prism of their own needs, but take into consideration
how those activities will be perceived by others (Stiglitz, 2002). These processes relate
to building reputation, credibility and trust. In the considerations cited, the researchers
pointed to the important role of reputation in reducing the information asymmetry.
Reputation is a general assessment of a given subject by the public (Fombrun, van Riel,
1997). C. Shapiro (1983) treats reputation as a signaling tool, pointing out that it only
matters in a market with imperfect information. If a consumer does not have complete
information about a product, he may rely on the quality of products made in the past.
It is also pointed out by B. Klein and K. Lefer (1981) and S. Kaplan, P. Roush and L.
Thorne (2007).
Ch. Fombrun indicates that reputation is an informational signal that increases the
observer’s trust in a given entity (Fombrun, van Riel, 1997). Reputation allows the entity
to generate a premium in the prices of its products and services (Fombrun, van Riel,
114
VII. The Economics of Information in the Global Economic Life
1997), which can be dened as a reputation premium resulting from the built up reputation
capital (Leszczyński, 2019). From the perspective of information asymmetry, investments
in reputation may prove good product quality (Fombrun, van Riel, 1997, 2007). G. Aker-
lof (1970) indicated actions that can combat imperfections of information, i.e.: warranty,
brand, network, certication. In each of these cases, trust that conditions functioning of
the market and decisions of its participants is of key importance.
When analyzing the presented mechanisms, one can refer to the aforementioned
country of origin effect. The term ‘made in’ owes its origin precisely to information asymme-
try and to the temptation to abuse by German producers who at the end of the 19th century
supplied their products to the British market, suggesting that they were products of
England. England’s response was to force German manufacturers to use the inscription
‘Made in Germany’ (Leszczyński, 2019). Referring to the indications of G. Akerlof, one
can state that the country of origin effect concerns the category of brand. In the literature
appears the concept of a national brand, introduced by S. Anholt (Anholt, 2013). In this
light, the country of origin is a brand and a promise of product quality.
In addition to the brand, certication is also very important. It is characteristic es-
pecially for products perceived as premium goods. The rst example is Switzerland,
which is famous for the best quality watches signed with the ‘Swiss made’ mark. Research
(Feige, 2016) shows that consumers are willing to pay twice as much for Swiss watches
as for watches from other countries. What is of great importance in this market is the
certication. Its history on the Swiss market stems from the producers’ temptation to abuse.
The rst certicate named ‘The Geneva Seal’ was introduced by the Geneva authorities
in 1886 and was intended to counteract the abuse of manufacturers who were falsifying
the Geneva watches (ch24.pl).
On the one hand, the certicate conrms that the watch was made in the canton of
Geneva, and on the other, it indicates meeting the quality requirements. A similar pattern
can be noticed in the wine market, here the research results also show the inuence of
the country of origin on the price (Lee, Gartner et al., 2018). In this market, there are also
price differences among products from a given country, which can be explained, inter
alia, by the introduction of wine classication which is to eliminate information asym-
metry. As stated by M. Rekowski, as a result of the rst wine classication in the 19th
century, producers who were awarded the highest class of wines – premiers curscould
sell them at the highest price (Rekowski, 2013).
115
The trade war between the USA and China – the genesis of the conict
J. Stiglitz and A. Weiss (1981) point out that the interest rate itself may be the signal
for a lender. This principle is reected in the government bond market, where debt secu-
rities of countries in a bad nancial condition and with low credibility are characterized
by higher protability. Countries with lower bond prices are perceived by investors as
more risky. In this area, of key importance is the so-called bond spread – or risk premi-
um, i.e. differences in the yields of bonds of a given country and countries perceived as
safe (Waszkiewicz, 2014). Another indicator is the creditworthiness assessed by rating
agencies. In order to be well graded, it is not enough for the country to pay off its debt
on time (Waszkiewicz, 2014).
