Huawei ban: More than trade war, it's a fight for tech hegemony

May 24, 2019 17:44
The Trump administration's clampdown on Huawei is part of efforts to keep China's tech sector in check and prevent serious competition to the US, critics say. Photo: Reuters

Washington's decision to add Huawei to a prohibitive 'entities list', under which US firms are barred from supplying electronic components to the Chinese telecoms equipment giant, has shocked the tech world and thrown some supply chains into disarray.

Although the White House later agreed to postpone the ban for 90 days, its ultimate goal of crimping the mainland tech behemoth may not have changed at all.

US President Donald Trump has repeatedly claimed that he hopes to reach a lasting trade deal with China, but his saber-rattling and hostile moves against Beijing suggest that he is anything but sincere in his so-called “hope” for ending the trade war.

Chances are, he may eventually impose even more tariffs on Chinese goods.

That said, imposing tariffs is only the sideshow, as it has become crystal clear that what the US is truly attempting to do is to curb China’s scientific and technological development, particularly in the 5G field, which is where the real battlefield lies.

Given the sheer size of China’s economy, it may be able to sustain a long trade war, but there's no denying the fact that there are some fundamental technological weaknesses which Beijing has to overcome before it can truly prevail in this epic fight.

The ongoing conflict between the United States and China might be known as a trade war, but we all know that it is actually the struggle for global technological leadership, rather than redressing trade imbalances, that is taking the center-stage in this saga.

The rationale behind Washington’s moves is simple: since it can no longer place constraints on China through trade agreements alone at this stage, nor does it have a timetable for reopening talks with Beijing, the best way out is to directly come after Chinese tech companies and strangle them as quickly as possible.

Given this, we believe that after taking on Huawei and, possibly, drone maker DJI, the US will continue to blacklist more and more Chinese tech firms.

As Huawei chairman Ren Zhengfei has said, as far as the overall national strength is concerned, China is still lagging far behind the US.

While micro-enterprises and small and medium-sized firms and low-skilled workers in the mainland are likely to bear the brunt of shrinking exports, and will require a lot of policy support from Beijing, achieving self-reliance on a national level in developing core technologies would certainly take a lot more time.

Nevertheless, we believe as long as Beijing can continue to stay the course in carrying out economic reforms and opening up, promoting the viability of private businesses, and reducing control and allowing innovation, it will be able to ride out the storm successfully in the long run, despite obstacles in the short term.

This article appeared in the Hong Kong Economic Journal on May 22

Translation by Alan Lee

[Chinese version 中文版]

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Hong Kong Economic Journal