ING Economic and Financial Analysis | May 23, 2019 08:44AM ET
Japan and Europe seem to be standing with the U.S. to prevent the rise of Chinese technology. But China could retaliate in ways that could prove very damagingh3 U.S. adds allies to curb China's tech rise/h3
The United States seems to have persuaded Japan and some European countries not to use Chinese technology products or sell tech to Chinese companies. This is reflected in the asset market, where sentiment towards the Chinese tech industry is negative.
The purpose of these actions is to prevent China from becoming a world tech giant in the short term, but China isn't wholly unprepared for this.
h3 China’s long-term plan to deal with tech warfare/h3It is more difficult to end a technology war than a bilateral trade war. Technology warfare involves companies from more countries, each with unique technology. This makes the process a long and difficult one for China, which is why President Xi called it the "Long March".
h3 China's short term reaction could be aggressive/h3The Chinese government may be patient during this "Long March" but only up to a point. Eventually, it could react more aggressively to stop the U.S. from piling pressure on Chinese companies. Here are the possible responses from China:
It is still too soon to estimate the damage that a technology war could inflict on China's GDP, as this is still at an early stage.
But we believe that the Chinese government will keep using fiscal stimulus and liquidity easing measures to offset any negative impacts. So keeping GDP growth at or above 6.0% in 2019 should not be an issue unless there are fewer supportive measures than we have expected.
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