China study­ing tech firms’ ex­po­sure to U.S. sup­pli­ers

The ef­fort comes ahead of the re­lease of a re­tal­ia­tory black­list

The Standard (St. Catharines) - - Business - YOKO KUBOTA

BEI­JING—China is study­ing tech­nol­ogy com­pa­nies’ re­liance on Amer­i­can sup­pli­ers, ac­cord­ing to people fa­mil­iar with the mat­ter, an ap­par­ent at­tempt to as­sess their abil­ity to with­stand fur­ther trade-war shocks, even as Bei­jing pre­pares to roll out a re­tal­ia­tory black­list of for­eign busi­nesses.

The in­ter­a­gency ef­fort, which in­volves of­fi­cials can­vass­ing do­mes­tic com­pa­nies, has taken place over the past few months as the trade war has in­ten­si­fied.

A Chi­nese of­fi­cial last week re­it­er­ated plans to re­lease “in the near fu­ture” an “un­re­li­able en­tity list” of for­eign busi­nesses and in­di­vid­u­als that would face re­stric­tions in their deal­ings with Chi­nese coun­ter­parts. The list, which was first floated by Bei­jing in May, is an ap­par­ent planned re­sponse to Wash­ing­ton’s at­tempts to shut out telecom­mu­ni­ca­tions gi­ant Huawei Tech­nolo­gies Co.

The sur­vey of do­mes­tic com­pa­nies is part of China’s longert­erm goal of wean­ing it­self off de­pen­dence on U.S. tech­nol­ogy as a di­vide widens be­tween the world’s two largest economies. Chi­nese com­pa­nies have long re­lied on Amer­i­can tech­nol­ogy and sup­pli­ers for its semi­con­duc­tors, modems and jet en­gines.

The sur­vey also high­lights the care Bei­jing of­fi­cials are tak­ing to en­sure lo­cal play­ers aren’t hurt as they at­tempt to match the U.S. in the trade dis­pute with coun­ter­mea­sures—a re­flec­tion of fragility in the Chi­nese eco­nomic out­look.

Of­fi­cials from China’s Na­tional De­vel­op­ment and Re­form Com­mis­sion, Min­istry of In­dus­try and In­for­ma­tion Tech­nol­ogy and Min­istry of Com­merce have been reach­ing out to cer­tain do­mes­tic busi­nesses to ask about sup­ply­chain struc­ture and ex­po­sure to U.S. com­pa­nies, ac­cord­ing to the people fa­mil­iar with the mat­ter.

Those con­tacted by the Chi­nese govern­ment in­clude some of the coun­try’s best-known smart­phone mak­ers—Xiaomi Corp., Oppo and Vivo, th­ese people said.

Xiaomi, Oppo and Vivo de­clined to comment. The three govern­ment agen­cies didn’t re­spond to re­quests for comment.

China’s at­tempt to gain more tech­no­log­i­cal in­de­pen­dence from the U.S. pre­dates the trade dis­pute. But it gained fresh im­pe­tus af­ter Wash­ing­ton last year barred Amer­i­can com­pa­nies from do­ing busi­ness with Chi­nese tele­com gear maker ZTE Corp. and chip maker Fu­jian Jin­hua In­te­grated Cir­cuit Co. ZTE was banned as pun­ish­ment for vi­o­lat­ing terms of an ear­lier deal to set­tle al­le­ga­tions that it en­gaged in sanc­tions-bust­ing sales to Iran and North Korea, while Jin­hua was ac­cused of steal­ing tech­nol­ogy secrets, a claim it had de­nied. The ZTE ban has since been lifted, but ten­sions were re­newed af­ter the U.S. black­listed Huawei this year.

On Thurs­day, a spokesman for China’s Min­istry of Com­merce urged the U.S. to lift its sanc­tions against Huawei. “If some­one wants to force­fully de­cou­ple the economies of the two coun­tries, the con­se­quences will surely be harm­ful to them­selves and oth­ers,” spokesman Gao Feng said in a brief­ing. Ten­sions have see­sawed re­cently. On Fri­day last week, Pres­i­dent Trump urged U.S. com­pa­nies to find al­ter­na­tives to do­ing busi­ness in China as both coun­tries ramped up tar­iff threats. By Mon­day, he sounded a more op­ti­mistic note about trade talks: “I think they want to make a deal,” he said.

Mean­time, in Bei­jing, lead­ers this week have been re­new­ing their em­pha­sis on pro­tect­ing

China’s sup­ply chain, a point made at sep­a­rate events by Pres­i­dent Xi Jin­ping and Vice Pre­mier Liu He, China’s point man on trade talks, ac­cord­ing to state me­dia.

More broadly, se­nior Chi­nese lead­ers and lo­cal cadres have stepped up pub­lic in­spec­tion of sites linked to sci­en­tific de­vel­op­ment. In June, Mr. Liu vis­ited the Chi­nese Acad­emy of Sciences, where he called for stronger core tech­nol­ogy re­search. Days be­fore Mr. Liu’s visit, Vice Pre­mier Sun Chun­lan toured sites in Shang­hai linked to in­te­grated cir­cuits, say­ing sel­f­re­liance was crit­i­cal to suc­ceed­ing in an en­vi­ron­ment fraught with un­cer­tainty.

Some Chi­nese com­pa­nies have al­ready moved to cut U.S. tech­nol­ogy out of their sup­ply chains. Cisco Sys­tems Inc. Chief Ex­ec­u­tive Chuck Rob­bins said ear­lier this month that the com­pany, which in the past has sold prod­ucts to China’s large car­ri­ers and state-owned en­ter­prises, was no longer be­ing asked to par­tic­i­pate in bids.

When China’s Min­istry of Com­merce first an­nounced the un­re­li­able en­tity list in May, Bei­jing of­fi­cials said they would tar­get for­eign en­ti­ties that vi­o­late mar­ket rules and con­tracts, that dis­rupt sup­plies to Chi­nese com­pa­nies for “non­com­mer­cial pur­poses” or that other­wise hurt Chi­nese na­tional in­ter­ests. It has yet to name any spe­cific com­pa­nies or in­di­vid­u­als, or spell out what the con­se­quences would be.

Nam­ing spe­cific for­eign busi­nesses to a list of un­re­li­able en­ti­ties would add more un­cer­tainty to the trade dis­pute, while de­ter­ring for­eign in­vest­ment, said Jeff Moon, a for­mer as­sis­tant U.S. trade rep­re­sen­ta­tive for China.

“Black­list­ing for­eign com­pa­nies in China would fur­ther un­der­mine busi­ness con­fi­dence among in­vestors cur­rently in the China mar­ket, en­cour­age firms to re­lo­cate out of China and dis­cour­age new in­vest­ment in China,” Mr. Moon said.

HEC­TOR RE­TA­MAL AFP/GETTY IMAGES FILE PHOTO

A Chi­nese of­fi­cial last week re­it­er­ated plans to re­lease an “un­re­li­able en­tity list” of for­eign busi­nesses and in­di­vid­u­als that would face re­stric­tions in their deal­ings with Chi­nese coun­ter­parts. The list is an ap­par­ent planned re­sponse to Wash­ing­ton’s at­tempts to shut out Huawei.

Newspapers in English

Newspapers from Canada

© PressReader. All rights reserved.