In a new move that is likely to worsen China-US relations, a bipartisan group of U.S. lawmakers has introduced a bill that would ban the sale of U.S. chips, other components or technology to Huawei, ZTE and other Chinese companies that violate U.S. sanctions or export control laws.

Respected news agency Reuters broke the news that Senator Tom Cotton and Representative Mike Gallagher, both Republicans, along with Senator Chris Van Hollen and Representative Ruben Gallego, both Democrats, introduced a bill that specifically names Huawei and ZTE. These are just two of the Chinese companies that are off U.S. supply lists because of fears that their switches and other gear could spy on Americans.

Senator Cotton wrote,

“Huawei is effectively an intelligence-gathering arm of the Chinese Communist Party whose founder and CEO was an engineer for the People’s Liberation Army. If Chinese telecom companies like Huawei violate our sanctions or export control laws, they should receive nothing less than the death penalty – which this denial order would provide.”

China’s Foreign Ministry spokesperson Hua Chunying said the proposed legislation was due to ‘hysteria’ and wants to stop the bills.

It comes among mounting Huaweiphobia

Wall Street Journal reports that U.S. Federal prosecutors are investigating allegations that Huawei stole trade secrets from T-Mobile U.S. Inc and other U.S. businesses.

Huawei stated the company and T-Mobile settled their disputes in 2017 following a U.S. jury verdict that found “neither damage, unjust enrichment nor willful and malicious conduct by Huawei in T-Mobile’s trade secret claim”.

Is Trump playing high-stakes poker?

Huawei

This proposed legislation is one of many both civil and government actions. Some say it is to rally America to a new cause since the Cold War ended and there was no more ‘reds-under-the-beds” threat.

Trump has said China’s is cheating through intellectual property theft, illegal corporate subsidies and rules hampering U.S. corporations that want to sell their goods in China.

David Bowdich, the FBI’s deputy director, said that nearly every one of the agency’s 56 field offices has investigations into economic espionage that lead back to the country of China.

Huawei and ZTE are not alone – it is just they have the highest profile.

Chinese chipmakers United Microelectronics Group (UMG) and Fujian Jinhua Integrated Circuit (FJIC) are accused of stealing trade secrets from U.S. semiconductor company Micron. Regardless of whether UMG and FJIC did or did not steal technology they are now on the list of Chinese companies that cannot buy from U.S. companies.

And this is just one of four similar cases bought by the Justice Department last quarter.

The issue runs deeper. The no-buy ‘list’ is secret, but the no-sell list is not.

It seems if Chinese companies cannot buy components, they can buy the company, if not directly then via start-ups (as a front), or the equity and venture capital companies that often carve companies up.

Chinese companies have bought GE’s whitegoods business. Lenovo bought Motorola. Micron Technologies is part owned by Chinese companies via a backdoor investment in WD. There are billions of dollars in deals going on, and the U.S. does not have strong legislation to stop this.

 The inter-agency CFIUS, the Committee on Foreign Investment in the U.S., which approves or blocks inward investments is apparently fairly lax! CFIUS rules on an ad hoc, deal-to-deal basis. Those familiar with its review process say it’s a dense, opaque bureaucracy whose wheels grind slowly and whose decisions exhibit no pattern.

The No-sell list could grow very much larger

Rep. Robert Pittenger, R-N.C., and Senate Majority Whip John Cornyn, R-Tex., introduced bipartisan, bicameral legislation to modernise the national security review of potential foreign investments. They stated:

“Chinese investment in the United States increased more than 900% between 2010 and 2016.  Much of this investment was part of a strategic, coordinated, Chinese government effort to target critical American infrastructure… China is buying American companies at a breathtaking pace.”

While some are legitimate business investments, many others are part of a backdoor effort to compromise U.S. national security. For example, China recently attempted to purchase a U.S. missile defence supplier using a shell company to evade detection.