US sanctions on China’s Huawei spell trouble for Shenzhen economy

Huawei’s success has been a major factor in Shenzhen’s transformation from a fishing village to an international tech hub

Analysts say US sanctions on the company will be a blow not just to the city, but the broader Chinese economy

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For Shenzhen’s economy, which last year surpassed Hong Kong’s in size, the loss of Huawei would be devastating. Illustration: Lau Ka-kuen

Published: 7:00am, 31 Aug 2020Updated: 6:33pm, 31 Aug 2020

When Ren Zhengfei, a former officer in the People’s Liberation Army, established Huawei in the Shenzhen special economic zone in 1987, the boomtown was still struggling to gain a meaningful spot in China’s economic landscape. It was dwarfed not only by neighbouring Hong Kong, but by other mainland Chinese cities.

Few could have imagined then that four decades later the one-time fishing village would emerge as the poster child for Chinese economic development. Fewer still would have predicted that Huawei, now a key part of the city’s economy, would become a global telecommunications equipment giant that Washington sees as a security threat and potential challenger to the US-led world order.

However, as Shenzhen celebrates its 40th anniversary as one of China’s four special economic zones, it is unclear whether the city of 13 million can keep shining as the country heads into a turbulent new era.

As the United States adopts a more confrontational approach against China, the city’s easy access to foreign capital, technology and markets – which was so important to its rise – is crumbling.

For Huawei, its luck is running out as Washington has relentlessly tried to prevent its involvement in next generation 5G communications networks around the globe while restricting the company’s access to vital American tech components.

A new US government order will effectively ban Huawei and its affiliates from buying semiconductors made with US equipment or software from September, a rule that is seen by some analysts as a death sentence for the company.

A downturn in Huawei’s business, or its complete demise, would not only deal a blow to Shenzhen’s economy, but undermine broad confidence in China’s technological and economic strength, which Beijing is trying to promote through a high-profile celebration of the city’s 40th anniversary.

There is no other company in China that can replace Huawei to lead the country’s tech and globalisation. If Huawei can’t withstand US sanctions, who can?

Liu Kaiming