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Trade war

Asia tech bosses fear a US-China cold war splitting global market

Beijing accuses Congress of 'hysteria' in latest chip trade dispute

Jerry Yang, co-founder of Yahoo, warns of growing risks in the U.S.-China economic conflict while speaking at the Nikkei Forum on Jan. 17 in Singapore. (Photo by Ken Kobayashi) 

SINGAPORE -- The global economy faces "very serious disruption" from the escalating US-China trade war, business leaders have warned, as the U.S. renews allegations of trade theft against Huawei Technologies and lawmakers move to ban chip sales to key Chinese companies.

The business leaders' warnings came as Beijing condemned as "hysteria" a draft bill presented in the U.S. Congress to prohibit chip sales to Chinese companies found to have violated American trade sanctions and export controls. The draft legislation named both Huawei and ZTE, which was the target of a U.S. ban last year.

The company chiefs forecast that, even if Washington and Beijing settled the current tariff war, their long-term economic and political rivalry could split global tech markets by forcing companies to choose between China and the U.S.

Speaking to the Nikkei Forum "Innovative Asia" in Singapore on Jan. 17, Jerry Yang, search engine Yahoo co-founder, said the relationship between the world's two big economies had become "more unpredictable than ever" with China adopting a "very aggressive" tech-based development plan and Washington seeing Beijing as "an adversary."

"We are starting to see very serious disruption in the way that things have been going and where they are headed," warned Yang, who left Yahoo in 2012 to head AME Cloud Ventures, a tech investor.

An influential voice in global tech, who sits on an U.S. national committee on U. S-China relations, he said that while the U.S. was justified in raising concerns at the World Trade Organization about certain Chinese trade practices, there was "a danger of protectionism" on both sides that would "create a very negative cycle."

Piyush Gupta, chief executive of DBS Group Holdings, the Singapore bank and one of Southeast Asia's biggest lenders, also warned of the consequences of global markets splitting into spheres of influence.

"That is the biggest risk... if you think about the next five years," said Gupta in an interview with the Nikkei Asian Review on Jan. 17. A split into a "China-led world and China-led technology versus the rest of the world" would have "a really important negative consequence for a lot of companies and a lot of countries," he said.

He added: "Tomorrow if Asian countries have to choose sides between whether we go with China, whether we go with the U.S., that becomes a lot more tricky because China is a dominant country in the region. It's a big market and it's hard to ignore."

Gary Liu, chief executive of the South China Morning Post, said technology would be the "flashpoint" in bilateral relations over the long-term. Huawei was ahead of rivals in developing 5G mobile technology, the key to the next generation of tech development. "That's why the company is such a threat," he said. Already the technology giant is facing growing sanctions around the world, including restrictions on participating in 5G development in key countries including the U.S., Australia and New Zealand.

Separately ZTE, the Chinese telecoms equipment company that was paralyzed last year after it was barred from buying U.S. chips or equipment amid allegations of sanctions busting, brushed off the possible threat to its business of the latest moves in the U.S.

In an interview with the Nikkei Asian Review in Hong Kong, David Dai, ZTE's vice president in charge of corporate branding and communications, declined to comment on the Huawei case or on the possible U.S. chip sales ban. However he insisted the group intended to press ahead with plans to invest in expanding its next generation 5G business. "We are leading the 5G industry in China [and] China has a big market," he said.

On top of the vast opportunity at home, Dai pointed to the "long term cooperation with some carriers in Europe," and revealed that ZTE staff is now on the ground in Europe conducting test runs of its technology.

However, in a sign of mounting concern over a possible crackdown, the company has recently hired Joseph Lieberman, former U.S. senator and a Democratic vice-presidential candidate in the 2000 election, as a lobbyist in Washington. The former Connecticut senator was once a strong critic of ZTE, accusing the company and Huawei of posing "a real threat to national security" in a signed letter in 2010.

While he has apparently changed his view, the mood appears to be hardening in Washington. The Wall Street Journal revealed on Jan. 16 that U.S. authorities were preparing a criminal case against Huawei, saying the charges revolve around a robotic device called "Tappy" made by T-Mobile, which is used in testing smartphones.

The newspaper reported that Huawei declined to comment on the Department of Justice probe but it said that a civil court trial arising from the case ended with no finding of malicious conduct against Huawei. The A jury awarded T-Mobile $4.8 million against Huawei for breach of contract.

The Chinese company was catapulted into the heart of the US-China conflict last month with the Dec. 1 detention of the company's CFO, Meng Wanzhou in Canada on the strength of an American extradition warrant issued in relation to the alleged violation of Iran sanctions. Meng is the daughter of the company's CEO Ren Zhengfei, who recently praised U.S. President Donald Trump's efforts to reach a trade deal with China, while emphasizing the negative effect "the detention of certain individuals" could have on U.S.-China relations.

Additional reporting by Kenji Kawase in Hong Kong and Justina Lee in Singapore

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