MS Risk Blog

China’s Moves in Wake of Huawei Arrest

Posted on in Uncategorized title_rule

Although lots of politically significant developments could be witnessed in 2018, not many of them have had so far-reaching global implications as the arrest of Huawei’s chief financial officer (CFO), Meng Wanzhou, in Canada on December 6, at the request of the United States, on charges of violating U.S. sanctions against Iran and of committing bank fraud to cover up Huawei’s business dealings there. This seemingly very straightforward law-enforcement action has prompted China to retaliate by allegedly taking Canadians as “revenge hostages” on made-up charges in much the same way as it would likely to be happening in some third-rate dictatorship.

For China, Meng Wanzhou is not just a mere CFO of a company. As the daughter of Ren Zhengfei, Huawei’s founder and chairman, she will inherit the company upon his retirement. Her father Ren Zhengfei, a former Army engineer grew Huawei into the largest private company in China and the No. 2 mobile phone manufacturer in the world, and is a national champion at the forefront of President Xi Jinping’s efforts for China to be self-sufficient in strategic technologies.  At the same time, however, Huawei is a leading spy agency of China’s Communist Party. Chinese law mandates that companies help spy for China. Article 7 of China’s National Intelligence Law says, “Any organization or citizen shall support, assist and cooperate with state intelligence work in accordance with the law, and keep the secrets of national intelligence work known to the public.”

The company’s role in the Chinese Communist Party is comparable to that of steelmaker Alfred Krupp in Germany before World War II.  According to the New York Post:

“Just as Germany’s leading supplier of armaments basically became an arm of the Nazi machine after war broke out, so is China’s leading hi-tech company an essential element of the party’s […] plan to dominate the world of the future “.

While Huawei claims that it has never engaged in intelligence gathering, a series of evidence indicates otherwise. These security fears have led several countries, including the U.S., Britain, Canada, New Zealand and Australia, to block Huawei from dominating their wireless networks. Not only have they largely kept Huawei out of their own countries, they have convinced other countries like Japan, India and Germany to go along, too.The U.S. has even banned all Huawei devices from its military bases worldwide. According to FBI Director Christopher Wray these devices give the Chinese power to “maliciously modify or steal information” and “conduct undetected espionage”.

Huawei is the leading company in upgrading cellular networks from 4G to 5G technology. The Communist Party knows the power potential 5G holds. Because 5G is 100 times faster than 4G, it is being primed to run many of the world’s connected devices. Whoever dominates 5G will soon dominate the Internet.

Huawei’s rapid rise as a leader in 5G technology has largely come through Communist Party’s help providing it with low-interest loans and blocking out free-market competitors from the Chinese market. In return, the government can ultimately use Huawei’s 5G technology to gain access to unprecedented amounts of intelligence.

Huawei, both literally and in name, serves China’s efforts for world domination. The Chinese characters that spell its name can mean “To Serve China.” Huawei’s importance to China’s Communist Party should not be underestimated. The government can not and will not respond lightly to anyone who threatens its rise to dominance.