Pentagon and Treasury Department objections to proposed export controls indicate that the balance of power in the global chip industry has shifted towards China. Image: iStock

While it remains unknown where the whole Huawei saga will end up, Washington’s formal request for Canada’s extradition of Meng Wanzhou to face financial fraud charges in the US doesn’t bode well for her and the Chinese tech giant.

Meng, the financial chief officer (FCO) of Huawei Technologies Co Ltd and a daughter of Ren Zhengfei, the company’s founder and president, was arrested on December 1 in Vancouver at the behest of the US. On January 29, Canadian Justice Minister David Lametti confirmed his country had received a formal request from the US for her extradition.

A day earlier, US authorities unveiled a 10-count indictment against Huawei and a 13-count indictment against Meng, the telecoms giant and two of its affiliates. The charges listed in the first indictment are “theft of trade secrets conspiracy, attempted theft of trade secrets, seven counts of wire fraud, and one count of obstruction of justice.” The allegations in the second are related to bank fraud, sanctions violations and obstruction of justice.

If Meng is extradited to the US and she and Huawei are convicted of the charges in the twin criminal indictments – or even just some of them, the FCO may face prison and the company’s global business could be seriously damaged. It could also badly affect China and its crucial ties with the US. Perhaps because it knows the stakes are so high, Beijing has vehemently opposed Meng’s detention, her extradition and all charges against her as well as Huawei.

What’s more, for China, all of these moves are not merely judicial but a political ploy aimed at stifling its tech giant and containing the country’s rise.

The Canadian government insists that Canada is a rule-of-law nation and Meng’s detention “was not a political decision on Canada’s part”

But the Canadian government insists that Canada is a rule-of-law nation and Meng’s detention “was not a political decision on Canada’s part. It was a matter of following the rules. It’s a matter of obligations on the part of Canada to follow through with its obligations under international agreements,” including its extradition treaty with its southern neighbor. As previously noted, most like-minded people and countries probably agree with Ottawa.

As for the US, it also stresses that its actions are aimed at tacking criminal or illegal acts committed by Meng, Huawei and its subsidiaries.

In a press conference on January 28, US Acting Attorney General Matthew Whitaker said the US is “bringing criminal charges against telecommunications giant Huawei and its associates for nearly two dozen alleged crimes.”

For FBI Director Christopher Wray, “the charges unsealed today clearly allege that Huawei intentionally conspired to steal the intellectual property of an American company in an attempt to undermine the free and fair global marketplace.”

Commerce Secretary Wilbur Ross alleged: “For years, Chinese firms have broken our export laws and undermined sanctions, often using US financial systems to facilitate their illegal activities.”

Homeland Security Secretary Kirstjen Nielsen, another senior official attending the press conference to announce the indictments, said, “As charged in the indictment, Huawei and its [CFO] broke US law and have engaged in a fraudulent financial scheme that is detrimental to the security of the United States.”

Reading the two detailed indictments (by the Western District of Washington state and the Eastern District of New York) as well as these comments by the US officials, one may agree that the US is conducting legal cases against criminal or illegal acts committed by Huawei, its CFO and subsidiaries.

Yet, putting the US’s Huawei charges in the context of its current trade and technology dispute or its wider rivalry with China, one may speculate that Washington’s actions are also politically motivated. The fact that the US announced the charges just two days before Washington and Beijing held crucial talks on their trade disputes reinforces such a perception.

If that is the case, China, or more precisely its supreme leader, Xi Jinping, has played a part in pushing the US to act in such a manner.

Asked to comment about the views that “the suspicion around Huawei’s 5G in Europe and the United States is not all about technology. It is about politics as well” and that “Huawei perfectly embodies the cold war going on between China and the US” in an interview with foreign media on January 15, Ren downplayed his company’s importance, saying: “We are like a small sesame seed, stuck in the middle of conflict between two great powers.”

But, evidently, with revenue of more than $100 billion last year, Huawei isn’t “a small sesame seed.” It’s now the world’s largest supplier of telecoms equipment and second-largest smartphone maker. The tech mammoth is playing a leading role in building 5G infrastructure, the breakthrough technology behind the next generation of super-fast wireless communications, worldwide.

