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Huawei Connections to North Korea Embolden China Hawks

DuckerFrontier, July 25, 2019

DuckerFrontier recently launched The Lens, a weekly newsletter published by our Global Economics and Scenarios team to highlight developments and trends that will have the highest impact on business scenarios. Below is an excerpt from this week’s edition highlighting Huawei’s involvement in the installation of a 3G network in North Korea.

Key Takeaways

On Monday, the Washington Post published documents that detailed Huawei’s involvement in the installation of a 3G network in North Korea. These actions violate US and EU sanctions against North Korea. This story broke the morning of a scheduled White House meeting with tech firms that supply Huawei, to discuss the ban on the Chinese company. President Donald Trump announced last month, following a meeting with President Xi Jinping, that the US would relax restrictions on the shipment of US products to Huawei that do not threaten US national security.

Our View

This is not the first time a Chinese telecom has been accused of violating US sanctions. Last year, ZTE was in the news for violating US sanctions on both Iran and North Korea. Trump extended a lifeline to ZTE at the request of Xi, but paid a domestic political price in the form of a backlash from Senate Republicans. Amid growing anti-China sentiment in Washington, Trump will be unable to fully roll-back sanctions against Huawei without weakening his national security credentials.

Business Implications

Regardless of the outcome of trade talks, there will be rising restrictions on cross-border transfer of technology and intellectual property between the US and China over the medium term. Firms operating in the tech sector should continue to expect further decoupling of the US and Chinese economies.

Emilie Newton, Junior Analyst for Global Economics and Scenarios

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