A broader perception of a state plays an important role. B. Herzog (2014) points to
the political reputation, i.e. the government’s commitment to building the competitive-
ness of the economy and scal stabilization, which are basis for minimizing concerns on
the market. In the market of debt instruments, the so-called general reputation of the state
gets increasingly important. This measurement is carried out by the Reputation Institute
in the annual Country RepTak report (Reputation Institute, 2020). Based on the results
of the research (Leszczyński, 2019), it can be concluded that the overall reputation is
strongly related to the assessment of the countries’ competitiveness, including their eco-
nomic reputation. The analysis of economic data also shows that the overall reputation
of a country may explain differences in bond yields and risk premiums (reputation pre-
mium), country brand valuation (reputation capital), and export volumes (home country
competitiveness) (Leszczyński, 2019).
7.3. The trade war between the USA and China – the genesis of the conict
At the turn of the 20th and 21st centuries, China became one of the fastest growing
economies in the world, reaching 75 times higher GDP in 2019 compared to 1980 (World
Bank, 2020), and since joining the WHO structures, its GDP has increased by USD 13
trillion. For comparison, since 1980 US GDP has increased more than 7 times, and since
2001 – by less than USD 11 trillion (World Bank, 2020). Currently, the US GDP is over
USD 21 trillion, while China’s – over USD 14 trillion. On the Forbes Global 2000 list in
2020, the top 10 largest companies in the world include as many as 5 companies from
China and 4 from the USA (Forbes, 2020). In the case of the most valuable brands in
the world, 6 companies from the USA and 3 from China are in the top 10. The total
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VII. The Economics of Information in the Global Economic Life
value of American brands included in the ranking is USD 3.2 trillion, while Chinese
brands – USD 1.3 trillion (Brand Finance, 2020). These countries are also perceived as
one of the most important world leaders (U.S. News, 2020). Their political and economic
inuence is highly rated. Although some analyzes (Gallup, 2020) indicate that the US is
performing better in this respect, in some studies China is ahead of the US both politi-
cally (U.S. News, 2020) and economically (Pew Research Center, 2020).
The beginning of the trade war between the US and China dates back to 2018. Fol-
lowing the statements of Donald Trump’s adviser – Peter Navarro – it can be concluded
that the causes of the conict relate to the US losses due to trade with China. L. Kapus-
tina et al. (2020) indicate that the sources of this conict include: the desire to reduce
the US decit in trade with China, reducing unemployment in the US, limiting China’s
technological capabilities, limiting the growth of China’s military power and reducing the
US budget decit. E. Bekkers and S. Schroeter (2020) indicate similar reasons, i.e.: trade
imbalance between the US and China, increased reciprocity of applied custom tariffs,
reinstating of jobs in the US and the ght against the effects of Chinese policy – poor
protection of intellectual property, forced transfer of technology and subsidizing enter-
prises by the Chinese government.
The sources of this conict go back to 2001, when China joined the WTO, which
meant that after 15 years of membership it would automatically receive the Market Econ-
omy Status – MES. Non-Market Economy (NME) status, obtained by China in the ac-
cession protocol, was associated with restrictions for the Chinese economy, mainly in the
area of imposing anti-dumping duties by economic partners, which gives them a strong
tool in shaping political and economic relations with China (Skrzypczyńska, 2015). The
expiry of this status was supposed to take place in December 2016, but both the US and
the European Union questioned the legitimacy of automatism, thus treating China as
a non-market economy and retaining the entire spectrum of tools allowing for the use of
anti-dumping measures. It was precisely the use of this situation by the USA that was the
main reason for the so-called trade war with China. Global domination of one of these
countries in the future may depend on its effects.
In December 2017, in the National Security Strategy, president Donald Trump iden-
tied China and Russia as the greatest threats to the US. He also stated that the military
power of the USA is of key importance, and pointed to the rebuilding of the American
economy as one of the conditioning instruments (Polski Instytut Spraw Międzynaro-
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Information economics on the example of the trade war
dowych, 2017). The tools that were supposed to ensure rebuilding the economy of the
United States included:
duties – 25% customs duty on 818 products from China worth USD 34 billion
(July 2018), 25% customs duty on 279 products worth USD 16 billion (August
2018), 10% customs duty, increased in May 2019 to 25% on products worth
USD 200 billion (September 2018);
administrative restrictions introducing Chinese companies to the so-called
entity list (US Departament of State, 2019);
instrumental introduction of legal changes banning of: downloading Chi-
nese TikTok and WeChat applications in the US; cooperation of American
companies with companies from the black list, e.g. Huawei; the use of equip-
ment considered a threat to the security of the USA by American companies
(Rutkowska, 2019); the use of the TikTok app by the US military (Malinowski,
2020).
