The US crackdown on Huawei has made the Chinese telecommunications giant the flashpoint in a monumental economic and technological showdown between the two superpowers that is testing allies of both.

One day after the US moved to block Huawei from the US market and banned the export of US technology and materials to the company, China warned Washington Thursday against further harming trade ties.

At the same time, Beijing formally arrested two Canadians who have been detained for months on national security grounds, a move widely seen as retaliation for Ottawa's arrest of a Huawei executive last year at Washington's behest.

In Britain, a heated debate continued over the government's reported decision to allow some Huawei technology in its coming 5G mobile network, a decision that has miffed Washington and led to the May 1 firing of defense secretary Gavin Williamson.

- Trade war worries -

And the spat over Huawei added to the uncertainty over negotiations between Washington and Beijing to end a bruising trade war, after the two sides exchanged fire with tariff hikes in recent days.

"The US's bullying and maximum pressure tactics have caused the China-US economic and trade talks to suffer a serious setback," Chinese Commerce Ministry spokesman Gao Feng said.

"China does not fear any pressure, and has the confidence, resolution and ability to respond to any risk and challenge," he added.

The tough talk has hit global financial markets and stirred concerns in other capitals of dangerous fallout.

"I think launching now a technological war or a trade war vis-a-vis any other country is not appropriate," French President Emmanuel Macron warned Thursday.

"First, it is not the best way to defend your national security -- we don't need it. Second, it is not the best way to develop your own ecosystem and have a world of cooperation and decrease tensions," he said.

- Huawei already 5G leader -

The Huawei confrontation has been building for years, as the world's largest company has raced to a huge advance on rivals in developing next-generation 5G mobile technology.

The US believes Huawei is backed by the Chinese military and that its equipment could provide Beijing's intelligence a backdoor into the communications networks of rival countries.

For that reason, Washington has pushed its closest allies to reject Huawei technology, a significant challenge given the few alternatives for 5G equipment.

On Wednesday, President Donald Trump declared a "national emergency" empowering him to blacklist companies seen as "an unacceptable risk to the national security of the United States" -- a move clearly aimed at Huawei.

At the same time, the US Commerce Department announced an effective ban on US companies selling or transferring US technology to Huawei.

"This will prevent American technology from being used by foreign-owned entities in ways that potentially undermine US national security or foreign policy interests," Commerce Secretary Wilbur Ross said.

- Broader technology battle -

But the Huawei fight is over more than just US telecommunications security. Washington sees Huawei's rise as emblematic of China's drive to wrest global technological and economic leadership from the United States.

That drive, in Washington's eyes, includes large subsidies and protections for strategic industries, backed also by an alleged concerted program to steal American technology.

The US Justice Department has prosecuted numerous cases in recent years of Chinese theft of trade and intellectual property secrets in the aerospace, food processing, agriculture, defense and other industries.

The department has charged several Chinese intelligence officials and operatives over a decade-long concerted effort to steal engine technology from US aviation giant Boeing and its suppliers.

In January, Huawei and company officials were indicted for offering bonuses to engineers to steal robotic technology secrets from US telecoms carrier T-Mobile.

"China is a formidable competitor and its leaders are clear in their intentions to displace the US, which they see as in decline, and rebuild global rules and institutions to serve China's interests," James Lewis, a technology and intelligence expert at the CSIS think tank, told a Congressional hearing this week.

"China has developed a competing model for innovation and investment that is well-funded and centrally directed. US technological leadership is no longer undisputed," he said.

- Huawei tech widely used -

Lewis said the fight over 5G highlights the challenges to both US and Chinese strategies in a deeply integrated global economy.

Many countries already have Huawei telecoms equipment deeply integrated into their national networks.

Ross noted in an interview Thursday with Fox Business Network that even many US rural telecommunications companies use the cheaper Huawei technology in their 4G systems.

Now the Chinese company is the undisputed leader in getting to market proven 5G hardware and software.

"As everything becomes interconnected, it creates more risk," said Ross.

Huawei: Rags to riches story, or Chinese Trojan horse?
Shanghai (AFP) May 17, 2019 - Chinese army technician Ren Zhengfei founded Huawei with just $5,000 in seed money, according to company lore, but 32 years later it is at the centre of a titanic tug-of-war between the United States and China for world technological supremacy.

Here are answers to key questions on the company's meteoric rise and the uncertain future it faces after President Donald Trump moved to curb its business in the United States:

- What is Huawei? -

Founded in 1987 in the southern Chinese city of Shenzhen, privately-held Huawei is a global technology leviathan -- the world's largest producer of telecommunications networking equipment and the number-two supplier of smartphones, behind Samsung and ahead of Apple.

