Huawei executive arrest calls for new global strategy

Source:Global Times Published: 2018/12/16 19:58:39

Illustration: Xia Qing/GT

The recent arrest in Canada of Huawei CFO Meng Wanzhou has brought uncertainty to the negotiations during the current China-US trade truce.

The incident has triggered a wave of nationalist sentiment in China, which may turn into domestic political pressure if things do not turn out well for Meng and Huawei.

This may be what some US politicians would like to see and it may also be what some extreme nationalists in China want. But what is likely is that it would cause considerable damage to the economic interests of both China and the US.

Therefore, it is necessary to have a rational understanding of the arrest incident.

Some observers said that the US moves against Huawei are similar to the ZTE incident. When the ZTE incident occurred earlier this year, China and the US were testing each other's stance, and the ZTE case became a bargaining chip for the US. This time, the US' attempt to extradite Meng from Canada could also be seen as its preparation for the negotiations with China in the next stage. That's just a viewpoint from the perspective of the trade war. In fact, the purpose behind the US pressure on Huawei goes deeper than that.

Many professionals have tried to analyze Meng's case based on the US legal system, its control in the global financial sector and its extradition mechanism. The reason why US domestic law can have such "long-arm jurisdiction" around the world is because of the country's superpower status. If a country wants and is able to exert its "unilateral hegemony" around the world, basically no one can stop it. So it is meaningless to discuss legal interpretations or to emphasize judicial independence. A country's judicial system, no matter how independent it is, ultimately must serve the fundamental interests of the country.

In our opinion, the US pressure on Huawei is part of its containment strategy aimed at holding back China's international development. As an iconic Chinese company that has global competitiveness in terms of advanced technology, Huawei is also the only Chinese company that can compete with Western peers in the 5G field. UK mobile operator EE has already conducted 5G network trials in partnership with Huawei. But BT Group, which owns EE, recently announced that it would remove Huawei equipment from EE networks, citing "national security" concerns.

It is apparent that the Huawei case represents US pressure on Chinese tech companies, and the US' desire to contain China's global strategy and development in recent years. The essence of the trade war is competition for market space. The trade row instigated by the US is not a huge blow on is own, but China's tech and finance sectors may face considerable pressure.

At present, the US has successfully persuaded some other countries to exclude Huawei's equipment from their 5G networks. In Europe, the UK and Germany will reportedly hold 5G spectrum auctions next year. Undoubtedly, Huawei, the world's largest telecommunications equipment provider, will be the most competitive bidder. However, when a US delegation visited Europe in November, they contended that for security reasons, Europe, as an ally of the US, must exclude Huawei from 5G network construction. Huawei is facing unprecedented pressure from the US government, which will have a serious impact on its business operation. If the telecom markets in major developed countries reject Huawei's 5G technology, its application will face some restrictions.

It should be pointed out that Meng's incident is not an isolated case and will possibly not be the last one. In fact, over the past two years, the US judicial system has stepped up its crackdown on Chinese multinational companies. On December 5, former Hong Kong home affairs chief Patrick Ho Chi-ping was found guilty by a federal jury in New York of bribing African officials for oil exploration rights for a Chinese energy group. On November 19, the chief judge for the Southern District of New York issued an order dismissing the application of six Chinese banks to cancel a property investigation order, media reports said.

These seemingly small cases show that Chinese multinational companies may become targets in the battle between the world's two largest economies.

Meanwhile, this may also serve as a warning to other Chinese companies about doing business globally.

Under these circumstances, strategic judgment is extremely important for deciding how China should set the tone of its relationship with the US, as well as how to strive for more development space in this challenging environment. China needs to make appropriate choices based on its national strength, and to better serve its national interests and the country's overall strategic objectives.

The article was compiled based on a report by Beijing-based private strategic think tank Anbound.


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