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Meng arrest and Huawei claims illustrate China’s high-tech dilemma


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Trump weighs into the row after the Huawei senior executive is released on bail but Chinese companies are urged to follow international rules


There is nothing like a high-profile court case to spark an outpouring of condemnation and soul-searching. During the past 10 days, the arrest of Meng Wanzhou has not only catapulted her into the center of trade tensions between the United States and China, it has also created a seismic shift in geopolitical relations.


Considered corporate royalty in the world’s second-largest economy, she is the daughter of Huawei’s founder Ren Zhengfei, as well as being the chief financial officer and deputy chairwoman of the sprawling technology titan.


Although released on bail, she is still battling to avoid extradition from Canada to the US over alleged violations of Washington-imposed sanctions on Iran.


Realpolitik played out on a roulette wheel appears to be an apt description of this latest twist in the economic Cold War, especially after comments by United States President Donald Trump.


He made it clear in an interview on Tuesday night that he could intervene in the US Justice Department case against Meng and Huawei if it helped him secure a deal with Beijing.


“If I think it’s good for the country, if I think it’s good for what will be certainly the largest trade deal ever made – which is a very important thing – what’s good for national security – I would certainly intervene if I thought it was necessary,” Trump told Reuters in the Oval Office.


Meng’s US$7.4 million bail decision and the president’s remarks illustrate the gravity of the situation.


But then in China, the shrill rhetoric which followed her arrest has been punctuated by absorbing analysis of ways to defuse the ticking time bomb between the two nations.


“Chinese enterprises should extensively follow business and international rules,” Zhu Feng, the dean of the Institute of International Relations at Nanjing University, said. “In 40 years of reform and opening-up, politics often focused on business operations, which should now be corrected with urgency.


Media frenzy


“In a highly interdependent world, China cannot afford to disintegrate with the US or other countries. And abiding by international rules is essential to the success of Chinese companies,” Zhu added.


Still, the state-owned media frenzy has at times been particularly vitriolic while glossing over Huawei’s controversial past.


Last month, the Court of the Appeal in the United Kingdom dismissed the group’s appeal of patent infringements brought by Unwired Planet, a mobile data, software and services company based in the heart of Silicon Valley.


The telecom giant is now seeking permission to appeal the decision in the UK Supreme Court.


Moving further back in time, the US multinational technology conglomerate Cisco Systems took legal proceedings against Huawei in 2004, claiming it stole core router software code.


Eventually, the case was settled out of court in a confidential agreement.


Watch the video at the source.


But these accusations are conveniently airbrushed from Huawei’s rise as a major global player and the flagship of the “Made in China 2025” policy.


“Along with restricting Huawei’s products from entering the US market, Washington is demanding its allies take coordinated action and bar Huawei’s equipment in the construction of their 5G networks,” the Global Times, which is run by the Communist Party’s official newspaper, the People’s Daily, wrote in an editorial.


“Australia, New Zealand the UK have all followed the US lead [by banning or curtailing Huawei’s involvement in 5G systems]. It shows Washington’s unique capability to elbow out Chinese high-tech firms through non-market means,” it added.


Even so, Meng’s arrest illustrates the vulnerability of the country’s high-tech industry.


Despite its global ambitious, China still has to rely on a steady supply of foreign-made semiconductors, which are the heartbeat of the “Internet of Things” and the industrial factories of the future.


Last year, revenue from the sector in the US edged close to $250 billion compared to China’s miserly $24.7 billion, statistics from IEK, which is part of the government-sponsored Industrial Technology Research Institute in Taiwan, reported.

Trade conflict

With such a disparity, it is hardly surprising that Chinese companies have to import about $200 billion worth of chips from the US annually.


This, in turn, has left the industry exposed to the trade conflict, threatening ‘smart’ companies such as  Huawei, Xiaomi and ZTE.


“[The] China-US trade conflict has taught us a lesson – that it is extremely important to develop core technologies,” Chen Fengying, a researcher in the global economy at the China Institutes of Contemporary International Relations, said.


“And for that to happen, the government and enterprises both have to greatly increase their investments in technology research and development,” Chen added.


For President Xi’ Jinping’s administration, what happens in Vancouver in the weeks ahead, could have repercussions which will go far beyond Meng’s fate.


But it is unlikely in the short term to result in Beijing breaking the 90-day trade truce hammered out at a dinner with Trump and his team during the Group of 20 summit in Buenos Aires earlier this month.


On Monday, telephone talks between Vice-Premier Liu He, US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer took place, according to a statement released by the Chinese Commerce Ministry.


“[This was] meant to push forward with the next steps in a timetable and road map [for negotiations],” the ministry stated, which could include reducing tariffs on US-made imported cars.


After all, a combination of condemnation and soul-searching will only take you so far.



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