What cards could China play in response to UK’s Huawei ban?

By Zhao Junjie Source: Global Times Published: 2020/7/16 22:31:29

Photo: VCG

When the UK made the unwise decision to join the US' politically driven crackdown on Chinese telecom giant Huawei based on fabricated "national security risks," it seemed to be ready to take the countermeasures from China even at the cost of the interests of the UK's businesses.

As China is evaluating the development and is expected to take countermeasures to protect the legitimate rights and interests of Chinese enterprises, here is a list of the available options for China to fight back.

Chief among the options, China could call for businesses to revise their investments in the UK. With the discriminatory act, the UK has made it questionable whether the country can provide an open, fair and non-discriminatory business environment for companies from other countries. The UK is China's largest investment destination in Europe. If some Chinese companies, especially state-owned enterprises, start to pull back investments and sell assets in the UK, this could cause more Chinese companies and even other Asian countries' businesses to reconsider their plans to invest in the UK.

For UK companies in China, especially those largely benefiting from bilateral cooperation, the UK has complicated their situation by taking the first step of politicizing commercial and technological issues. The UK's interference in the Hong Kong issue had already made companies like HSBC suffer. HSBC's support of the national security law and further investment plans in China have clearly shown its objections to the UK's practice of curbing China. Companies like HSBC may start lobbying the UK government as their interests are further impacted.

China-UK trade remains in a stable condition despite the impact of COVID-19. But since the UK has started violating free-market principles, China may take corresponding measures. China could even consider cancelling the UK' s most-favored-nation treatment. Overall, bilateral trade may see a decline, but China could tackle the impacts by expanding domestic demands.

In terms of the financial sector, China is a vast market for the UK's financial services. If China starts to transfer parts of its financial cooperation with UK companies to their European competitors, their profits will see severe impacts.

China can also expand the influence of the yuan in Europe and we can join forces with the euro. Following Brexit, it is very difficult for the UK to maintain the dominance of the pound in Europe. Because the EU is also reluctant to see the strengthening of the pound, it means that the yuan and the euro can gradually expand in the European market and finally suppress the pound. And this is feasible.

The UK should not forget that China's economy has gained significant strength and the UK's available options are fewer than China's in a showdown over not just technology but also the Hong Kong issue. Of course, although China may fight back, it will not blindly escalate the situation. China's possible countermeasures are expected to be accurate, reciprocal and justified.

It should be noted that the UK government has given a buffer period in its Huawei ban, indicating that banning Huawei is a difficult action for it to take. There is reason to believe that giving the UK some time, as more UK companies taste the pain and start to be dissatisfied, they will let the government understand that the Huawei ban is a very unwise decision and the UK should change its attitude, before it is too late.

The author is a research fellow at the Chinese Academy of Social Sciences' Institute of European Studies. bizopinion@globaltimes.com.cn


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