The latter stages of 2018 and start of 2019 has proved challenging for Huawei, the Chinese telecommunications giant and one of Beijing’s “national champion” tech firms. On December 1, Canadian authorities in Vancouver arrested the company’s chief financial officer, Meng Wanzhou, at the behest of the United States. On January 11, news broke that Polish officials had arrested a Huawei employee on espionage charges. On January 28, the U.S. Justice Department unveiled indictments accusing the company of systematically violating U.S. sanctions against Iran and stealing trade secrets from its U.S. business partner T-Mobile. And both the UK and Germany are considering banning the firm from participating in the development of 5g Infrastructure.
The response from Beijing was swift: almost immediately after Meng was picked up in Vancouver, China detained two Canadians in what was widely seen as a retaliatory measure. A few weeks later, a third Canadian was sentenced to death for drug smuggling at a perfunctory court proceeding that was ordered shortly after Meng’s arrest- and it is this retailation which will be of focus in this article, as it forces the question of which western companies will now be caught in the cross fire.
This growing Sinophobic sentiment has been building – in 2012, the U.S. House Intelligence Committee released a report saying that telecom infrastructure gear from Huawei and ZTE are national security risks. The main issue is the Chinese law that requires that chinese companies to be at least 51% owned by Chinese nationals, and that a Communist Party cell be active within the company. This creates a narrative that chinese companies serve as natural agents of the Chinese governemnt. This is espically significant in regards to the development and launch of 5G broadband across the west, where Huawei have secured lucrative contracts in this area– the fear being companies like Huawei could poteinatlly subject the West to Cyberterrorism threats. “We are urging folks not to rush ahead and sign contracts with untrusted suppliers from countries like China” a US State Department official told reporters in Brussels. A warning echoed by European Commission Vice President Andrus Ansip. Ren Zhengfei, CEO of Huawei, denied the allegations and maintained that they have never provided information to the Chinese government.
However, some such as Gui Bin feel this fear is heavily overblown as in reference to provisions of the law ‘it does not authorise pre-emptive spying; national intelligence work must be defensive in nature’ and there is no clear rational in Chinese authorities risking the future prosperity of globally acclaimed brands like Huawei.
With speculation of a blanket ban of Huawei involvment in the West, the forces the question of what will Huawei and pariticularly the Chinese companies do in retailtaion. The most prominent repurcussion was the fact that Chinese investment in the US dropped by more than 80 per cent in 2018. To the Chinese, Huawei is symbolic of their country’s rise to a resurgence of power and prominence. The Huawei story is told and sold in China as a romanticized rags-to-riches saga: A middle-aged rank-and-file retired People’s Liberation Army officer takes his meager savings to form a private company. It is clear that the Chinese have taken offence.
Recent developments show how a major port in northern China has banned coal imports from Australia — a sign that Beijing may be flexing its economic muscles and warning nations not to bar its next-generation wireless technology. Australia followed the US advice and banned Huawei involvement in 5G – serving as a stark warning to other countries who have followed suit.
China, which has a history of using trade as leverage, has been seeking to counter resistance in several nations to using Huawei in 5G networks. Retailtion will take several forms: techno-nationalist backlash and regulatory backlash.
On the eve of the arrest, Chinese companies and business groups are already encouraging employees to boycott Apple and other US suppliers and buy Huawei products instead. Companies such as Jiangxi Ruike Refrigeration Technology and Chengdu RYD Information Technology released internal memos which incentivised employees to trade their Apple products for Huawei products or instilled new policies requiring that the company buy Huawei products exclusively and only use Huawei software. This is concerning news to both the tech and automobile industry, where China serves as the epicentre to their supply chain and consumer base – ‘If I was General Motors China or KFC, I would get prepared’.
A more serious backlash, would be the State sponsored regulatory backlash. The International Resource Development, a company that helps US firms establish a presence in China, have raised concerns from dozens of businesses since Meng’s arrest, all of them worried about retaliation. US companies can expect retaliatory measures such as slower processing of visas and The Chinese government “may choose to expend more resources auditing US and Canadian companies“. Precedent substantiates these claims, in a standoff with South Korea last year, Chinese authorities shut down dozens of Lotte stores, citing issues such as fire safety regulations. They also halted the construction of a Lotte theme park in northeastern China. And the blocked buyout of Qualcomm by Chinese Authorities, serves a powerful warning to the magnitude of such retaliation.
March 1st has been appointed as the deadline for the US and China to resolve the trade war. Liu He, China’s lead negotiator in the talks with Robert Lighthizer, the US trade representative have been promising and Trump also pledged to take a softer approach to Huawei. This could mitigate concerns about Chinese retaliation, and it will be interesting to see how this develops – but the remarks from Mr Ren that ‘There is no way the US can crush us’ sets a worrying pretence.
References =
https://phys.org/news/2019-02-dont-huawei-5g-eu-nations.html#jCp
https://thehill.com/policy/technology/430584-huawei-ceo-denies-links-to-chinese-government
https://www.ft.com/content/d87c2dac-335d-11e9-9be1-7dc6e2dfa65e
https://www.ft.com/content/3a66d070-33d2-11e9-bd3a-8b2a211d90d5
https://edition.cnn.com/2018/12/12/business/china-huawei-retaliation/index.html
