President Trump’s decision to ban Chinese company Huawei from selling its telecommunication equipment in the US overheats tensions between US and China. China alleged that US resolutions are dictated by the government’s fear of foreign competition and are not supported by sufficient evidence.
According to what anonymous sources from the White House told Politico, next week, Trump is expected to sign an executive order to ban Huawei from the development of the 5G wireless network, the latest generation of cellular mobile communication. The decision is aimed, on one hand, at sending a signal that Cyber security has become a priority for the US and, on the other, at increasing pressures on China before the Mobile World Congress, the largest exhibition for the mobile industry, which will take place February 25th and 28th in Barcelona. “There’s a big push to get it out before MWC,” said an anonymous source to Politico. Such a drastic decision will definitely transform a simple technology fair in a negotiation table between China and Western countries.
This Trump’s executive order could have the effect of further threatening the already tense relationship with Beijing. At the end of January, during Chinese Vice-premier Liu’s visit to Washington, US’ attorney charged Huawei with 23 crimes, including threats to national security. In addition, during the month of December, Meng Wanzhou, Huawei’s CFO, and the founder’s daughter, were both accused of misleading banks about doing business in Iran and arrested in Canada. Courts are considering an extradition request from the US.
Why is the Huawei case so relevant for the future of US-China relations?
Huawei is a controversial company, with more than one guise. It is China most successful global technology firm. Headquartered in Shenzhen and with more than 180 000 employees, last year it announced a record turnover of $110bn and was able to ship 200 M smartphones worldwide. It has built 1500 networks, reaching a third of the planet’s population and is now aggressively pushing to build 5G telecommunication network at an extremely competitive price.
According to prosecutors’ allegations, Huawei has been able to achieve such results leveraging on a non-transparent governance, which has been accused of having repeatedly broken the law. The staff has been encouraged, with bonuses, to steal intellectual property and the CFO is being accused of violating sanctions on Iran. US attempts to prevent such a company from building the network are ,therefore, somehow understandable, particularly given the fact that its dispersed design makes the firm’s decisions and actions hard to track and monitor. The biggest fear is that the Chinese government could take advantage of its influence to gather costumers’ data from Huawei and obtain competitive advantages. An intrusion of the Chinese government in a private company is even more likely after the National Intelligence Law – which requires Chinese firms to cooperate and provide sensible information to the one party-government – passed in 2017.
On the other hand, China defends Huawei’s interests and argues that allegations are senseless and not supported by sufficient evidence. Chinese government has interpreted Trump’s move as an attempt to fight Chinese competition.
The line between justice and trade negotiation is, in effect, becoming blurred. If, on the one hand, officials argue that they are simply enforcing the law, Trump, with his actions and statements, is involuntarily giving credit to those who would suggest an improper use of justice.
Together with the US, other countries need to take a decision on whether conducting further business transactions with Huawei. Australia has decided, for example, to ban Huawei 5G equipment and, less severly, Japan has strengthened limits and controls on a towards the firm. If the over 170 countries where Huawei has a significant dominance were to adopt similar solutions, its market share would be quickly eroded. US alone could alone make Huawei out of business.
Potential effects and solutions
It is questionable whether banning Huawei is the best solution. This would come with huge costs for everyone: 180 000 jobs would be wasted, competition, together with choice for customers, would be reduced and, finally, most US tech companies would lose one of their biggest clients.
If allegations are not supported by proper evidence, the exclusion of a Chinese firm from the US market would be a dangerous precedent. China may react by imposing similar bans on US companies, such as General Motors, and tensions may rise to undesirable levels.
As a consequence, in the US, a more transparent process against Huawei would have a positive impact on public interest.
As The Economist stated, instead of unnecessarily boosting tensions, both Western countries and China should foster a better relationship. Countries where Huawei is aiming at expanding should enhance their monitoring and have at least half of the telecommunication networks built by another company. Britain, Germany and Singapore already have systems to control Huawei equipment and to react if things were to get worse. On the other hand, China should contribute by limiting government intrusion in corporate decisions and should prove itself abroad as trustful. Finally, Huawei should work on a more transparent corporate governance, recruit employees from Western countries in the top management and demonstrate its independence from the Chinese government.
