A dra­matic ar­rest may be the least of it: Huawei’s trou­bles are in­ten­si­fy­ing

The Guardian - Journal - - The Guardian -

Mar­kets can be er­ratic beasts, as in­dica­tive of col­lec­tive neu­roses as col­lec­tive wis­dom. But it is not sur­pris­ing that they re­acted to Wed­nes­day’s thun­der­bolt.

Much re­mains un­clear about Canada’s ar­rest of a pow­er­ful ex­ec­u­tive from Chi­nese tele­coms be­he­moth Huawei at the re­quest of the US. What­ever pre­cisely hap­pened, and how­ever this plays out, it is a dra­matic course of ac­tion against a com­pany at the heart of Chi­nese tech­nol­ogy am­bi­tions – and the push­back against them. It comes in the midst of a trade war with the US and broader se­cu­rity fears about Chi­nese firms.

Huawei is the world’s largest tele­coms equip­ment provider, and its sec­ond largest mo­bile phone man­u­fac­turer: it is a pil­lar of the Chi­nese econ­omy.

Its founder Ren Zhengfei is a former mil­i­tary of­fi­cer; the ar­rested ex­ec­u­tive, Meng Wanzhou, is his daugh­ter.

Note also the tim­ing. She was ar­rested on 1 De­cem­ber: the day Xi Jin­ping and Don­ald Trump sat down to din­ner in Buenos Aires. No one in China will see this as any­thing other than in­tensely po­lit­i­cal, what­ever the truth of the mat­ter. Diplo­mats have de­manded her re­lease and say she has bro­ken no laws.

Re­ports say the ar­rest re­lates to al­le­ga­tions that Huawei has breached US sanc­tions on ex­ports to Iran; US pros­e­cu­tors be­gan an in­ves­ti­ga­tion two years ago. Last year, ZTE, an­other Chi­nese tele­coms firm, pleaded guilty to sanc­tions vi­o­la­tions. A dev­as­tat­ing US ban on the sale of parts and soft­ware to the firm was down­graded to an $892m fine and mon­i­tor­ing after Mr Trump’s in­ter­ven­tion. No one was de­tained that time. So why an ar­rest, why her and why now?

In the back­ground is in­tense and grow­ing sus­pi­cion to­wards Huawei and other Chi­nese firms, which they say is un­mer­ited. Western in­tel­li­gence of­fi­cials have re­peat­edly raised con­cerns about Huawei’s in­volve­ment in in­fra­struc­ture.

Now New Zealand and Aus­tralia have joined the US in bar­ring Chi­nese equip­ment in the roll­out of 5G net­works, and Wash­ing­ton is lob­by­ing other al­lies to do the same. The is­sue is es­pe­cially pointed for the re­main­ing mem­bers of the “Five Eyes” in­tel­li­gence al­liance, Canada and the UK. The day be­fore the ar­rest be­came pub­lic, Canada’s top spy warned of the risks of state-spon­sored es­pi­onage in ar­eas such as 5G mo­bile net­works. Ear­lier this week, MI6 chief Alex Younger said the UK needed to de­cide how com­fort­able it was with Chi­nese own­er­ship of tech­nolo­gies be­ing used. For­eign firms will not be in­volved in China’s 5G net­work.

Mar­ket nerves were driven by the as­sump­tion that this ar­rest could rat­tle the cur­rent, frag­ile trade truce – though China wants a deal and has now said it will im­me­di­ately im­ple­ment agreed mea­sures. What­ever the fall­out and longer-term out­comes, Huawei’s tra­vails and the trade dis­pute re­flect broad and grow­ing western con­cerns about China’s in­creas­ing in­ter­na­tional might, and how it does and will ex­er­cise it.

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