Huawei is an integrated Chinese telecom company whose products range from handsets to large-scale transmission equipment.  It’s the leading provider of next generation, G-5, cellular infrastructure, a market where the US has no viable entry.  Washington has successfully put enormous pressure on the big US telecom companies not to buy Huawei products, arguing that its devices may contain hidden back doors that could allow Chinese intelligence operatives to spy on conversations and intercept data.

Despite this, Huawei has established a substantial foothold in small US communities because its offerings are much cheaper and better than competitors’.  American worries/threats appear to be met with shoulder shrugs in the EU as well, on the idea that conversations are already being intercepted by the US, so how much worse than Mr. Trump can China be.

In addition, the administration has:

–placed Huawei on the “Entity List,” thereby designating Hauwei a threat to national security and giving the government the ability to cut off the company’s access to American-made computer chips and other components

–floated the idea that Huawei–other Chinese companies as well–could be denied access to US financial markets–bond, stock and bank lending–as venues for raising capital.  Government-related investment pools may also be barred from owning Chinese securities, including Huawei

–had the Huawei CFO (the daughter of the Huawei chairman) arrested on charges of money-laundering and violating the embargo on Iran–effectively telling the company not to use the US banking system at all.  Ms. Meng is still under house arrest in Vancouver, 14 months after being detained at US request in Canada, fighting extradition.

practical implications, as I see them

–although chipmaking has been a Beijing priority for as long as I can remember, the industry has never really developed in China.  I don’t know why.  Washington’s action certainly underlines for Beijing the urgent need to do so.

–my strong impression is that US-based chip companies have continued to supply Huawei from fabs abroad during the on-again, off-again embargo.  Since high-end fabs can be located practically anywhere, the Trump ban on sales to Huawei has likely knocked the US way down the list of locations for new investment

–over the past few years China has slowly been opening its securities markets to foreigners.  The pace of creating an alternative to the US as a source of capital will doubtless pick up after the Trump threats.  Hong Kong, for example, has recently changed its rules to allow companies with multiple classes of shares to list.  And Alibaba has chosen Hong Kong over its prior home, New York, for its latest equity raising.  I think this is just the beginning of China’s move to decrease its reliance on the US

–by weaponizing the dollar-based payment system against national champion Huawei (Mr. Trump has suggested that the charges against Ms. Meng would disappear as part of a trade deal), practical support for the renminbi as a substitute for the dollar must be rising strongly in Beijing.  Implementation is a looong way off, but the seeds have been planted.

on a more conceptual level…

It seems to me that the recent rash of shoot-yourself-in-the-foot economic policy making in Washington makes the US much less desirable as a place for capital investment to anyone, foreign or domestic.  Yes, Mr. Trump is the catalyst, but Washington appears to meekly acquiesce to his economically damaging edicts.

Two saving graces:

–Xi Jinping’s embrace of backward-facing state-owned enterprises as a way of strengthening the grip of the Communist Party over that economy parallels Mr. Trump’s odd desire to relegate the US to the third world.  So China may not be able to exploit fully the huge opportunity Washington is presenting it.

–the obvious move for Beijing would be to ally with the EU against the US.  The easiest connecting link would have been the UK, which, however, is in the process of destroying itself through Brexit.  Is Germany an acceptable substitute?