MNI EXCLUSIVE: China Reaction To UK Huawei Move May Be Limited

--China Reprisals Against UK May Be Measured, Advisors Say

--Concern That China Could Damage Business Reputation

     BEIJING(MNI) - Any Chinese reprisals in response to the UK ban on Huawei's

5G technology may be limited and not necessarily immediate, Chinese policy

advisors told MNI, with one suggesting that Beijing needs to safeguard its

reputation as a reliable business partner.

     China must take some kind of "revenge", even if only verbally, according to

Shi Yinhong, a senior professor at the School of International Studies at Renmin

University. But officials will need to consider carefully before employing the

"symmetrical approach" taken in recent months in retaliation against other

countries, he said.

     The UK moved Tuesday to exclude Huawei from its 5G telecom network from

2021 and ordered local operators to remove existing Huawei 5G equipment before

2027.

     Urging the UK to reverse its decision, China's Ministry of Commerce said on

Thursday that the country is "making an assessment and will take necessary

measures to resolutely defend the legitimate rights of Chinese enterprises."

     One advisor noted the conflicting pressures the UK was facing with its 5G

infrastructure, between the commercial opportunities offered by Huawei and

growing mistrust between China and the West.

     There is a "politicisation of everything" including the coronavirus

pandemic, said Zhang Yansheng, chief research fellow at the China Center for

International Economic Exchange.

     --EXTENSION OF US-CHINA TRADE WAR

     Given this situation, China may not retaliate immediately and further

inflame the situation, but take a longer-term approach, said Zhang.

     His view was echoed by Mei Xinyu, a senior researcher at the Chinese

Academy of International Trade and Economic Cooperation affiliated with MOFCOM.

     "This is an extension of the China-U.S. trade war," he said, arguing that

the U.S. is damaging its own business reputation by suppressing Huawei, as it

sends the message that other companies around the world could also face

sanctions in the future.

     According to Mei, China should change its strategy, emphasising its

credibility as a reliable supplier and not take retaliatory action just to prove

its strength.

     "If Beijing takes any countermove, it should not dampen China's business

reputation," Mei emphasised.

     Some UK telecom operators could use the rest of this year to front-load

orders of Huawei 5G equipment, even pre-ordering for delivery in later years,

effectively finding ways of "getting around the ban," according to Mei.

     He also noted that the UK move did not impact the firm's ability to build

consumer retailing and enterprise services in the country, and that, by 2027,

China will be advancing in the development of 6G.

     Shi pointed to domestic factors facing the UK government, in addition to

pressure from Washington, with a push by legislators for action on Huawei

amplified by concerns over China's move to extend its national security law to

Hong Kong a former British colony.

     "With the implementation of the national security law in Hong Kong, there

is quite a chance that relations will deteriorate further," said Shi, expressing

concern that investment flows between the two countries could fall.

     Recent moves suggest the UK and the U.S. are prepared to take economic hits

to stop China gaining strategic advantages, Shi said, noting that in recent

years Beijing policy makers calculated that the size of their economy would

deter other countries from risking access to the Chinese market.

     "It is a chance for China to rethink its recent tough foreign policy and

make appropriate adjustments," said Shi, adding that "beating every critic with

the same weight" could exhaust China and lead to isolation on the world stage.

--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com

[TOPICS: M$A$$$,M$B$$$,M$E$$$,M$Q$$$,M$U$$$,MC$$$$,MT$$$$,MX$$$$,MGB$$$,MGQ$$$]