Prepare for difficult times, China’s Xi urges as trade war simmers

BEIJING/WASHINGTON (Reuters) – China must prepare for difficult
times as the international situation is increasingly complex,
President Xi Jinping said in comments carried by state media on
Wednesday, as the U.S.-China trade war took a mounting toll on tech
giant Huawei.

The world’s two largest economies have escalated tariff
increases on each other’s imports after talks broke down to resolve
their dispute, and the acrimony has intensified since Washington
last week blacklisted Chinese telecom equipment company Huawei
Technologies Co Ltd.

The listing, which curbs Huawei’s access to U.S.-made
components, is a potentially devastating blow for the company that
has rattled technology supply chains and investors, and saw several
mobile carriers on Wednesday delay the launch of new Huawei
smartphone handsets.

During a three-day trip this week to the southern province of
Jiangxi, a cradle of China’s Communist revolution, Xi urged people
to learn the lessons of the hardships of the past.

“Today, on the new Long March, we must overcome various major
risks and challenges from home and abroad,” state news agency
Xinhua paraphrased Xi as saying, referring to the 1934-36 trek of
Communist Party members fleeing a civil war to a remote rural base,
from where they re-grouped and eventually took power in 1949.

“Our country is still in a period of important strategic
opportunities for development, but the international situation is
increasingly complicated,” he said.

“We must be conscious of the long-term and complex nature of
various unfavorable factors at home and abroad, and appropriately
prepare for various difficult situations.”

The report did not elaborate on those difficulties, and did not
directly mention the trade war or of the United States.

No further trade talks between top Chinese and U.S. negotiators
have been scheduled since the last round ended on May 10, the same
day President Donald Trump increased tariffs on $200 billion worth
of Chinese goods and took steps to levy duties on all remaining
Chinese imports.

Negotiations between the United States and China have stalled
since early May, when Chinese officials sought major changes to the
text of a proposed deal that the Trump administration says had been
largely agreed.

However, Chinese Ambassador to the United States Cui Tiankai,
speaking to the Fox News Channel, said on Tuesday that Beijing was
still open for talks.

Repercussions of the blacklisting mounted for Huawei, with some
mobile operators, including the Ymobile unit of Japan’s Softbank
Corp and rival KDDI Corp putting launch plans for Huawei’s new P30
Lite smartphone on hold.

Another big Chinese tech firm, video surveillance equipment
maker Hikvision Digital Technology Co Ltd, could also face limits
on its ability to buy U.S. technology, the New York Times reported,
citing people familiar with the matter, sending the firm’s
Shenzhen-listed shares down 5.54 percent.

RETALIATION
While China has not said whether or how it may retaliate to the
measures against Huawei, state media have taken an increasingly
strident and nationalistic tone.

U.S. firms said in a survey released on Wednesday they were
facing retaliation in China over the trade war. The American
Chamber of Commerce of China and its sister body in Shanghai, said
members reported that they faced increased obstacles such as
government inspections, slower customs clearances and slower
approval for licensing and other applications.

It also said that 40.7% of respondents were considering or had
relocated manufacturing facilities outside China. Of the almost 250
respondents to the survey, which was conducted after China and the
United States both raised tariffs on each other’s imports this
month, almost three-quarters said the impact of tariffs was hurting
their competitiveness.

To cope, about one third said they were increasingly focusing
their China operations on producing for Chinese customers and not
for export, while one third said they were delaying and cancelling
investment decisions.

Long considered a solid cornerstone in a relationship fraught
with geopolitical frictions, the U.S. business community has in
recent years advocated a harder line on what it sees as
discriminatory Chinese trade policies.

The United States is seeking sweeping changes to trade and
economic policies, including an end to forced technology transfers
and theft of U.S. trade secrets. Washington also wants curbs on
subsidies for Chinese state-owned enterprises and increased access
for U.S. firms in Chinese markets.

China for years has blocked major U.S. tech firms, including
Google and Facebook, from fully operating in its market. Those and
other restrictions have fueled calls from within the U.S. business
community for Washington to pursue more reciprocal policies.

Cui told Fox News Channel that U.S. restrictions on Huawei “are
without any foundation and evidence” and could undermine the normal
functioning of markets.

“Everybody knows Huawei is a privately owned company. It is just
a normal Chinese private company,” Cui said. “So all the action
taken against Huawei are politically motivated.”

Reuters

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