What’s more, it’s seen as a linchpin in “Made in China 2025” – China’s – and indeed Xi’s – flagship policy aimed at developing “China into a world science and technology leader.” Central to the US’s charges against Huawei is theft of trade secrets (or theft of technology and intellectual property). Theft of technology is also at the heart of the US’s current trade dispute with China.

Thus, justified or not, Beijing’s overtly ambitious “Made in China 2025” plan and, especially, its forceful way of achieving it, including allegedly “aggressively [seeking] to obtain technology from American companies,” has instilled anger and fear in the US, which has, in return, adopted a tough posture vis-à-vis China.

In his rare interview, the Huawei president stressed his company has never spied for the Chinese government, vowing that he “will never do anything to harm any other nation” and “would rather shut Huawei down than do anything that would damage the interests of our customers.”

The Huawei president stressed his company has never spied for the Chinese government, vowing that he “will never do anything to harm any other nation” and “would rather shut Huawei down than do anything that would damage the interests of our customers”

Judging by his comments in that interview, one would probably give the 74-year-old businessman the benefit of the doubt because he sounded very moderate and trustworthy.

Yet, under China’s 2017 intelligence law, a very tough piece of legislation that permits the security apparatus to monitor and investigate foreign and domestic individuals and bodies, Huawei would have no choice but to comply if Chinese authorities knocked on its door. That’s why, though there is not yet clear-cut evidence that the communist regime in Beijing has ever asked Huawei to create a “back door” into western networks through its equipment, suspicions and cautions about Huawei are understandable.

In his interview, Ren was also asked to comment on “the access of American companies to the Chinese market,” the Chinese restriction “on foreign investment in the sector where Huawei is involved” and whether “China should open up the access for foreign companies.”

He answered that he is “a person that always advocates open policies.” He also recalled litigation between his company and Cisco, an American multinational technology conglomerate, in 2003 and said, “Even back then, I did not try to win the case by inciting nationalistic sentiments against Cisco.” This is because, he explained, he believed “that China, as a nation, would only have hope once it opens up and implements reform.”

He likewise added, “Even in light of the recent setbacks we encountered in some Western countries, we still support China, as a country, to become even more open. I think China can become more prosperous only when it becomes more open and continues to press ahead with its reform agenda.”

But under Xi, its most authoritarian and powerful leader since Mao Zedong, China hasn’t “become more open” and wholeheartedly pursued reform. In some areas, the contrary is true despite the fact that he has repeatedly portrayed it as a champion of free trade, open economy and globalization.

For instance, though he has long and frequently pledged that his country “will not shut its door to the outside world, but open itself even wider,” the access of foreign and American companies to the Chinese market, especially in the technology area, remains relatively restricted. And this, in fact, is another key issue in the current Washington-Beijing dispute.

For instance, China has long blocked US technology companies such as Facebook and Google (and recently Microsoft’s Bing search engine). Yet, in a recent interview with the Financial Times, Chinese ambassador to the European Union Zhang Ming complained strongly – if not hypocritically – of “slander, coercion, pressure, coercion [and] speculation” against Huawei.

In its editorial on Tuesday, the Global Times, an influential offspring of the People’s Daily, China’s top newspaper, rightly observed that “the press conference on Monday which announced charges against Huawei held by the Justice Department was attended by the US commerce secretary, FBI director, homeland security secretary and other senior officials.” It then asked: “Does Washington really need such a lineup to deal with an alleged “criminal” foreign enterprise?”

Probably, if Huawei was not a Chinese technology conglomerate, perhaps so many high-ranking officials wouldn’t have attended that conference.

Thus, it could be true that there are “deep political intentions” behind the US moves or that “Chinese high-tech enterprises have become the biggest victims of US containment of China’s rise” as Chinese officials and state media claim. If that’s true, they should also ask themselves why the US has now become hostile toward their country.

As already noted, President Xi’s regressive and assertive policies are partly – if not largely – blamed for the Trump administration’s hardline posture vis-à-vis China on trade and other key areas.

On this reading, it can be said that the US has now filed such charges against Huawei not merely because it has committed alleged illegal or criminal activities but also, possibly, because it happens to be a Chinese tech giant at a time when the US is very wary of – and tough toward – Xi’s China.

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