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China Threatens ‘Dire Consequences’ If Tech Giants Comply With Trump Ban

Courtesy of ZeroHedge. View original post here.

Beijing put big tech on notice last week, threatening 'dire consequences' if companies such as Microsoft, Dell and Samsung comply with the Trump administration's ban on sales of key American technology to Chinese companies, according to the New York Times. Any companies which cooperate with the new policy 'could face permanent consequences,' according to the Times. Chinese authorities also suggested using DC lobbyists to resist the government's moves. 

China - which is already ditching Microsoft Windows for military applications - held a flurry of meetings on Tuesday and Wednesday after tech firms for discussions amid the backdrop of Beijing's planned blacklist of blacklisting of US firms on an "unreliable entities list." 

Also participating in meetings were semiconductor companies Arm of Britain and SK Hynix of South Korea, according to the report, which cites a KPMG estimate that around 60% of all semiconductors sold are connected to China's supply chain, so maybe by that new computer sooner than later. 

The breakneck unraveling of the world’s most important trade relationship has left companies and governments around the world scrambling. While the dispute had already been nettlesome for Chinese-U.S. relations, the sudden ban on Huawei last month caught many by surprise, raising the stakes by striking at the heart of China’s long-term technological ambitions.

Now, each of the two superpowers appears to be crafting new economic weapons to aim at the other. What was once a fraught, but deeply enmeshed, trade relationship is threatening to break apart almost entirely, raising the specter of a new geopolitical reality in which the world’s two superpowers would compete for economic influence and try to freeze each other out of key technologies and resources. -New York Times

"This is now extremely delicate because the Trump administration, through its brinkmanship tactics, has destabilized the entire relationship, commercial and otherwise," according to China expert Scott Kennedy – senior adviser at the Washington-based Center for Strategic and International Studies who studies Chinese economic policy.

More broadly, the warnings also seemed to be an attempt to forestall a fast breakup of the sophisticated supply chains that connect China’s economy to the rest of the world. Production of a vast array of electronic components and chemicals, along with the assembly of electronic products, makes the country a cornerstone of the operations of many of the world’s largest multinational companies. -New York Times

"The Chinese government has regularly resorted to jawboning multinationals to try to keep them in line when there are disputes between China and others that could lead these companies to reduce their business in China." 

For example, in 2015 Xi dropped by Seattle before heading to meet with President Obama. While there, he had a chat with Amazon executives and Chinese tech executive in order to woo them on the prospect of future business, while the Obama administration was reportedly trying to push back against China's anticompetitive trade practices

That said, China is far less likely to succeed this time around, according to Kennedy, who says that "American companies aren’t going to violate American laws, especially in such a high-profile context where their actions are scrutinized." 

"The companies are between a rock and a hard place, but that hard place will win out."

Three Chinese government bodies are involved in the recent discussions; the National Development and Reform Commission (China’s central economic planning agency), the Ministry of Commerce and the Ministry of Industry and Information Technology. The Times posits that the fact that the three are all involved suggests the meetings came from the top-down in an attempt to rally support for Huawei – which was not specifically named. 

"There is a strong perception in Beijing that the U.S. government is intent on blunting China’s technology rise, and that if this process is not slowed or stopped, the future of China’s entire digital economy is at risk," said Eurasia Group head of geotechnology, Paul Triolo, adding "Mr. Xi and the party will be seen as unable to defend China’s economic future" it Huawei's 5G rollout is derailed by the Trump administration. 

As the trade relationship between the United States and China has broken down, fears have risen in China that major companies will seek to move production elsewhere to avoid longer-term risks. In the meetings this week, Chinese officials explicitly warned companies that any move to pull production from China that seemed to go beyond standard diversification for security purposes could lead to punishment, according to the two people. -New York Times

Russia, meanwhile, just announced that it would build a 5G network over the next year. The deal will see “the development of 5G technologies and the pilot launch of fifth-generation networks in 2019-2020." MTS said in a statement on Wednesday, according to the Guardian

During Chinese President Xi Jinping's recent visit to Russia, Russian President Vladimir Putin repeatedly called Xi a "close friend," noting that the two had met nearly 30 times in six years. 


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