Tech giant caught in crossfire

The US struggle to contain China damages business, says Emily Hohler.


Huawei's Zhengfei: rare public appearance
(Image credit: © 2019 Bloomberg Finance LP)

The US pushed its campaign against Huawei into "hyperdrive" on Monday, with the Department of Justice charging the Chinese telecoms giant with crimes including sanctions violations and theft of trade secrets, says Michael Schuman in Bloomberg. Clearly, the US is engaged in a "wider, geopolitical struggle to contain a rising China" and to some extent Huawei has "got caught in the crossfire".

Nevertheless, it's becoming increasingly difficult for the company to "paint itself as an entirely innocent victim". Few companies of this size have attracted "such a litany of accusations of rule-breaking". As long ago as 2003, Huawei admitted copying router software code from Cisco. The Justice Department claims managers offered bonuses to staffers who stole trade secrets. "Is there fire where there's smoke?"

Standing up to Beijing

Australia, Britain, Canada, Germany and Japan are all now looking closely at their telecoms-equipment supply chain, says Kate O'Keeffe in The Wall Street Journal. Australia and New Zealand have already restricted Huawei's involvement in their future 5G networks. Huawei has denied breaking US law, and the firm's reclusive founder, Ren Zhengfei, made a rare public appearance to allay fears, saying that the Chinese government had never asked it for data and he would "definitely" refuse if it did, reports the Financial Times.

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However, the firm's history will "always attract suspicion". Ren was an engineer in China's People's Liberation Army and an early Huawei contract was to build a communications system for the PLA when Beijing "mirroring today's situation" refused to trust America's Cisco to do so.

Other players in the telecoms industry aren't happy about all this, says Ben Woods in The Daily Telegraph. British telecoms companies are warning that barring Huawei from the 5G roll out would cost billions and delay it by up to 18 months. As a whole, Europe's carriers have "at least 20 billion reasons to love Huawei", says Liam Proud on Breaking Views.

That's a rough estimate of the market value in euros that they could lose down from €294bn today if Huawei is excluded from new contracts. That might do "little to deter hawkish politicians". Investors, however, have already watched the Thomsons Reuters Europe Telecommunications Services Index slide by two-fifths over the past year. "A Huawei ban would deprive the sector of a valuable crutch."

US wants shake-up in China trade talks

In a move intended to "smooth" talks, the Chinese government announced plans to rush anew foreign investment law through that will "formallyban forced' technology transfers and other illegal interference by government officials in the operations of foreign-invested enterprises".

More than a "few regulatory tweaks" are needed, says Michael Schuman in The Atlantic. Aside from wanting China to stop forcing US firms to disgorge their commercial secrets, Washington wants Beijing to cut back on the subsidies it "lavishes" on favoured industries and to widen access to China's lucrative domestic market to foreign companies. This requires a "shake-up of the entire relationship between state and business in China".

President Xi Jinping, for all his talk of free trade, has shown little inclination for such change. Indeed, since coming to power in 2012, a priority has been to strengthen Communist Party control. This means that a "truly comprehensive trade pact will be difficult, perhaps even impossible, to reach".

Emily Hohler

Emily has worked as a journalist for more than thirty years and was formerly Assistant Editor of MoneyWeek, which she helped launch in 2000. Prior to this, she was Deputy Features Editor of The Times and a Commissioning Editor for The Independent on Sunday and The Daily Telegraph. She has written for most of the national newspapers including The Times, the Daily and Sunday Telegraph, The Evening Standard and The Daily Mail, She interviewed celebrities weekly for The Sunday Telegraph and wrote a regular column for The Evening Standard. As Political Editor of MoneyWeek, Emily has covered subjects from Brexit to the Gaza war.

Aside from her writing, Emily trained as Nutritional Therapist following her son's diagnosis with Type 1 diabetes in 2011 and now works as a practitioner for Nature Doc, offering one-to-one consultations and running workshops in Oxfordshire.