Escalating the " Huawei " War !

China seems to be stepping up the pressure as the tariff war with the United States reaches a new crescendo but its latest move will certainly have trade repercussions in board rooms across the rest of the world.   Companies are being put in the position of having to publicly decide whether they support the United States - or China  ?

This seems to revolve around the Chinese communications giant Huawei and its exclusion from supplying parts to western telephone systems.  The world is rolling out the improved 5G system and it is feared that Huawei componentry will enable China to spy on traffic flowing through the system.  A Huawei ban in the United States is flowing to other countries and now a wide range of organizations connected with communications have cut ties with this Chinese technology giant. The New York based  Institute of Electrical and Electronic Engineers have refused to allow Huawei scientists to review journal publications and a similar stance has been taken by Google.

China has announced that it will establish a " blacklist " of " unreliable entities " around the world which would harm the interests of Chinese companies.  It is suggested that the Chinese Commerce Ministry will directly target foreign companies that refuse to do business with Huawei because of the American ban.   The world is being asked to take sides.   They will need to decide who they favour - America or China.

What has alarmed many countries was the Chinese response when a Huawei executive was taken off a plane making a stopover in Canada and served with an extradition order to the United States to face court on a civil action.  Two Canadian tourists on a private visit to China were taken into custody on a spying charge.  There is a growing fear that executives on this list of " unreliable " companies may have similar problems gaining exit after visits to China.

It is noticeable that executive travel to China has dropped to a mere trickle since the tariff war gained impetus.  It seems that media comment attributed to individuals that may have appeared in earlier publications is sufficient to create obstacles when business people plan to return from a China visit. This " unreliable " listing simply takes the uncertainty further.

It has always been assumed that the world's two greatest economies are so dependent on one another that they have to solve their trading problems short of war.  The fact that they are both nuclear armed makes war unthinkable, but there is a friction point in the South China sea which China claims as sovereign territory and which the rest of the world sees as an international trade route.  A clash between the two country's navies in the South China sea seems inevitable.

This Chinese initiative seems to take the economic rivalry into new territory.  Granting trade access to Huawei may now determine trade preferences on an arbitrary basis.  The world is in danger of splitting into two distinct trading blocks.  Just where this all ends up is an economists nightmare !