Despite the U.S.-China trade deal signed last week, the two countries appear headed for more confrontation, especially over high tech.
One of China's highest-profile tech executives, Huawei founder Ren Zhengfei, told the World Economic Forum (WEF) in Davos on Tuesday that he expects the U.S. to escalate its crackdown on Huawei. But he vowed that the world leader in building 5G networks is prepared to withstand further restrictions on its foreign markets and suppliers.
Analysts say his remarks suggest that the Chinese may be ready to directly confront Americans in the global competition for high-tech advancements, which are seen at the core of trade frictions.
"He [Ren] is fully aware that the tech competition between the U.S. and China will escalate. The U.S. has no plan to cut China some slack simply because they have just signed the Phase 1 deal. Both are now entering the battleground of their tech disputes," said Lin Tsung-nan, professor of electrical engineering at National Taiwan University in Taipei.
Beijing's critics say Huawei acts as a virtual arm of the Chinese government, benefitting from favorable policies and funding that have sped its expansion around the world. They warn countries that allow Huawei to build their new wireless data networks that they are giving Beijing's authoritarian government enormous influence over their security. Instead, U.S. officials argue, countries should trust American, European, Korean and other companies.
Provisions in the U.S.-China Phase 1 trade agreement aim to root out Chinese state policies that encourage intellectual property theft and forced technology transfers. However the deal leaves open questions about enforcement. Many, including Huawei chief Ren, remain skeptical that the countries will reach an agreement on such issues.
Speaking to the audience in Davos, Ren said he believes the United States will escalate its crackdown on Huawei, but that the impact will be minimal as the company has adapted to restrictions imposed since last year.
Huawei and its 46 affiliates were targeted in 2019 after the U.S. government concluded that the company has long engaged in activities contrary to U.S. national security. Ren's daughter, Huawei Chief Financial Officer Meng Wanzhou, is fighting an extradition case in Canada stemming from allegations she committed fraud by lying about Huawei's relationship with an affiliate doing business in Iran.
Analysts have mixed views about the long-term impact of the blacklisting on Huawei. Ren said he is optimistic because Huawei has invested hundreds of billions of dollars in its own core technology over the past few years, including chips and software. Last year, the company released its own operating system, called HarmonyOS, though, so far, it hasn't been installed in any of the company's smartphones.
It has also released a flagship smartphone, the Mate 30, without licensed Google Android software. Sales in China have been in line with expectations, although its global sales target of 20 million units is yet to be met.
But Professor Lin said the ultimate challenge facing Huawei lies ahead.
"The real test will come after the U.S. completely cuts off [Huawei's] access to American technology and relevant exchanges. Huawei will then have to prove if its products, manufactured based on its so-called plan B, will continue to be competitive in overseas markets," the professor said.
After having restricted Huawei's access to American technology, the United States is reportedly looking to introduce a stricter rule that could block Huawei's access to an increased number of foreign-made goods.
Media reports said the United States plans, among other things, to force Taiwan Semiconductor Manufacturing Co (TSMC), the world's largest contract chipmaker, to limit its supplies of 14 nanometer chips to Huawei.
Washington is also lobbying other countries, such as Britain and Germany, to bar Huawei — which it accuses of spying for the Chinese government — from the buildup of their next-generation mobile networks known as 5G.
Whether U.S. allies will be persuaded to block Huawei from building their 5G networks remains uncertain, but Lin said the stakes in the standoff are clear.
"If China succeeds in using Huawei to dominate [the global 5G network], the free world will gradually fall into China's high-tech iron curtain. That's why the U.S. has turned aggressive in blocking Huawei, which has strived after having had copied code from Cisco's [router software] technology a decade ago," Lin said.