Oh my, how times have changed.
Huawei executives doing the perp walk. American universities shuttering Confucius Centers. Voters in the Maldives, Sri Lanka and elsewhere rejecting leaders who have cozied up to China. Malaysia and others demanding better deals from Beijing or otherwise trying to dig their way out of the Chinese debt trap.
The days when people were ok with China taking over the world are coming to an end. Fast.
For years, supporters of Chinese policies argued that a rising China would grow to accept international norms and be a net contributor to global peace and prosperity. Meanwhile, critics made gloomy predictions that an increasingly powerful China would exert an increasingly destabilizing influence.
That argument is over.
Chinese telecom giant Huawei has become the posterchild for what’s wrong with China – and with good reason. Rather than act as a responsible global company from a responsible nation, Huawei has acted like a pirate on the high seas, abiding by no laws but its own. Now, the chickens are coming home to roost.
Headquartered in Shenzhen, Huawei Technologies Co. Ltd. describes itself as an “employee-owned” business, claiming that its approximately 80,000 employees hold almost 99 per cent of its stocks. However, the vast majority of those shares are controlled by a small group of people who enjoy close ties with the Chinese government and the Communist Party. Few people doubt that Huawei operates as an arm of the government, and U.S. intelligence agencies have warned American citizens not use the company’s products and services.
Meng Wanzhou, Hauwei’s chief financial officer, is under indictment for allegedly attempting to circumvent U.S. sanctions on Iran. She was arrested in December in Canada, and U.S. officials have now filed for extradition.
Separately, Huawei is also under indictment for engaging in allegedly illegal trading practices – mostly stealing stuff from T-Mobile. Stealing intellectual property from U.S. firms is nothing new for Chinese firms. Indeed, intellectual property theft is the centerpiece of the U.S. trade representative’s November report on Chinese business practices.
Oh, there are other charges as well, such as the Chinese government’s highly organized attempt to subvert international trade sanctions. But the trade report is replete with evidence that Hauwei is not really a private company gone rogue. Rather, it appears to be just another corporate puppet on Beijing’s string, one deeply engaged in economic warfare.
But don’t blame the growing disenchantment with China on Hauwei alone. It began two years ago, at the19th Chinese Communist Party Conference, when President Xi Jinping laid out his expansive vision for China’s role in the global economy. His “Belt and Road Initiative” destined to encircle the world with Beijing’s golden tentacles; together with his expansive territorial claims, he surely caused the hearts of the party faithful to quicken.
But Xi also got the rest of the world rethinking the wisdom of handing China the keys to the global car.
Since then a great deal of research has been devoted to analyzing and illuminating China’s behavior. One notable report from Sharp Power explains how China manipulates information. Another, from the Center of International Private Enterprise, explains how China uses “corrosive capital” to undermine the rule of law and threaten democracy.
Today, countries that used to think of China as a benevolent checkbook are starting to question whether it was wise to turn over their telecom structure to a company that does the bidding of an aggressive foreign power with only its own interest at heart.
Now that China has the world’s attention, the question is: What’s next? This is no time for a new Cold War, but the Trump administration has been right to let China know that corrupt business practices and expansionist territorial claims will not go unchallenged. The U.S. can and must defend its interests for the long term.
The dust-up over Huawei aside, there’s a good chance the U.S. and China will cut a trade deal in the next 30 days. That would not be a bad thing. Even a limited deal, for a limited time, would show that Washington has Beijing’s attention, improve some market access for the U.S., and remove uncertainties from global markets.
As for dealing with rogue companies like Huawei, the U.S. should emphasize the necessity of abiding by the rule of law. Washington must not trade away criminal prosecutions in exchange for trade deals or other “concessions” from Beijing. When people break the law, they should be prosecuted for their crimes – not be used for negotiating “leverage.”
Similarly, per the Huawei/T-Mobile case, Chinese companies that steal trade secrets should be subject to the full range of legal punishments, including sanctions as well as criminal prosecutions.
Further, companies that knowingly use stolen intellectual property should be considered traffickers in stolen goods (a federal offense). Once convicted, they should be punished the way any company or individual would be for trafficking in stolen physical goods.
The world is wising up to Beijing’s “good guy” act. It’s time for China to pay the piper.