US-China tech war bigger than coronavirus, says EU chamber chief

GUANGZHOU, China (Reuters) – Coronavirus has disrupted supply chains and demand across the global economy, but it is the prospect of Europe becoming a victim of the US-China technological war that keeps the President of the European Chamber in China " awake "night".

PHOTO: Chinese and American flags flutter near the Bund, before the U.S. trade delegation meets its Chinese colleagues for talks in Shanghai, China, July 30, 2019. REUTERS / Aly Song

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"When two elephants dance, it is difficult to stay out and not be impacted," said Jörg Wuttke, who is also the main representative in China for German petrochemical giant BASF.

China is starting to recover from the coronavirus that was first identified in the central city of Wuhan in December, before spreading worldwide, infecting more than 8.3 million people. Fear of a second wave increased after an outbreak in Beijing last week.

But coronavirus is "a challenge that I think can be tackled," said Wuttke in a video link from his home in Beijing.

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He was supposed to participate in the launch of a trustworthy survey of the chamber chapter in southern China in Guangzhou, but was left out due to the resurgence of coronavirus in the capital.

European companies are currently "sailing in the dark" due to the uncertainty brought about by the virus, Wuttke said.

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But nevertheless, he sees being caught in the crossfire between the United States and China as a long-term threat.

"When it comes to the type of US-China trade war, the technological war that is going on, the possibility of a financial war, is something that will be more lasting, more damaging and definitely brings enormous uncertainty," he said.

"We have a total dependence on American semiconductors, as well as China," he said. "We also have a huge market here (in China).

"The final concern, of course, is if the US or China turns to us and then says," Please make a choice – are you going with us or against us? "

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The United States put Huawei China’s HWT.UL’s Huawei Technologies Co. Ltd on a commercial blacklist in May 2019, citing national security concerns, and Commerce Secretary Wilbur Ross said on Wednesday that those concerns remain, especially above 5G.

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The move effectively banned American companies from doing business with the world's largest manufacturer of telecommunications network equipment and escalated a trade battle between the world's two largest economies.

Wuttke said that despite years of lobbying, European companies continue to face an unfair playing field in China, also in emerging technological fields like 5G.

"Ericsson is taking orders (in the Middle East), Africa and Asia and, of course, in Europe it is competing with Huawei head-on," he said.

"But they really can not compete here, which obviously brings a big disadvantage, because China represents 50% of 5G possible market."

The South China trade confidence survey found little appetite for its members to leave the region, where they enjoy close access to industrial supply chains, with 88% saying they had no plans to move in the next three years.

However, the broader trust poll also found that 44% of respondents expect the regulatory environment to worsen over the next five years.

Wuttke explained that the apparent contradiction is due to companies that remain confident of growth opportunities in China, which his company expects to account for 30% of global growth in the next decade by a conservative estimate.

"We want to be part of this program, we want to be part of this growth model," he said.

Southern China also continues to offer the best environment for foreign companies to operate, explained George Lau, deputy mayor and general manager of TÜV Rheinland, a certification company.

Reporting by David Kirton; Editing by Nick Macfie

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