China is trying to increase domestic production of key technologies and one analyst thinks Beijing will win the trade war and ween itself off U.S. tech within the next seven years.
“It’s a really wide conflict, and it’s simply not going to go away.”
“China will never trust the United States again, and it will achieve its technology independence within seven years,” Independent Strategy President David Roche said on CNBC’s “Squawk Box.”
A sticking point in trade negotiations for China is the way its telecom giant Huawei has been treated by the U.S. Huawei was blacklisted from conducting business with American companies back in May without permission, and the treatment has frustrated Chinese President Xi Jinping, according to report Tuesday from Kyodo News in Japan.
Chinese companies have long used American suppliers for key tech like semiconductors, modems and jet engines. The trade war between the world’s two largest economies is straining the relationship, though, and China is looking for ways out.
According to a Wall Street Journal report in August, the Chinese government is gauging how reliant its own companies are on American tech, and trying to find ways to improve supply chain structures for increased domestic production.
It’s also developing its domestic chip industry. The Made in China 2025 initiative, created by the government, sets goals of 40% domestic semiconductor production by 2020 and ramps up to 70% production by 2025, according to CNBC. A February report from the Center for Strategic and International studies found 16% of semiconductors used in China are made there, and only half of those are produced by Chinese companies.
Roche also doesn’t see any kind of end for the trade war because the conflict has expanded beyond trade.
“It is a conflict between a rising global power and a declining global power … . It’s not just about trade. It’s about technology, it’s about the free flow of ideas — it is rapidly becoming about the free flow of individuals. So it’s a really wide conflict and it’s simply not going to go away,” Roche said.
The next round of negotiations between trade representatives from the U.S. and China are set for October.