New Round of US-China Trade War, Who Loses?

Behind the arrest, the technology manufacturing company Huawei is accused of being associated with the Chinese military, so that its products can be used for spying. The US government has contacted its allies - Japan, Italy and Germany - and warned them about the risk of using products made by Huawei.

As a result, a number of countries currently prohibit the use of Chinese telecommunications products: Huawei and ZTE. Australia and New Zealand have even enacted rules regarding the ban. Meanwhile, Japan is proposing a similar ban to be applied domestically. BT, a British telecommunications group, said it would not buy Huawei’s 5G device.

The arrest of Meng Wanzhou shows that the US-China battle to dominate technology has intensified. Director of the Technology and Public Policy Program at the Centre for Strategic and International Studies in Washington James Andrew Lewis said the ability to master technology is now an indicator of a country’s strength.

Currently, mastery of technology is very important for a country. This is different from the 20th century, where the strength lies in natural resources and the ability to produce goods in large quantities. “The ability to create and use new technology is a source of economic power and military security,” he said, as quoted by CNN (12/11).

China also took steps to deal with this problem, including calls for boycotting Apple’s iPhone product. Some institutions and companies in China have threatened to impose sanctions on their employees who use iPhone, while some promised to provide subsidies if their employees want to buy Chinese-made smartphones. They also asked their employees to show support for Huawei.

“The US aims to obstruct the rise of China. We, Chinese people, must unite and support national products,” Nanchong Chamber of Commerce, a trade organisation in Shanghai, said.

One of the electronic component supplier companies in Shenzhen said it would provide a 15-percent subsidy to its employees who buy smartphones made by Huawei and ZTE. The company will also punish any employees who buy an Apple’s smartphone with a fine of 100 percent of the smartphone price. This also applies to other US-made electronic products.

Chengdu RYD Information Technology said it would only use Huawei’s devices from now on. The company offers a 15-percent subsidy to its employees who buy products made by Huawei. Another company that fully supports Huawei is Xinjiang Nor-West Star Information Technology.

In addition to boycotting Apple products, the business of US companies in China is also at stake, including Boeing that will inaugurate its first airplane manufacturing plant in China. It is a collaboration with Commercial Aircraft Corp. of China Ltd (Comac), and the construction of the plant had begun before Trump became US President.

The trade war poses a threat that China will increase tariffs for Boeing 737, even though China has been the biggest buyer of this plane type in the world. The Boeing 737 is also the company’s biggest source of profit.

Boeing is also at risk of losing its customers in China. Xiamen Airlines, a subsidiary of China Southern Airlines Co., has begun business talks with Airbus, even though Xianmen has been a Boeing customer for more than 30 years. China is estimated to need around 7,700 commercial planes in the next 20 years, with a value of US$ 1 trillion for Boeing, Airbus, and local manufacturers such as Comac.

As the largest exporter in the US, Boeing has urged the governments of both countries to resolve their trade problems. Moreover, the aerospace industry has produced a surplus in the US trade balance of up to US$ 80 billion per year.

China is a very important country for Boeing’s business. Based on CAPA Centre for Aviation data as of August 2018, Boeing has 1,670 planes serving the Chinese market. Meanwhile, Airbus has only 1,598 planes. This is the reason why Boeing decided to build a plant in China. “The plant is a very interesting point in our history to have a scale of this size in China,” President of Boeing China John Bruns said, as quoted by Bloomberg (12/15).

So far, the Seattle-based airplane manufacturing company has no other plants outside the US. However, McDonnell Douglas Corp, which Boeing acquired in 1997, has invested heavily in producing MD-80 in China.