Huawei now claims to have nearly 190,000 employees, operates in 170 countries, and reported revenue of more than $100 billion in 2018.

Its equipment is the backbone for telecom networks that carry much of the planet's data and communications traffic.

But while size matters, so does a far-sighted business strategy.

Its steady geographic expansion and heavy investment in research have positioned Huawei as the most critical single player in the coming advent of hyper-fast 5G networks.

5G will enable revolutionary new technologies like artificial intelligence, driverless cars and automated gadgets and factories, and Huawei has the world's most advanced and cheapest 5G capacities in the world.

- How has it gotten so big? -

Critics allege Chinese government support has fuelled Huawei's success, but being in the right place at the time has also been a critical factor.

Ren, now 74, founded Huawei just when two epochal events were gaining pace: China's manufacturing boom and the telecommunications age.

Shenzhen, once a sleepy fishing village, transformed into the beating heart of China's industrial miracle and Huawei plugged into its fast-expanding manufacturing sector.

As revenues in China soared, Huawei ventured overseas beginning in 1997, targeting underdeveloped Southeast Asian, African and Eastern European markets ignored by global players.

Avoiding head-to-head competition with more advanced Western rivals, it gobbled up world market share and poured revenues into R&D to develop increasingly sophisticated products.

"Fortunately for Huawei, both manufacturing and the telecommunication equipment market were surging," Jeffrey Towson, an equity investor and expert on China's digital scene, writes in "The One Hour China Book", an analysis of successful Chinese businesses.

"Huawei expanded its product line and became adept at targeting small niche markets."

- Why is the US worried? -

Ren's military background, Communist Party membership, and Huawei's opaque culture have long fuelled suspicions of Chinese state control, as has the widely-held belief that no company in such a strategic industry could achieve such heights without Beijing's involvement.

As Huawei and its market breadth grew, so did US concerns that China's one-party security state could use Huawei networks for espionage or cyber-attacks.

Fuelling US fears is President Xi Jinping's stated desire to use government support to build up Chinese tech companies into dominant players in advanced future technologies.

The trade war has turned into a tech war, with the US effectively barring Huawei from the US market.

Washington has made it personal, prevailing on Canada to arrest Ren's daughter -- Huawei CFO Meng Wanzhou -- in Vancouver, and seeking her extradition on charges of evading Iran sanctions.

Two other Huawei affiliates were charged this year with stealing tech secrets from telecom group T-Mobile in a separate case.

- Who owns the company? -

Huawei says company shares are owned by employees and Ren insists it enjoys no favour from Beijing, but analysts dispute that.

Two US academics -- China experts Christopher Balding and Donald Clarke -- analysed available corporate documents to determine that staff do not own actual shares.

In a paper last month, they said the company is owned by a shadowy trade union, noting that in China such unions are invariably government-controlled.

"Huawei may be deemed effectively state-owned," they concluded.

"Regardless of who, in a practical sense, owns and controls Huawei, it is clear that the employees do not."

Balding was more explicit on Twitter on Friday.

"Let us make one thing clear: you can criticise many things about the Trump administration (but) there is effectively zero doubt Huawei is a branch of the PLA and actively engages in espionage for Beijing," he tweeted.

- The end for Huawei? -

Washington dramatically tightened the screws this week, requiring US companies to obtain approval before selling critical technology to Huawei, a move that could prevent it from buying semiconductors from US suppliers like Qualcomm that are crucial for its business.

Analysts said Huawei can likely pivot to other semiconductor sources, plus its own rapidly advancing chipsets, and that the US campaign could bring pushback from European allies whose carriers rely on Huawei equipment.

If fully implemented, the move would "quickly put at risk both the company itself and the networks of Huawei customers around the world," said Paul Triolo, a tech analyst at Eurasia Group.

But it was unclear whether Trump would fully implement the policy, he said, and business realities would likely result in approval for most tech sales to Huawei.

"It is still not clear the extent to which the administration is using this as a new weapon in its campaign against Huawei (our preliminary take) or a negotiating tactic in trade talks," Triolo wrote in an analysis piece.

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Trump ramps up battle against Chinese telecom giant Huawei
Washington (AFP) May 16, 2019
Donald Trump stepped up his battle against Huawei Wednesday, effectively barring the Chinese telecom giant from the US market and adding it to a blacklist restricting US sales to the firm amid an escalating trade war with China. An executive order signed by the president prohibits purchase or use of equipment from companies that pose "an unacceptable risk to the national security of the United States or the security and safety of United States persons." "This administration will do what it takes ... read more