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May 22, 2019

Huawei founder says US underestimates company


May 22, 2019

BEIJING: Huawei founder Ren Zhengfei on Tuesday shrugged off US attempts to block his company’s global ambitions, saying the United States underestimates the telecom giant’s strength.

Ren spoke to Chinese media days after President Donald Trump issued orders aimed at thwarting Huawei’s business in the United States, the latest salvo in a months-long effort to stop the company’s charge to the top of the leader board in next-generation 5G technology.

“The current practice of US politicians underestimates our strength,” Ren said, according to transcripts from state-run media.

“Huawei’s 5G will absolutely not be affected. In terms of 5G technologies, others won’t be able to catch up with Huawei in two or three years,” he said.

The US Commerce Department announced an effective ban on American companies selling or transferring US technology to Huawei.

US internet giant Google, whose Android mobile operating system powers most of the world’s smartphones, said this week it was beginning to cut ties with Huawei in light of the ban.

The move could have dramatic implications for Huawei smartphone users, as the telecoms giant will no longer have access to Google’s proprietary services — which include the Gmail and Google Maps apps — a source close to the matter told AFP.

But the Commerce Department on Monday issued a 90-day reprieve on the ban on the transfer of technology by allowing temporary licences.

Huawei has sought to ease customers’ concerns over the Google announcement.

Ren said Huawei and Google are discussing how to respond to the ban, calling the US firm a “highly responsible company”. A company spokesman in Australia said the US actions “will not impact consumers” with a Huawei tablet or smartphone in the country, or those planning to buy a device in the future.

As for Huawei’s access to key components, Ren said half of chips used in the company’s equipment come from the United States and the other half it makes itself.

“We cannot be isolated from the world,” Ren said. He denied reports that German chipmaker Infineon has halted shipments to Huawei.


Monetary policy

By Editorial board

The State Bank of Pakistan has continued its policy of monetary tightening – despite its limited impact on reducing domestic government lending. On Monday, the SBP, contrary to the advice of the business community, undertook a massive 1.5 percent hike in the policy rate. With the policy rate now at 12.25 percent, the SBP has made domestic borrowing extremely expensive for the government as well as the business sector. The central bank has explained this away by referring to the need to control rising inflation, a widening fiscal deficit and expected increases in gas and electricity tariffs. With the change in leadership at the helm of the SBP, the hike in interest rate has swiftly followed the depreciation of the Pakistani rupee. While the federal government and the SBP have insisted that these moves are meant to ‘stabilise’ the Pakistani economy, the public response to the measures suggests that there is a state of panic. The SBP itself has noted that inflation will only increase next year, which quite swiftly undercuts its own reasoning for tightening the monetary policy. The logic of reducing money supply and increasing the policy rate is usually to reduce inflation in a time of low growth.

It is clear that the next year will be another year of low growth – but one wonders if at this moment it is wise to enact policies that bring investment down to zero. Borrowing is at the heart of all commercial activity in the economy, especially those geared towards exports. It would take no genius to understand that Pakistan needs to increase its exports to reduce its current account deficit. This would require pushing the interest rate down, rather than up. Similarly, increasing the policy rate will do more damage than repair if government borrowing does not shrink. The most immediate impact of the hike in policy rate will be to increase the already fast-growing debt-servicing costs that the government is paying. Instead of fulfilling its promises to shrink the fiscal deficit, the PTI government has managed to increase it by 2.4 times of what it was last year, despite cutting development spending by half.

Claims that such policies consider a ‘holistic’ picture of the Pakistani economy seem to be out of touch with ground realities. Growth rates are low, inflation is high, export growth is slow, and the current account deficit remains out of control. None of this will change next year – and there is nothing to suggest that there will a way back from these policies any time soon. There is a fear that more and more people will try and buy dollars to protect the value of their money – which is the exact opposite of what the government wants. One can justify unpopular measures if they take into account the real picture of the economy. Instead, it appears Pakistan is stuck in economic dogmas that could lead to a deeper crisis.

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