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Free AccessMNI EXCLUSIVE: China To Wait On Huawei Moves, May Target Cisco
--China To Wait To See Whether US Implements Latest Moves
--Could Target Cisco, But Probably Not Apple
By Wanxia Lin and Archie Zhang
BEIJING (MNI) - China will wait to see whether intensified U.S. controls on
chip purchases by tech-giant Huawei go into effect in August before retaliating,
but would respond quickly, possibly by adding U.S. companies including Cisco to
a list of "non-reliable" entities or by blocking pending deals in China, policy
advisors and sources close to the government told MNI.
Counter-measures could come in 24 hours if the U.S. does implement the
restrictions, said Mei Xinyu, researcher at Chinese Academy of International
Trade and Economic Cooperation, affiliated with the Ministry of Commerce,
although he added that China would only act if forced to do so.
Any inclusions in the unreliable entities list would be "highly selective",
possibly targeting companies with links to politicians seen as anti-Chinese or
with a significant presence in key electoral districts, Mei said.
Cisco may be one Chinese target, according to both Mei, who said the
company had been "very active" in containing Huawei, and also according to a
source close to the Chinese government. Lv Xiang, a research fellow of the
Institute of American Studies at the Chinese Academy of Social Sciences, said
China would retaliate if pushed.
--CISCO DEAL
California-based Cisco is waiting for the green light from a Chinese
anti-trust review of its acquisition of optical equipment maker Acacia, a deal
originally announced in July 2019.
"Cisco has submitted the applications twice to the (Chinese)
administration. I think the government is delaying the review process in
preparation for tense moments like this," the source said.
The Global Times, a Chinese Communist Party tabloid, has reported that
Apple and Qualcomm could also be targeted, but both Mei and the source close to
the government said that such a move could be counter-productive as the
companies have such significant operations in China. Qualcomm also supplies
chips to other Chinese mobile phone makers such as Xiaomi, noted a person from
the technology industry, who asked for anonymity due to the sensitivity of the
issue.
Chinese companies have stepped up efforts to source key hardware from South
Korea, Japan and Europe, the source close to the government said, adding that
U.S. pressure contributed to a Dutch decision to block the sale of chipmaking
technology to China by ASML. China also has high hopes for Samsung, as South
Korea's relations with China have improved since President Moon Jae-in came to
office in 2017.
Chinese media reported that Samsung Electronics Vice Chairman Lee Jae-yong
recently visited a factory expansion in Xi'an, western China, in the most
prominent business arrival in the country since borders were largely closed in
response to the coronavirus pandemic.
The U.S. Commerce Department said on Friday it would require foreign
semiconductor manufacturers which use American chipmaking technology to obtain a
U.S. government licence before shipping chips to Huawei. While there is a
120-day grace period, the source close to the Chinese government said that the
U.S. would not renew all licences.
The move comes as the Sino-U.S. relationship is at its lowest ebb since
1989, according to officials, although the source said that a Phase One trade
deal signed in January should survive.
Reprisals against the U.S. moves will inevitably impact China's own
economy, said Wang Haifeng, director of International Trade and Investment at
the Chinese Academy of Macroeconomic Research, run by the National Development
and Reform Commission. But Wang said Huawei should be able to withstand the U.S.
actions, and had been preparing to lose access to U.S. technology for more than
two years.
--MNI Beijing Bureau; +86 (10) 8532-5998; email: wanxia.lin@marketnews.com
--MNI Beijing Bureau; +86 (10) 8532-5998; email: archie.zhang@marketnews.com
--MNI London Bureau; +44 203 865 3829; email: jason.webb@marketnews.com
[TOPICS: M$A$$$,M$Q$$$,M$U$$$,MI$$$$,MT$$$$,MX$$$$,MGQ$$$,MGU$$$]
To read the full story
Sign up now for free trial access to this content.
Please enter your details below.
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.