China warns big tech to defy Trump ban on sales to Huawei
SAN FRANCISCO — The Chinese government this past week summoned major tech companies from the United States and elsewhere to warn that they could face dire consequences if they cooperate with the Trump administration’s ban on sales of key American technology to Chinese companies, according to people familiar with the meetings.
Held Tuesday and Wednesday, the meetings came soon after Beijing’s announcement that it was assembling a list of “unreliable” companies and individuals. That list was widely seen as a way of hitting back at the Trump administration for its decision to cut off Huawei, the Chinese electronics giant, from sales of American technology. The United States has accused Huawei of stealing trade secrets and conducting surveillance on behalf of Beijing.
Details about the meetings, the latest move in two weeks of high-stakes economic brinkmanship between the United States and China, were shared by two people familiar with them, who asked not to be named because they were not authorized to discuss them and could face retribution. The companies summoned by Chinese officials included a number of the world’s most important semiconductor firms, as well as other tech giants.
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-US 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.
“This is now extremely delicate because the Trump administration, through its brinkmanship tactics, has destabilized the entire relationship, commercial and otherwise,” said Scott Kennedy, a senior adviser at the Washington-based Center for Strategic and International Studies who studies Chinese economic policy.
The meetings this week were led by China’s central economic planning agency, the National Development and Reform Commission, and attended by representatives from its Ministry of Commerce and Ministry of Industry and Information Technology, who addressed their remarks to a broad range of companies that export goods to China, according to the two people familiar with the gatherings.
The involvement of three government bodies suggested a high level of coordination and likely approval from the very top of China’s opaque leadership structure. The intervention seemed designed to rally support for Huawei, though the company was not specifically mentioned, the two people said.
“There is a strong perception in Beijing that the US 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 Paul Triolo, head of geotechnology at the consultancy Eurasia Group, adding that the spat had major political implications for Xi Jinping, China’s president and head of its ruling Communist Party.
“Mr. Xi and the party will be seen as unable to defend China’s economic future” if the confrontation with the United States does major damage to Huawei and throws off China’s rollout of the next generation of wireless technology, called 5G, Triolo added.
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.
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.
The Chinese officials appeared to have differing messages for the companies, depending on whether they were American or not, the people added.
To those from the United States, they warned that the Trump administration’s move to cut off Chinese companies from American technology had disrupted the global supply chain, adding that companies that followed the policy could face permanent consequences. The Chinese authorities also hinted that firms should use lobbying to push back against the government’s moves.
“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,” Kennedy said.
The Chinese agencies did not respond to requests for comment.
The Chinese officials told companies from outside the United States that as long as they kept up their current relationships and continued to supply Chinese companies normally, they would face no adverse consequences. They also stressed China’s commitment to open trade and its protections of intellectual property, according to the people familiar with the meetings.
The Trump administration’s ban on sales to Huawei was a blow to semiconductor companies that supply parts used in Huawei’s telecom gear. Several American companies slashed tens of millions of dollars from their quarterly revenue expectations. About 60 percent of all semiconductors sold are connected in some way to China’s supply chain, the consulting firm KPMG estimates.