7.4. Information economics on the example of the trade war
between the USA and China
At the same time, the so-called information war is taking place between the US and Chi-
na. Its sources can be found in the confrontational America First narrative which was one
of the reasons for Donald Trump’s victory in the presidential election. It was in this cam-
paign that Donald Trump identied China as one of the greatest threats to the US, and
it was one of the main issues raised during the campaign (Appelbaum et al., 2016; Beech,
2016; Haberman, 2016). The information conict that started during the campaign can
be divided into two areas:
global reputation of the USA and China,
trust in the American and Chinese business.
As M. Taddeo notes, information warfare can be dened as the use of information
technology to disrupt and control the enemy’s resources. It is of particular interest to
governments and intelligence agencies, and since the 21st century, information technol-
ogies have become increasingly important in this area (Taddeo, 2011). The essence of
information warfare is, on the one hand, misleading through manipulation and distortion
of information, and, on the other, protection against similar actions (Kryszak, 2017).
118
VII. The Economics of Information in the Global Economic Life
In the international environment, the communication activities of states t into the
concept of international public relations, the effects of which may depend on many fac-
tors (Ławniczak, Rydzak & Trębecki, 2009; Vercic, L. Grunig & J. Grunig, 1996, p. 32).
Communication activities at the state level can be divided into several areas, e.g. national
branding, public diplomacy or propaganda (Szondi 2006; Kaczmarek, Leszczyński, 2016;
Janicka, 2018; Leszczyński, Rabczun, 2018). The information conict between the US
and China, according to the concept of the specialization of international public rela-
tions, should be classied as propaganda. G Szondi (2006) describes it as:
inuencing,
creating crises,
discrediting competitors,
justifying hostilities,
manipulating public opinion.
In the light of information economics, an information war is supposed to lead to
lowering the condence of the environment in competitors, which may translate into the
decision-making processes of consumers, investors, governments and intergovernmental
organizations. Currently, it is intangible assets that constitute an important element in
building competitiveness on the market (Kaczmarek-Śliwińska, 2014). Information war-
fare activities are to deepen information asymmetry, the consequence of which may be
an image crisis. D. Tworzydło points out that the image crisis may translate into an eco-
nomic crisis (Tworzydło, 2017). In this context, it can contribute to lowering the country
reputation premium, reputation capital and home country competitiveness.
7.5. Global reputation of the USA and China
Regarding public condence in the US and Chinese governments, it should be noted that
in the Best Countries ranking, China scored 4 points in 2020 (out of 100 possible), which
is an increase of 1 point compared to 2016. On the other hand, the United States scored
16 points in 2020, recording a drop by as much as 17 points compared to 2016. It should
be mentioned that in this ranking the public assessed highest such countries as Canada
(100 points), Switzerland (99) and Norway (99) (U.S. News, 2020).
Compared to China (4 points), the USA, with 25 points, comes off much better
when it comes to the transparency of government actions, although it is still a low result
119
Global reputation of the USA and China
compared to other countries (U.S. News, 2020). US information activity may have under-
mined China’s reputation. According to the concept of the halo effect, the perception of
the country may be inuenced by its leader. In 2020, Chinese President Xi Jinping was
trusted by 19% of respondents in the global market, while Donald Trump was trusted by
only 17%. For comparison, Vladimir Putin is trusted by 23%, while Emmanuel Macron is
trusted by 64% of respondents, and Angela Merkel – by as much as 76% of respondents
(Pew Research Center, 2020a).
