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China warns big tech of “dire consequences” of trade war

by on10 June 2019


Do not shift your supply chains out of China

China has formally warned big US tech companies of “dire consequences” if they shift their supply chains out of the country as part of Donald “Prince of Orange” Trump’s trade war.

The White House has banned US firms from doing business with tech giant Huawei over concerns it poses a national security risk and allegations of trade theft by adding it to a so-called “entity list” – which follows months of other efforts to exclude the firm.

China has raised the threat of retaliatory measures such as the creation of an “unreliable entities list” of companies it believes are acting in an anticompetitive manner. Huawei has argued that the national security and trade theft complaints are a pretext to prevent the company from becoming more powerful and to sabotage China’s efforts to rapidly roll out next-generation 5G technology.

According to the New York Times, the meetings lastweek involved China’s economic planning agency, the National Development and Reform Commission, as well as members of its Ministry of Commerce and Ministry of Industry and Information Technology. A specific list of attendees was not published, but the remarks were directed at a “broad range of companies that export goods to China”, including a “number of the world’s most important semiconductor firms, as well as other tech giants”.

The Chinese officials warned US firms not to move their supply chains outside of China and not to comply with the orders banning business ties with companies, as well as urged them to lobby against the Trump administration’s efforts to restrict trade:

The Chinese officials appeared to have differing messages for the companies, depending on whether they were American or not.

US companies were warned that the Trump administration’s move to cut off Chinese companies from American technology had disrupted the global supply chain, adding that companies that followed the policy could face permanent consequences. The Chinese authorities also hinted that firms should use lobbying to push back against the government’s moves.

Officials said failure to do so could lead to “permanent” problems for the companies involved, in the Times’ telling, with Huawei going unmentioned but obviously at the top of their minds.

The officials also told non-US firms that they would face no consequences as long as they maintained normal business relationships with their Chinese counterparts.

The prospect of permanent disruption of those supply chains could be disastrous, but it is unlikely that US firms would choose breaking the law over complying with the Chinese demands.

 

Last modified on 10 June 2019
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