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US president Barack Obama has criticised Beijing's far-reaching anti-terrorism laws, which will affect US tech firms. Photo: Reuters

Analysis | Technology leaders say ‘no comment’ on US-China relations amid trade war fears

US-China relations have quickly become the last thing many business leaders on both sides are willing to discuss publicly, following US president Barack Obama's sharp criticism of Beijing's new rules regarding American tech firms.

Barack Obama

US-China relations have quickly become the last thing many business leaders on both sides are willing to discuss publicly, following US president Barack Obama's sharp criticism of Beijing's new rules regarding American tech firms. 

Obama’s criticism of Beijing’s plan to require technology companies to hand over encryption keys and install security "backdoors" in their systems to give Chinese authorities surveillance access comes soon after it was announced Chinese President Xi Jinping will make his first planned state visit to the United States.

"This is something I've raised directly with President Xi," Obama said in an interview with Reuters earlier this week. "We have made it very clear this is something they are going to have to change if they are to do business with [us]."

On the record, big technology companies from both the US and China including Microsoft and China’s Huawei and ZTE have all declined to comment on Obama’s vociferous and rapid reaction to Beijing’s efforts to strengthen its control of cyber security – a key part of China’s new counterterrorism laws.

Privately, industry executives are increasingly worried that worsening US-China relations could damage business, particularly in the tech sphere. Some feared that the spat could signal a coming technology trade war between the two countries.

“We’re all businessmen, so we don’t want to get involved into politics,” said an executive with a major Chinese telecommunications equipment maker.

“I bet nobody [in the technology business] wants to comment on this as we are all waiting to see how Washington and Beijing can find a solution,” said the executive who declined to be named due to the political sensitivity of the matter.

“If not, then there will be no winner. Beijing can take actions. So can Washington.”

Mainland Chinese companies have invested roughly US$40 billion in the US since the start of the 21st century, according to a report published last week by the US-China Economic Security and Review Commission. Real estate and information technology were the top-two US sectors for mainland investments last year.

National security has long been an issue in all aspects of the US-China relationship, from politics to business, with commentators in both countries warning that national security could be used as an easy excuse for Washington to turn down Chinese investments when the relationship is strained.

“A Chinese firm is subject to a security review in the US for buying US pork. We have no idea why that would be subject to security review,” Hua Chunying, China’s Foreign Ministry spokeswoman, said on Tuesday, apparently referring to Chinese meat process Shuanghui’s record-breaking US$4.7 billion acquisition of Smithfield in 2013. The deal was eventually closed after a long and bureaucratic approving process.

Beijing has also argued about the need to tighten its cyber security measures in the wake of former NSA contractor Edward Snowden’s revelations of sophisticated US spying techniques.

This week in Barcelona, Spain, where the annual Mobile World Congress is held this week, few participants were willing to discuss US-China relations. In Beijing, on the sidelines of China’s annual political summit this week, delegates were equally tight-lipped.

Tencent’s founder and chief executive Pony Ma Huateng may be an exception. He publicly defended Beijing’s decision to tighten control of cyber security related matters.

"Every country faces the same problem nowadays. It's public interest against personal privacy, and we have to find out where to draw the line. The line shifts in different situations. When someone appears dangerous, perhaps we should give weight to the maximization of public interest. In the rest of the time, we should consistently protect personal privacy,” Ma told reporters on Wednesday.

"We can now use software to pick out every bit of detail in a way that helps solve anti-terrorism issues and meanwhile disturbs users' privacy as little as possible. Experience tells us there is a lot of room to navigate in this area," he said. 

China's far-reaching counterterrorism law is not the only salvo the government has recently aimed at US tech firms. It was announced this month that the government had dropped Apple and Cisco Systems from its approved state procurement lists
Legal experts have said complex World Trade Organization (WTO) regulations would make it very difficult for the US government and major technology companies to take legal action against Beijing's de facto “black list” for state purchases of certain foreign brands in what many analysts said was a response to revelations of widespread Western cyber surveillance.

“Political pressure may be the only thing that President Obama can do with Beijing in the case of new trouble for technology business on both sides,” said an analyst with a Chinese government think-tank.

“The US still needs to rely on China for a lot of things such as regional matters about Russia and North Korea so hopefully Washington can calm down and ease the tension (on technology trouble) with China before President Xi visits,” he added.

When Xi's Septembr visit was announced last month, observers said the trip was an attempt by both nations to take stock of their relationship and prevent it from further deteriorating during Obama’s remaining term in office.

Additional reporting by Danny Lee in Barcelona

 

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