May 23, 2019 / 7:42 AM / 2 months ago

China says U.S. needs to fix 'wrong actions' as Huawei ban rattles supply chains

BEIJING (Reuters) - China said the United States needs to correct its “wrong actions” in order for trade talks to continue after it blacklisted Huawei, a blow that has rippled through global supply chains and battered technology shares.

FILE PHOTO: A man takes a picture of a Huawei logo at the Huawei European Cybersecurity Center in Brussels, Belgium, May 21, 2019. REUTERS/Francois Lenoir/File Photo

Japanese conglomerate Panasonic Corp joined a growing list of global companies that is disengaging from Huawei Technologies Co Ltd, the world’s second-largest seller of smartphones and the largest telecom-gear maker, saying it had stopped shipments of some components.

Its move came a day after British chip designer ARM said it had halted relations with Huawei to comply with the U.S. supply blockade, potentially crippling the Chinese firm’s ability to make new chips for smartphones. Huawei uses ARM blueprints to design the processors that power its smartphones.

“If the United States wants to continue trade talks, they should show sincerity and correct their wrong actions. Negotiations can only continue on the basis of equality and mutual respect,” Chinese Commerce Ministry spokesman Gao Feng told a weekly briefing.

“We will closely monitor relevant developments and prepare necessary responses,” he said, without elaborating.

The United States has accused Huawei of working for the Chinese government and engaging in activities contrary to national security, accusations Huawei denies.

The Trump administration softened its stance slightly this week by granting the firm a license to buy U.S. goods until Aug. 19 to minimize disruption for customers.

‘FALSE STATEMENT’

However, U.S. Secretary of State Mike Pompeo kept up the pressure against Huawei in a CNBC interview on Thursday, saying its founder chief executive was lying about his company’s ties to the Beijing government.

“That’s just false. To say that they don’t work with the Chinese government is a false statement. He is required by Chinese law to do that. The Huawei CEO, on that at least, isn’t telling the American people the truth, nor the world,” Pompeo said.

Pompeo said he expected other American companies to cut ties with Huawei as the risk of doing business with it becomes clear.

Japan’s Toshiba Corp said it had resumed some shipments to Huawei after temporarily suspending shipments to check whether they included U.S.-made components.

“What we are witnessing is a potential reconfiguration of global trade as it has stood since World War II ... investors should begin thinking about how sensitive their portfolios are to global supply chain-exposed shocks,” Saxo Bank’s head of equity strategy, Peter Garnry, wrote in a note titled, “Are you ready for a cold war in tech?”

Huawei founder Ren Zhengfei told Chinese financial magazine Caixin on Thursday that he did not see ARM’s decision to suspend business with Huawei as having an impact on the company.

He said Huawei had a long-term agreement with ARM and speculated the British firm had made such a move because its parent, Japan’s SoftBank Group Corp, was waiting for U.S. approval for the merger of Sprint Corp, which it owns, and T-Mobile US Inc.

Industry experts have called out Huawei for its claims it could ensure a steady supply chain without U.S. help, saying the technology it buys from American companies would be “hard to replace.”

No further trade talks between top Chinese and U.S. negotiators have been scheduled since the last round ended on May 10, when U.S. President Donald Trump sharply hiked tariffs on $200 billion worth of Chinese goods and took steps to levy duties on all remaining Chinese imports.

China has retaliated with its own levies on U.S. imports, but it was Washington’s subsequent move against Huawei that took the trade war into a new phase, stoking fears about risks to global growth and knocking financial markets.

Reporting by Stella Qiu, Se Young Lee; Additional reporting by Doina Chiacu in Washington; Writing by Tony Munroe; Editing by Christopher Cushing, Nick Macfie and Bernadette Baum

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