China

The trouble with Huawei

BY Brian Carney & Declan Ganley   /  12 February 2019

Meng Wanzhou, the Chief Financial Officer of Huawei, was arrested by Canadian police on December 1st, 2018, at more or less the same moment that US President Donald Trump was sitting down to a formal dinner with China’s supreme leader, Xi Jinping.

The Trump Administration says that the President did not know of the timing of Meng’s arrest in advance, implying that the confluence of events was coincidental. But the symbolism was unmistakable: On December 1st, 2018, Huawei emerged as a very public piece in the great game between the US and China, and the US took one of its officers off the board even as the Chinese and American leaders broke bread together.

The immediate question after Meng’s arrest was: Could she be bailed pending an extradition hearing? Her personal net worth has been estimated at some $90 million. But she is the daughter of Huawei founder Ren Zhengfei, and so presumably an heiress to billions. Could any financial penalty induce a person in that position not to flee if extradition seemed certain? Her lawyers made a clever pitch. Meng would not flee Canada if bailed because to do so would lead her to lose face, an important matter in Chinese culture. Money may be no object, but face – that was serious business in China.

This reference to “face” was clever because it was actually an appeal to Western cultural norms, disguised as one to Chinese custom. We in the West pride ourselves on our multicultural sensitivity, and the last thing most Westerners want is to be seen as ignorant of another’s culture.

The Canadian courts granted Meng her bail. She is due back in court on March 6th.

In the months leading up to Meng’s arrest, Huawei had signed agreements in dozens of countries to deploy or test new 5G equipment that will form the basis of the next generation of wireless networks across the world. Far from being controversial, Huawei’s steady march across the 5G landscape seemed inevitable and unsurprising. The Chinese upstart has been gradually claiming market share for years, and as 5G standards have solidified, Huawei has also increased its share of the intellectual property essential to next-generation networks.

Until very recently, policy makers in the West appeared completely at peace with this. In part, this was due to a carefully calibrated rhetorical strategy on Huawei’s part. As with the appeal to “face” in the Meng bail hearing, Huawei and its supporters in the West have relied on a kind of quiet Western sense of guilt: Can you be sure that your suspicions of Huawei aren’t rooted in ugly prejudice? Questions of price competitiveness and Chinese-government-subsidized financing played their roles in winning Western carriers over to the cause of Huawei. But policymakers have been reluctant to call out Huawei for special scrutiny in no small part because they fear being seen as racist for doing so.

This forbearance is now being overtaken in at least some Western capitals by another realization. The Chinese government does not share the West’s commitment to freedom of expression, political pluralism or the marketplace of ideas. The internet in China lives behind a Great Firewall maintained at great expense by the Chinese state. And what’s more, Beijing, through its Made in China 2025 program and its Digital Belt and Road Initiative, has made it clear that it views national pre-eminence in technology – and especially communications technology – as a geostrategic imperative. It seems only prudent to take the Chinese government at its word in this regard.

Yet we are still moving too slowly and with an apparent caution that is in reality quite reckless. In early February, Germany ruled out an outright ban on Huawei in the country’s 5G networks. The UK is in the midst of a review that’s due to conclude in March. At this point, a ban in the UK also seems unlikely. Even in the US, smaller rural carriers have now raised their voices against a formal ban. Our own network operators are one force behind this reluctance to act: Carriers, hooked on Huawei’s generous financing (subsidized by Beijing) and competitive pricing, have become the equipment maker’s best advocates.

Businesses will always defend their profit margins; it’s what they do. But the operative question for policymakers is this: Can the West afford to run its vital communications networks over networks designed, built, programmed and in some cases operated by companies founded and based in mainland China, given Beijing’s human-rights record and commitment to primacy in this space? From a geopolitical perspective, the answer is obviously no.

Our wireless networks have become essential not just as communications media. They are now woven into the very fabric of our economies. With more and more smart appliances, thermostats and even cars, it is possible now or will be soon to achieve kinetic effects – to take down the power grid, cause debilitating traffic, prevent the delivery of essential supplies – simply through the manipulation of these networks. It is foolhardy to ignore these facts or treat them as unimportant, and doubly so when a potential geopolitical rival has already informed us of their importance to them.

Brian Carney is Senior Vice President at Rivada Networks and Declan Ganley is Chairman and CEO of Rivada Networks


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