Doing business in China has always been complicated. As much as China has embraced the principles of the market, it is still best described as state capitalism as most major companies either are owned by the state or heavily influenced by it.
That influence can go far beyond the economy, however, and that was the focus of the Congressional investigation into some of of the country’s largest telecom players. Huawei has been accused of being part of the Chinese espionage process, and the recommendation has been made to limit its U.S. networks access.
The fact is that blocking access to the U.S. market may have some espionage implications, but there are also plenty of potentially negative economic aspects as well. This is another attack on China seemingly planned for the middle of an election season, as blocking access to the U.S. will help American companies compete with their Chinese counterparts. It is impossible to say whether Huawei or the other companies are part of the Chinese spying apparatus -- all denied involvement. The point is that that the possibility is very real and, thus, can’t be dismissed out of hand. On the other hand, the U.S. has to be cautious if it wants to continue doing business with China. The connections between the government and industry are there and much tighter than stateside.
-Chris Kuehl, Ph.D., NACM economist