Huawei dispute risks escalating reprisals from China

Significance

The development raises the prospect of retaliation against North American companies from Beijing, which is already incensed by US tariffs and restrictions on technology exports and investment. This fear is reinforced by the recent arrest in China of two Canadians and an Australian.

Impacts

• Lower-wage countries have an incentive to streamline their domestic business climate, but reforms will be slow.
• Chinese firms will increase their investment in fast-growing South and South-east Asia.
• This will accelerate the trend towards fewer global value chains and more regional ones.