Value context and insight. lkm@koreatimes.co.kr
China may step up retaliation against US over Huawei stance: Moody's
By Lee Kyung-min
By Lee Kyung-min
China may increase retaliatory measures against the United States in response to the Trump administration's hostile position on Huawei Technologies, Moody's Analytics economist Shahana Mukherjee said Friday.
The view came as the drawn-out feud between the U.S. and China ― which began as a trade conflict and is now spilling over into finance and technology ― recently showed signs of further deterioration, indicated by the U.S. Congress considering a new law under which Chinese companies could be delisted from American exchanges.
This came less than a month after U.S. President Donald Trump's administration told a federal pension fund to halt investments in Chinese stocks.
Mukherjee said China's potential retaliation ― by reviving the idea of launching its own “non-reliable entity list” as a response to the U.S.'s stance on Chinese tech titan Huawei Technologies ― could be stepped up if the standoff between the two economic giants continues.
“China's communication via the stated-owned Global Times is likely to serve as a warning to other markets and suggest that such steps could be extended to other countries, potentially further undermining bilateral trade flows,” she said.
Moody's Analytics economist Shahana Mukherjee
The U.S. imposed new sanctions on Huawei in April to cut it off from global chip suppliers, which Moody's analytics said significantly hurt its research and development (R&D) investments and increased the uncertainties facing the tech giant.
Further risk stems from the review launched by the United Kingdom's cyber security center, which Moody's said could result in Huawei losing access to the U.K. network, marking a turn in the bilateral trade relationship between China and Britain.
“The strain in bilateral relations can manifest itself in several ways, including a further deterioration in U.S.-China bilateral trade,” Mukherjee said. “At this stage, any further action by the U.S. will increase the risk of a withdrawal from the phase one deal.”
In her view, how long-term investment decisions will shape up in the post-COVID-19 environment rests crucially on how soon the U.S. and Europe begin to see economic recovery. Equally important is how U.S.-China dynamics evolve against the backdrop of this crisis and the recent escalation.
“The current situation is marked by heightened volatility, and considering the uncertainty in the near-term business outlook, a visible shift in foreign direct investment decisions, if any, is unlikely to materialize before 2021,” Mukherjee said. “At this stage, we refrain from commenting on countries that are likely to benefit from a shift in foreign direct investment flows away from China.”