Nicola Bulgarelli
According to what anonymous sources from the White House told Politico, next week, Trump is expected to sign an executive order to ban Huawei from the development of the 5G wireless network, the latest generation of cellular mobile communication. The decision is aimed, on one hand, at sending a signal that Cyber security has become a priority for the US and, on the other, at increasing pressures on China before the Mobile World Congress, the largest exhibition for the mobile industry, which will take place February 25th and 28th in Barcelona. “There’s a big push to get it out before MWC,” said an anonymous source to Politico. Such a drastic decision will definitely transform a simple technology fair in a negotiation table between China and Western countries.
This Trump’s executive order could have the effect of further threatening the already tense relationship with Beijing. At the end of January, during Chinese Vice-premier Liu’s visit to Washington, US’ attorney charged Huawei with 23 crimes, including threats to national security. In addition, during the month of December, Meng Wanzhou, Huawei’s CFO, and the founder’s daughter, were both accused of misleading banks about doing business in Iran and arrested in Canada. Courts are considering an extradition request from the US.
Why is the Huawei case so relevant for the future of US-China relations?
Huawei is a controversial company, with more than one guise. It is China most successful global technology firm. Headquartered in Shenzhen and with more than 180 000 employees, last year it announced a record turnover of $110bn and was able to ship 200 M smartphones worldwide. It has built 1500 networks, reaching a third of the planet’s population and is now aggressively pushing to build 5G telecommunication network at an extremely competitive price.
According to prosecutors’ allegations, Huawei has been able to achieve such results leveraging on a non-transparent governance, which has been accused of having repeatedly broken the law. The staff has been encouraged, with bonuses, to steal intellectual property and the CFO is being accused of violating sanctions on Iran. US attempts to prevent such a company from building the network are ,therefore, somehow understandable, particularly given the fact that its dispersed design makes the firm’s decisions and actions hard to track and monitor. The biggest fear is that the Chinese government could take advantage of its influence to gather costumers’ data from Huawei and obtain competitive advantages. An intrusion of the Chinese government in a private company is even more likely after the National Intelligence Law – which requires Chinese firms to cooperate and provide sensible information to the one party-government – passed in 2017.
On the other hand, China defends Huawei’s interests and argues that allegations are senseless and not supported by sufficient evidence. Chinese government has interpreted Trump’s move as an attempt to fight Chinese competition.
The line between justice and trade negotiation is, in effect, becoming blurred. If, on the one hand, officials argue that they are simply enforcing the law, Trump, with his actions and statements, is involuntarily giving credit to those who would suggest an improper use of justice.
Together with the US, other countries need to take a decision on whether conducting further business transactions with Huawei. Australia has decided, for example, to ban Huawei 5G equipment and, less severly, Japan has strengthened limits and controls on a towards the firm. If the over 170 countries where Huawei has a significant dominance were to adopt similar solutions, its market share would be quickly eroded. US alone could alone make Huawei out of business.
Potential effects and solutions
It is questionable whether banning Huawei is the best solution. This would come with huge costs for everyone: 180 000 jobs would be wasted, competition, together with choice for customers, would be reduced and, finally, most US tech companies would lose one of their biggest clients.
If allegations are not supported by proper evidence, the exclusion of a Chinese firm from the US market would be a dangerous precedent. China may react by imposing similar bans on US companies, such as General Motors, and tensions may rise to undesirable levels.
As a consequence, in the US, a more transparent process against Huawei would have a positive impact on public interest.
As The Economist stated, instead of unnecessarily boosting tensions, both Western countries and China should foster a better relationship. Countries where Huawei is aiming at expanding should enhance their monitoring and have at least half of the telecommunication networks built by another company. Britain, Germany and Singapore already have systems to control Huawei equipment and to react if things were to get worse. On the other hand, China should contribute by limiting government intrusion in corporate decisions and should prove itself abroad as trustful. Finally, Huawei should work on a more transparent corporate governance, recruit employees from Western countries in the top management and demonstrate its independence from the Chinese government.
Nicola Bulgarelli