According to the Reputation Institute data, the election of Donald Trump as the
president of the USA translated into a weakening of the country’s reputation by more
than 8%, to 54 points (Reputation Institute, 2017). The results of studies conducted by
the Gallup Institute (Gallup, 2020) and the Pew Research Center (Pew Research Center,
2020b) show a similar view. It was also connected to a decline in condence in US-based
companies (Edelman, 2017). It should be also noted that 68% of global public opinion
perceived Donald Trump’s trade policy in a negative way (Pew Research Center, 2020b).
In 2020, the US reputation scored 59.6 points. This means that during the trade war the
US reputation improved by 5.6 points. China’s reputation, on the other hand, weakened
from 48.8 in 2017 to 45.8. In this regard, the US is winning the information war with
China, but it should be noted that the reputation of both countries is below the global
median, which in 2020 amounted to 63.1 (Reputation Institute, 2020; Reputation Insti-
tute, 2017).
According to the data of Pew Research Center, in the international environment
the US is perceived positively by 34% of respondents, while China – only by 24% (Pew
Research Center, 2020). These results show the weakening of perception of both Chi-
na and the US during the trade war (Pew Research Center, 2020; Pew Research Center,
2020c). For the global public opinion, the USA (27 points) is seen as an ally to a greater
extent that China (5), both countries, however, are equally viewed as a threat (USA – 12,
China – 13) (Pew Research Center, 2020d).
7.6. Trust in the American and Chinese business
The actions of the US administration aimed at limiting the possibilities for Chinese com-
panies to operate on the US market were also informative. In 2012, the House of Repre-
sentatives’ Intelligence Committee determined that cooperation between US companies
120
VII. The Economics of Information in the Global Economic Life
and Huawei and ZTE may be risky, and that these companies have the ability to take
over strategic computer systems in the US which the Chinese government could use in
a conict between these countries (Forbes, 2012). In late 2017, an ofcial warning against
the use of Huawei and ZTE was issued by the Intelligence Committee of the US Senate
(Wyborcza, 2018).
Penalties for ZTE for cooperation with North Korea and Iran, prohibition of the use
of Chinese technology products (e.g. Huawei) and applications (WeChat and Tik Tok),
lobbying in other countries and preventing the cooperation of American companies (e.g.
Google) with Chinese producers carry information value. Such actions by the US admin-
istration are aimed at lowering condence in Chinese business. One should be aware that
these types of tools can be used to inuence the public opinion, e.g. there is a list of pro-
hibited topics within TikTok, including criticism of the Chinese authorities or protests in
Hong Kong (Hern, 2019), while Facebook user data was used by Cambridge Analytica in
carrying out political campaigns (Gilbert and Ma, 2019; O’Sullivan, 2018).
The rst area is the public opinion’s assessment of the transparency of business activ-
ities in both countries. In this respect, in the Best Countries report in 2020 China obtained
16 points, while the USA twice as many, i.e. 32 points. Compared to 2016, China doubled
the number of points, while the USA lost 8 points. These are very poor results compared
to Canada (100), Norway (93) and Sweden (82) (U.S. News, 2020). Another factor is public
trust in companies from China and the US. This measurement is carried out annually by
Edelman. In 2020, trust in Chinese-based companies amounted to 38, while for the USA
it was 53 (Edelman, 2020). Compared to 2016, China recorded a 5 point increase and the
USA a 3 points decrease (Edelman, 2016). Condence in Chinese companies is increasing
among developing countries, in contrast to developed countries, where the perception of
Chinese business is weakening (Brunswick, 2020).
The results of research conducted in Great Britain indicate that information about
the Chinese origin of a brand lowers the trust that consumers place in it. Lenovo is
such a case. Based on an assessment of the brand itself, trust for Lenovo among Brit-
ish consumers was 32%, but after disclosing its Chinese origins – it dropped to 20%
(Feldman and Rowe, 2020). The biggest victim is Huawei, which is trusted by only 10%
of British, while 22% say they will never choose this brand’s products and 19% believe
that they would choose this brand only as a last resort. Respondents also indicate that
Chinese companies may be a threat to national security (Feldman and Rowe, 2020).
