Why the US has a lot to lose in a tech war with China

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JAMES KYNGE: The US and China are engaged in a dire struggle over tech. And some analysts say it’s likely that tensions could escalate from here, jeopardising the business dealings of both American companies and their Chinese counterparts. The tech war is part of the broader US-China trade war that started more than a year ago.

But while the trade war is being fought with tit for tat tariffs, the tech war is being waged with direct action against companies. America has blacklisted more than 140 Chinese companies, severely limiting their access to US made components that they rely on. This has already thrown several Chinese companies, such as Huawei, into crisis.

But China is fighting back. It has not publicly ordered a backlash against American corporations in China, but some US companies are now facing stiff headwinds. Chuck Robbins, chief executive of Cisco, the US networking equipment maker, says, Chinese state-owned companies are blocking it from deals and that Cisco is being uninvited to bid for some Chinese contracts.

If this treatment goes mainstream, US companies have a lot to lose. This chart shows how US companies operating in China sell nine times more to Chinese customers than Chinese companies operating in the US sell to Americans.

Another giant US corporation, the chip maker Qualcomm, also reported weakness in its China business. The company, which gets 65% of its revenue from sales in China, warned that earnings are on track to fall to a seven year low.

America’s aim in confronting China over technology is to punish specific companies, such as Huawei, for alleged wrongdoings. But this is feeding into a bigger and bleaker picture. The rivalry between the US and China is reversing nearly 40 years of economic engagement between the world’s two superpowers and ushering in an era of decoupling.

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