US tech firms’ market shares a trump card for China

By Hu Weijia Source:Global Times Published: 2019/5/30 21:13:40

Now may be the time to worry about the tech-heavy NASDAQ as US President Donald Trump steps up his trade war by targeting Chinese technology companies such as Huawei.

The US-China trade war started with tariffs but quickly moved to talk about the so-called theft of intellectual property and national security concerns. It is believed that more technology companies from not only China but also the US may become involved in an escalating trade battle.

One question worth considering is how the looming technology war could affect stock portfolios.

Shares of US technology companies will be hit hard if China retaliates against the US. The reason is simple: China is now an important market for US technology companies such as Apple, Microsoft, Intel, IBM and Tesla. The country is too important a market for US technology companies to exit, so their market shares in China are a trump card in China's hand amid a technology war.

China already has the world's biggest semiconductor market. In recent years, the country spent almost twice as much on importing chips as it did on crude oil. However, uncertainties resulting from Trump's policy have posed obstacles for Chinese companies looking to import from or merge with companies in the US semiconductor industry, leaving China few choices other than to pursue a path of independent innovation. 

Once a technology war begins, the first step to safeguard China's interests will be to reduce dependence on the US, which means US technology companies will lose market share in China.

This can be taken as a chance to attack US stock markets by targeting shares of US technology companies. The less dependent China becomes on US technology and firms, the more leverage China has against the US. When US firms lose the Chinese market, their share values will be hit, causing instability and volatility in Wall Street. 

What's more, it is possible that financial means will be used to ramp up the volatility. Some technology giants generating significant portions of their sales in China may be the first to bear the brunt. China has the ability to pull down the share prices of some certain US technology companies.

The technology sector accounts for a big proportion of the US stock market's capitalization. If big technology companies' shares plunge, the market is likely to tumble sharply, placing enormous pressure on the Trump administration. 

The author is a reporter with the Global Times.


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