Moving to limit Huawei in the United States unlikely to affect Alibaba, Tencent

President Donald Trump speaks at the 38th Annual National Peace Officers Memorial Service on Capitol Hill, Washington, May 15, 2019.

Carlos Barria | Reuters

Chinese internet giants such as Alibaba and Tencent are unlikely to be targeted in the same way as telecommunications giant Huawei is among the growing trading tensions between Beijing and Washington, CNBC analyst told Thursday.

First, the deterioration of US-China relations is likely to damage Chinese companies competing with US companies, according to Gil Davur, research director at DA Davidson.

Huawei's focus seems to be motivated by concerns about secrecy and intellectual property rights, but Huawei is also a major competitor for many US telecoms companies, says Luria to CNBC.

"Companies that are domestic Chinese focused like Alibaba and Tencent are less likely to be directly targeted," he said, adding that previous US sales are negligible and outgoing Jack Jack has done a "masterful job with To position themselves as friendly to the United States "

Nevertheless, he said that these companies would not escape the secondary effects of a weakening Chinese economy, which was partly squeezed by increased US rates.

& # 39; Long & # 39; implications

] US President Donald Trump said on Wednesday a national emergency over US technology threats by signing an executive order that allows officials to block transactions involving information or communication technologies that "pose an unacceptable risk" to US national security.

While Alibaba, Tencent, and even Baidu, can be spared from strict restrictions on doing business in the United States, other Chinese information technology companies may potentially suffer.

"The scope of the order is potentially far-reaching and can affect many mainland Chinese telecommunications equipment manufacturers, as well as communications service providers," said Rajiv Biswas, Asia Pacific chief economist at global data provider IHS Markit, CNBC. [1[ads1]9659012] <! – ->

The recent escalation of technology war between the world's two largest economies was reflected in the May 10 US Federal Communications Commission decision to reject China Mobile's application to provide US communications services for national security reasons, Sa Biswas .

Following the executive order, the US Department of Commerce said it was adding Huawei and its affiliates to the Bureau of Industry and Security (BIS) Entity List, which would make it harder for the Chinese telecommunications giant to do business with US companies.

Wednesday's move from the Trump administration is a "serious escalation with China that at least closes the prospect of continued trade negotiations in doubt", Paul Triolo, geotechnology practice leader of political consulting Eurasia Group, wrote in a note. "Unless it is handled carefully, this situation will likely place US and Chinese companies at new risk."

Huawei's network of customers worldwide can potentially be hit if the United States fully implements its moves against the Chinese firm because the company would be "unable to upgrade software and perform routine maintenance and hardware replacement" as it would no longer have access to US suppliers, according to Triolo.

Biswas agreed that the course of events dictates uncertainty about "long-range" implications for non-Chinese communications companies using parts made by Huawei and other Chinese network providers.

"President Trump's executive order may also have wider geopolitical implications for key US allies, such as the UK and other Western European countries considering allowing the use of Chinese communications equipment in their 5G rollouts," he added.

For its part, the United States is trying to convince allies to ban Huawei from participating in their plans for next-generation high-speed mobile networks, known as 5G. Washington argues that Huawei's technology risks enabling Chinese espionage through the high-speed networks, but Huawei says security issues are unfounded. So far, European countries have resisted such talks from Washington, but further restrictions could persuade international carriers to "immediately begin contingency plans," Triolo said.

While the expectation is that Beijing will oppose any countermeasures against US communications companies to show a tough negotiating position, Biswas said the broader "US and China technology is likely to be far more extensive than the commercial war, as it focuses on US security issues that are not can be easily solved. "

– CNBCs Tucker Higgins contributed to this report.

Correction: This article has been updated to reflect that Jack Ma is Alibaba's outgoing chairman.

Source link

Back to top button