An intensified tariff war with the U.S. is threatening China's hopes to transform itself into the dominant player in global technology.
A customer looks at her iPhone in a store of U.S. tech company Apple in Beijing on Friday, May 10, 2019. U.S. President Donald Trump's latest tariff hike on Chinese goods took effect Friday and Beijing said it would retaliate, escalating a battle over China's technology ambitions and other trade tensions.
China might now have to take the “tougher route” of developing more of its own technology, with less access to foreign partners and know-how, said Rajiv Biswas, chief Asia economist for IHS Markit.The government and companies are pouring billions of dollars into research. Huawei, the telecom equipment giant and China’s first global tech brand, spent $15 billion last year — more than Apple Inc.
China’s ruling Communist Party responded to an economic downturn last year by stepping up spending and lending. That effort reversed a campaign to curb reliance on debt, which had soared so high that rating agencies had downgraded China’s credit rating for government borrowing. On the surface at least, the impact of Friday’s U.S. tariff hike “is relatively modest,” Brian Coulton, chief economist for Fitch Ratings, said in a report. But if Trump proceeds with his threat to extend 25% tariffs to all imports from China, that “would be a much more material threat to China’s growth outlook,” Coulton said.
The United States and Europe have been increasing the cost and complexity of Chinese acquisition of foreign technology or blocking it outright. In October, the European Union tentatively approved the trade bloc’s first rules on foreign investments in sensitive sectors. That step followed criticism of Chinese purchases of European technology vendors that are considered vital national assets, including German robot maker Kuka.
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