Now Japan plans to bar government purchases of tech equipment from two major Chinese companies, Huawei Technologies and ZTE – a person with direct knowledge of the matter has said. This follows an arrest in Canada of an executive and new measures that bar purchases of equipment by the US government. US intelligence agencies allege that Huawei is, through back channels, selling US equipment to spies – there was no evidence presented by the US government however. Japan plans to ban government purchases, according to the Yomiuri Newspaper, which is linked to concerns about intelligence leaks and cyber attacks with the final decision coming as early as Monday.
There are several reasons that the US is concerned but the most important and likely the most dangerous component is the “backdoors” that are in alleged to be in this equipment, allowing for spies to do their work. The key concern now is that the US and China are finding new ways to disagree and attack each other both privately and in newsprint. The public domain is now full of accusations in a non-stop stream of information that, in the end will have negative impact on global equity markets. In short, this expanding and more volatile trade war is driving global equity markets lower.
Note that in a related issue, Huawei saw its CIO, the daughter of the founder, detained in Canada. Ms Meng, is now caught in what China claims is a human rights attack by the Trump Administration. As a result there have been waves of accusations passing through Ottawa and unfortunately the Canadian government is caught in the middle. The US has an extradition request and is considering criminal charges.
Look for more comments and updates about this ongoing trade war as we at Classiarius will be fully focused on it. This battle between the US and China will get much worse before improving.