Photo: Reuter/Bobby Yip

The US Commerce Department’s decision to lift a ban on sales of components to Chinese telecoms giant ZTE looks like it has survived a challenge from Congress.

But the uproar among lawmakers portends rough waters ahead for cross-border investment in the tech sector, as US politicians rile up fear of Chinese espionage and state-sponsored efforts to pilfer American innovation.

The only problem is that erecting a wall and shutting out Chinese companies might make the US less competitive in the process.

“The anxiety is now spilling over into all sorts of tech areas that have nothing to do with national security, causing venture capitalists and companies to steer clear of Chinese investments and investors there to pull out of the US,” Shelly Banjo wrote in a newsletter for Bloomberg.

“It’s also worth keeping an eye on a China fear campaign instituted in the name of national security to make sure it isn’t making America less competitive,” she added. “Losing out on innovative companies and technology, such as next generation wireless networks that Huawei and ZTE provide, will only hurt America’s position as a global tech leader.”

The controversy over ZTE, which saw the Trump administration initially slap a ban on sales to the firm which would have effectively put the massive employer out of business, is part of a broader conflict that has been dubbed a “tech war” between the world’s two largest economies.

A vocal group of US lawmakers, along with intelligence agencies, say that Chinese technology firms’ investment in strategic industries poses a national security risk. Congress has already passed legislation to step up screening of investments and ban the purchase of Huawei and ZTE equipment by federal agencies.

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