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Moves to restrict Huawei in the US unlikely to affect Alibaba, Tencent

President Donald Trump speaks at the 38th Annual Peace Officers Monitoring Service on Capitol Hill, Washington, on May 15, 2019.

Carlos Barria | Reuters

Chinese Internet giants such as Alibaba and Tencent are unlikely to be attacked in the same way as telecom giant Huawei amid growing trade tensions between Beijing and Washington, an analyst told CNBC on Thursday.

First, the deterioration of US-China relations will likely hurt Chinese companies that compete with US companies, according to Gil Luria, D.A.'s research director. Davidson

"The focus on Huawei seems to be motivated by concerns about secrecy and intellectual property, but Huawei is also a major competitor to many US telecommunications equipment companies," Luria told CNBC.

"Companies that focus on China, such as Alibaba and Tencent, are less likely to be directly targeted," he said, adding that the sales of the first in the United States are insignificant and that outgoing President Jack Ma has made a "Masterful work of positioning ourselves as friendly to the United States"

Still, he said, those companies could not escape the side effects of a slowdown in the Chinese economy, which has been pressured in part by the increase in US tariffs.

Implications of & # 39; long-range & # 39;

The president of the USA US Donald Trump on Wednesday declared a national emergency for threats against US technology by signing an executive order that allows officials to block transactions related to information or communication technology that "represents an unacceptable risk" to security. American national.

While Alibaba, Tencent, and even Baidu, can avoid the strict restrictions to doing business in the United States, other Chinese information technology companies could suffer.

"The scope of the order is potentially far-reaching and could affect many Chinese telecommunications equipment manufacturers as well as communications service providers," Rajiv Biswas, chief Asia Pacific economist at IHS Markit, a global provider, told CNBC. of data.

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The latest escalation of the technological war between the two largest economies in the world was reflected in the May 10 decision of the US Federal Communications Commission. UU To reject a request from China Mobile to provide communications services in the US UU For reasons of national security, Biswas said.

Following the executive order, the US Department of Commerce said it was adding Huawei and its affiliates to the Entity List of the Bureau of Industry and Security (BIS), which would make it more difficult for the Chinese telecommunications giant. Do business with American companies.

Wednesday's moves by the Trump administration are a "serious escalation with China that, at least, undermines the possibility of continuing trade negotiations in doubt," Paul Triolo, head of geotechnical practice at Eurasia political consultancy, wrote in a note. Group. "Unless handled carefully, this situation is likely to put American and Chinese companies at a new risk."

Huawei's customer networks around the world could be affected if EE. UU It fully implements its movements against the Chinese firm because the company "could not update the software and perform routine maintenance and hardware replacement", as it would no longer have access to US suppliers. UU According to Triolo.

Biswas agreed and said the turn of events raises uncertainties about the "long-range" implications for non-Chinese communication companies using parts made by Huawei and other Chinese network equipment suppliers.

"President Trump's executive order may also have broader geopolitical implications for key US allies, such as the US and other Western European countries that are considering allowing the use of Chinese communications equipment in their launches. of 5G, "he added.

For its part, the USA They are trying to convince the allies to ban Huawei from participating in their plans for the next generation of high-speed mobile Internet known as 5G. Washington says Huawei's technology runs the risk of allowing Chinese espionage through these high-speed networks, but Huawei says security concerns are unfounded. So far, European countries have resisted such calls from Washington, but additional restrictions could persuade international airlines to "immediately begin contingency plans," said Triolo.

While the expectation is that Beijing will retaliate with some measures against the US communications companies. UU To show a tough negotiating stance, Biswas said that the technology war between the United States and China is likely to be much longer than the trade war, because it is focused on the United States. national security concerns that can not be easily resolved. "

– CNBC's Tucker Higgins contributed to this report.

Correction: this article has been updated to reflect that Jack Ma is the outgoing president of Alibaba.

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