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China’s judgment on Huawei case: Anger, patriotism and iPhone boycotts

A Canadian court on Dec. 11 granted bail to a top executive of Huawei Technologies while she awaits a hearing for extradition to the U.S. on fraud charges. (Video: Reuters)

BEIJING — For many in China, the arrest of a senior executive from tech giant Huawei on a U.S. warrant is not about laws or sanctions or justice. It is about national pride.

The fraud allegations against Meng Wanzhou — Huawei Technologies’ chief financial officer and daughter of the founder — fit neatly into the Chinese narrative about American efforts to undercut China’s rise as an innovator and rival, especially in the race for the next step in smartphone technology, known as 5G.

Adding to that, Meng is seen in China as something of a corporate princess, and Huawei is deeply vested in Beijing’s push for ­Chinese-led development across Asia and beyond.

“The United States is deliberately doing this to Huawei because Huawei is an industry leader from China,” said Chen Lili, a 30-year-old doctor on a break from work at a hospital near a Huawei store in Beijing. “When I first heard about Meng’s arrest, I was shocked and angry.”

U.S. authorities offer very different stories. Meng, they say, has engaged in deception about Huawei’s ties to a company suspected of flouting U.S. sanctions on Iran. Huawei is cast as a potential threat for cyberespionage against the West and allies.

The clash of these contrasting portrayals has made Meng’s case a study in many of the deeper issues — competition, national security, international influence — that are intertwined with ongoing trade battles and nearly every dealing between Beijing and Washington.

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“Whether in the [Chinese] government or among the people, they will attach more importance to Huawei’s development and support it more now,” said Wu Xinbo, a professor of international studies at Fudan University in Shanghai. “In U.S.-China trade negotiations, this will just make China more determined to promote high-tech development.”

Meng, who was arrested Dec. 1 in Vancouver, B.C., faces U.S. charges of fraud for allegedly claiming Huawei had no financial ties to a Hong Kong-based ­company, Skycom, that sold U.S.-manufactured goods to Iran. It remains unclear when Meng, who was released on bail Tuesday, could be extradited from Canada.

But many Chinese have already issued their judgment.

“This is definitely not just about the law. This is something very vile in nature,” said 29-year-old office worker Lang Bin.

Chinese companies also are ­rallying around Huawei, which makes smartphones and networking hardware — a Chinese version of Apple and Cisco combined. Earlier this year, Huawei passed Apple as the world’s No. 2 smartphone supplier behind leader Samsung.

Mengpai Technology, which develops Internet-connected products, issued a “notice of support” for Huawei, offering 15 percent subsidies to staff and contractors who buy Huawei phones and pledging to fine them 100 percent of the cost if they buy an iPhone. The company also has instituted a ban on buying ­American-brand office equipment or American-brand cars.

Another tech company, electronics parts supplier Shenzhen Huiyisheng, went even further.

It said it would reward staff with Huawei phones with 500 yuan — about $72 — and asked those with iPhones to surrender them. Those who refuse would be fired, the company wrote in a post on Weibo, the Chinese version of Twitter.

A chamber of commerce in Shanghai offered similar incentives for buying Huawei and similar punishments for using Apple products.

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The United States “is trying to do whatever it can to contain Huawei’s expansion in the world simply because the company is the point man for China’s competitive technology companies,” the state-run China Daily wrote in an editorial.

Huawei, while being a private company, is closely aligned with the Chinese government.

“You don’t get to be a company the size of Huawei without playing ball with the government, without understanding the ­government’s priorities and helping execute them,” said Andrew Polk, founding partner of ­Trivium/China, a Beijing-based research firm.

Indeed, Huawei has been a linchpin in two of President Xi Jinping’s flagship projects: the trillion-dollar-plus “One Belt, One Road” infrastructure initiative, through which China is building airports and roads and cellphone networks across 60 countries, and “Made in China 2025,” aimed at turning China into the world leader in high-tech manufacturing. 

