China Briefing | Why China shouldn’t retaliate against US firms after Huawei ban

The trade war raging between China and the United States is entering increasingly dangerous territory, with Washington banning Huawei from buying American-made software and semiconductors, and threatening to blacklist more of the mainland’s top technology firms. Though the US has valid reasons to try level the trade imbalance with China, Washington banning Huawei and other Chinese firms from using American parts and software – all in the name of national security – points to a sinister effort to halt China’s technological growth. This is dangerous because it could further inflame already fraught bilateral tensions between the world’s two biggest economies, and may even lead to a real cold war. On one side, analysts have suggested US President Donald Trump is trying to use the threat of banning Huawei, and other Chinese tech companies, to extract more concessions from Beijing in trade talks – like he did last year with Chinese telecom company ZTE. My way or the Huawei: how US ultimatum fell flat in Southeast Asia Meanwhile, Chinese state media is ratcheting up its defiant rhetoric against the US, but curiously, top Chinese leaders are keeping largely silent on the issue. No matter the reaction or the intention, the Trump administration’s latest threat only adds more pressure on Beijing to consider countermeasures against US businesses. Earlier this week, Chinese President Xi Jinping took a tour of Jiangxi province, his first domestic trip since the trade tensions with the US escalated two weeks ago. Though Xi didn’t explicitly mention tensions with the US, foreign media quickly highlighted the president’s visit to a major rare earth minerals company and his remarks about the country having to “start all over again”. A trade deal is still possible. But it’ll take a Xi-Trump one-on-one China is the world’s biggest producer of rare earth minerals, which are critical to high-end manufacturing products, such as semiconductors. As such, some analysts interpreted Xi’s visit and comments as a subtle but firm suggestion that if necessary, China could dig in for a protracted trade war and equally hurt US hi-tech manufacturing. Others said Beijing would simply wait out Trump’s presidency, considering he is already facing strong political headwinds at home and rising calls for his impeachment. But while Beijing is undoubtedly preparing for a worst-case scenario, clearly it remains the preferred strategy to defuse tensions with the US. So far, senior officials have refrained from being confrontational in public. For example, Chinese ambassador to Washington Cui Tiankai on Tuesday told Fox News that Beijing was still open to talks. “China remains ready to continue our talks with our American colleagues to reach a conclusion. Our door is still open,” he said. It is also interesting to note that while official media has ramped up attacks on Washington’s “bullying” and “extreme pressure”, it has stopped short of criticising Trump directly and personally. Sure, it has interviewed Chinese and foreign analysts for comments to blast the US, but it has refrained from stirring up nationalistic fervour among ordinary Chinese. China remains ready to continue our talks with our American colleagues to reach a conclusion. Our door is still open Cui Tiankai But in recent days, concerns have surfaced about Beijing trying to mobilise nationalistic sentiment via other means, such as a China Central Television film channel, which unexpectedly dropped regular programming to air four anti-American films and documentaries. Ren Zhengfei, Huawei’s founder and CEO, cautioned against fanning nationalist sentiment even after his company was added to the US blacklist – preventing it from buying American-made software and products without US government approval. Ren said Huawei was “fully prepared” for a clash with the US because Huawei had become a global tech giant. He dismissed concerns that the US ban would have a devastating effect on the company’s operations and profits. Even though American companies like Google are reportedly starting to comply with the US regulations, stopping cooperation and supply of services to Huawei, Ren said the American companies were not to blame. In fact, he expressed appreciation towards American companies for their contribution to Huawei’s development and warned against fanning nationalist sentiment. If Trump kills off Huawei, do Asia’s 5G dreams die? Ren said supporting Huawei did not necessarily mean buying a Huawei smartphone. Buying or not buying a Huawei product was just a commercial decision, he added, and should not be linked to politics or patriotism. And he was right to say China’s future lies in “opening up”, because doing so would win more friends for the country. So for now, China would be wise to continue taking the moral high road and resist following the US by retaliating against American firms. With Xi and Trump expected to meet at the G20 summit in Japan next month, there is also a good chance they may strike a deal to ease tensions. ■ Wang Xiangwei is the former editor-in-chief of the South China Morning Post. He is now based in Beijing as editorial adviser to the paper