121
Trust in the American and Chinese business
Similar levels of public condence in Huawei and Chinese companies can be noted in
Canada and the US (Angus Reid Institute, 2019). As a result of actions undermining
trust in Huawei and due to the introduction of the above-mentioned restrictions, the
brand was gradually withdrawing from foreign markets and strengthening its position
in China.
In the second quarter of 2020, only 28% of the brand’s smartphones got sold
outside China, while sales in China accounted for 72% which translates into an in-
crease of over 16 percentage points compared to 2016 (Huawei, 2017; Business Stan-
dard, 2017). In the second quarter of 2020, only 28% of the brand’s smartphones
sold went outside China, while sales in China accounted for 72%, an increase of
more than 16 percentage points compared to 2016. Huawei’s share of the number of
smartphones sold in the Chinese market (Counterpoint, 2017; Counterpiont, 2020).
The non-recognition of China as a market economy at the WTO forum was the
foundation for a US diplomatic offensive in this area. One of the effects of these
activities is limiting Huawei’s ability to cooperate on the development of the 5G
network outside the US. The analysis of the attitudes of European countries shows
that 20 out of 31 analyzed countries have a negative opinion about cooperation with
Huawei in this area, while 11 view it as a neutral or positive thing (Instytut Nowej
Europy, 2020). In January 2020, countries that introduced restrictions on the use of
Huawei products and technologies accounted for a total of one third of the world’s
GDP (Buchholz, 2020).
Conclusions
The importance of information asymmetry in shaping economic processes at the global
level is as strong as in the case of the markets analyzed by G. Akerlof, M. Spence and
J. Stiglitz. Countries, just like the entities analyzed in previous studies, have developed
a number of mechanisms that allow for the elimination of information asymmetry. How-
ever, it should be borne in mind that the impact of information on the decisions of
other market participants depends on a number of conditions that may disrupt these
mechanisms. Those conditions include the information war between the US and China.
As a result of this war, information asymmetry increased and the level of trust in both
sides of the conict decreased.
122
VII. The Economics of Information in the Global Economic Life
On the one hand, Donald Trump’s confrontational narrative translated into a weak-
ening of China’s economic and political position. Raising social unrest and reducing the
sense of security on the Internet, identifying China as the main source of the problem,
led to a reduction and, in some cases, arresting the upward trend of condence in the
Chinese government, strengthening the negative country of origin effect, and changing
business strategies of Chinese enterprises. The example of the conict between the US
and China shows that the consequences did not apply only to the Chinese economy, but
also to the US. The offensive led by Donald Trump reduced the reputation of the United
States, the involvement of which in the international community was no longer perceived
as socially responsible. Customs duties imposed not only on China but also on other
countries, including the EU, undermining the competences of the WTO, WHO and
NATO’s political cohesion, the anti-immigration policy, and withdrawing from COP21
arrangements affect negatively the global reputation of the US and the assessment of
credibility of this country.
On this basis, it can be concluded that the confrontational style of conducting pol-
itics may also adversely affect the creator of this policy. Undermining the foundations
proving the social responsibility of the state translates into weakening both the position
of the attacker and the strength of the arguments used. Based on the observations of the
US-China trade war, it can be concluded that it was associated with a mutual deterioration
of reputation and trust in both sides of the conict. The arguments used seem to bring
more benets to the US, although these may be apparent. It should be noted that with
negative assessments of US actions global public opinion may begin to perceive China
better. It is worth remembering that this is a long-term process and can be inuenced
by many factors. First, the victory of Joe Biden will probably improve the US reputa-
tion, which, even with the current policy of protecting US interests, will strengthen the
formulated argumentation. Secondly, a Democratic representative’s victory may translate
into a less confrontational foreign policy. Thirdly, it should be noted that young people
perceive China much better than the elderly, which may be related to, inter alia, an in-
creasingly attractive offer that is competitive with the US and other Western countries’
market propositions.
123
Trust in the American and Chinese business
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