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When a leading Chinese scholar gave a presentation at a forum dedicated to the “One Belt, One Road” initiative last year, he used Huawei as an example to illustrate how the government’s expansionist project and China’s technology companies were growing hand in hand along a “Digital Silk Road.”

“Huawei has become what it is today because of the Belt and Road,” Zhang Yansheng, the principal researcher at the state-affiliated China Center for International Economic Exchanges, told the conference in Beijing.

When the president of Laos visited Beijing in May, he was greeted at the Diaoyutai State Guesthouse both by the president of China and the president of Huawei’s Southeast Asia regional division.

At the heart of the current trade dispute are Washington’s worries about Beijing’s ambitions for global technology leadership. U.S. Trade Representative Robert E. Lighthizer says China seeks to ­acquire American technology through any means necessary: ­acquisition, coercive joint venture licensing and outright theft.

Though U.S. officials say Meng’s arrest is unrelated to the trade spat, Huawei is one of the Chinese “national champions” that illustrate the administration’s concern about the marriage between Beijing’s financial resources and the research abilities of a commercial enterprise.

Huawei is one of a handful of global telecom companies developing the patented innovations that will set the global technical standards for the emerging fifth generation, or 5G, of cellular technology.

5G will provide faster, more capable mobile broadband services and make possible the “Internet of Things,” connecting billions of individual sensors in homes, factories and government offices across the country. Self-driving cars, more-efficient home appliances, virtual reality entertainment systems and smart factories all will rely upon 5G networks.

In the United States alone, 5G deployment is expected to involve $275 billion in network investment, according to the Information Technology and Innovation Foundation (ITIF), a Washington think tank.

Following congressional assessments that Huawei is a national security risk, the largest American carriers have stopped using Huawei equipment, and the company is effectively banned from supplying the American 5G network.

Australia and Japan have joined the United States in taking a hard line against Huawei, which can offer quality equipment that is often up to 30 percent less expensive than alternatives.

But even if Huawei gear isn’t used in new U.S. networks, the company still could profit by licensing its technology to American makers of cellular infrastructure. China holds about 10 percent of patents related to 5G standards, most of them belonging to Huawei, according to Doug Brake, ITIF’s director of broadband and spectrum policy.

“The market for the equipment itself is significant, but the intellectual property that goes into the equipment and end-user devices is huge,” he said.

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American spy agencies have long warned about what they consider the potential threat of espionage posed by having Chinese equipment used in U.S. telecommunications networks.

“The security agencies were very clear that this wasn’t a matter of conjecture on their part,” said one industry source, who spoke on the condition of anonymity because the conversations were confidential. “They felt they had found clear evidence of compromise.”

In late 2009, the National Security Agency advised AT&T, which was considering Huawei components, that it had best select another supplier if it wanted to continue its lucrative business with the U.S. government.

Chinese tech firms such as Huawei and ZTE “represent a counterintelligence threat because the Chinese approach is to use them as intelligence gatherers,” said James R. Clapper Jr., who retired last year as director of national intelligence.

“They not only permit it but encourage it,” Clapper said in an interview. “So if you buy their equipment or avail yourself of their services, you open yourself up to a potential counterintelligence vulnerability.”

China denies any such spycraft.

Britain, however, has not been persuaded by U.S. arguments and in 2003 decided to allow Huawei into its telecommunications network, though Huawei equipment is not allowed to touch any government intercept capability.

Britain is currently weighing whether to let its telecom companies use Huawei equipment in their 5G networks. One carrier, BT, said this month that it began stripping Huawei gear from its existing 3G and 4G networks in 2016 and said the Chinese company “has not been included in vendor selection for our 5G core.”

“Is there a potential risk for the future? Of course. Everybody accepts that,” said Robert Hannigan, who headed GCHQ, a British intelligence service, until January 2017.

Hannigan said he thinks “there’s a hysteria about” the Huawei issue.

“What we need,” he said, “is sober analysis, informed by expertise and intelligence.”

Lynch and Nakashima reported from Washington. Luna Lin and Yang Liu in Beijing contributed to this report.

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