Markets plunge over doubts on trade deal
The explosive arrest of the Chinese company’s chief financial officer has shone a spotlight on its global role in telecoms – and its links to the People’s Liberation Army and Communist party, writes Rob Davies
US stock markets fell sharply on Tuesday as investors lost faith in a trade truce between the US and China that had been negotiated by Donald Trump at the G20 summit. The Dow Jones industrial average lost close to 800 points – just over 3%. Other market indexes also fell sharply: the S&P 500 lost 3.2% and the Nasdaq dropped 3.7%.
Many executives consider themselves figures of great significance, but few are capable of sending a chill through global markets simply by getting arrested. Meng Wanzhou, also known as Sabrina Meng or Cathy Meng, is one.
The chief financial officer of the Chinese telecoms giant Huawei – and the daughter of its billionaire founder, Ren Zhengfei – was detained in Vancouver last week. She could face extradition to the US on charges thought to be related to allegations that Huawei breached sanctions levied by Washington against Iran.
Meng’s arrest, and Beijing’s demand that she be released amid allegations of “hooliganism” from the Chinese media, has dashed hopes of a thaw in US-China trade tensions. Chances of a rapprochement had appeared to be on the rise following a 90-day tariff truce agreed between the two countries at the recent G20 summit in Buenos Aires.
Stock markets in the US, UK and Europe – already skittish during this parlous period for relations between the world’s two biggest economies – gyrated on Tuesday and Thursday as investors considered the possibility of a fresh tariff escalation undermining an already fragile global economy.
While its finance director’s arrest has placed the company squarely at the centre of world affairs, Huawei is no stranger to being scrutinised with open distrust. It has been banned from involvement in the installation of 5G mobile networks in India, New Zealand and Australia, blocked from making acquisitions in the US and banned from selling phones on military bases by the Pentagon.
There is no official prohibition in the UK, but BT has excluded Huawei telecoms infrastructure from its own 5G rollout and removed some of its equipment from the 4G network.
Concerns about Huawei seem to emanate, at least in part, from the history of its 74-year-old founder, Ren (see box), who has long had ties with both the People’s Liberation Army, where he served as an engineer, and the Communist party. Moreover, his company has grown into a globestraddling colossus, the world’s largest telecoms equipment manufacturer, selling in 170 countries. It also overtook Apple earlier this year to become the world’s second-largest smartphone manufacturer behind Samsung, churning out 54m handsets in three months.
But however great its success, Huawei has never been able to dispel the cloud of suspicion that hangs over both Ren and his creation. Given the volume of espionage and cyberattacks that originate in China – targeting nations and companies alike – questions have inevitably been raised about the security implications of using Huawei’s technology.
It is, after all, a company founded by a military tech expert. Concern has focused on whether Huawei’s kit could be used to spy on foreign competitors, steal intellectual property or even install “kill switches” in energy or industrial projects. Some analysts have warned that, in the event of a conflict, Beijing could exploit hidden backdoors in Huawei technology to shut down a foreign power’s infrastructure at the touch of a button.
Ren himself has, in his relatively rare public appearances, sought to dismiss such concerns as scaremongering. At the World Economic Forum
in Davos in 2015, he told an audience: “There’s no way we can possibly penetrate into other people’s systems and we have never received such a request from the Chinese government.”
That, of course, is exactly what you’d expect a spy to say.
But the real question isn’t so much whether Huawei is a covert espionage operation but whether it could be coerced into becoming one. For a start, Chinese companies – and Huawei is no exception – typically have a Communist party committee within their corporate architecture. What these committees do, or how much influence they wield, is hard to gauge.
A new national intelligence law that came into force last year may be of even greater concern. Article seven of the law states: “All organisations and citizens shall, in accordance with the law, support, cooperate with, and collaborate in national intelligence work, and guard the secrecy of national intelligence work they are aware of.
“The state will protect individuals and organisations that support, cooperate with, and collaborate in national intelligence work.”
Alarming conditions such as these lend some credence to Huawei’s bogeyman status among governments, even in the absence of any hard evidence to support their fears.
The company has gone to great lengths to address its image problem, hiring legions of PR advisers and allowing GCHQ to run the rule over its tech at a special centre in Banbury, Oxfordshire. The company even hired the British government’s former chief information officer John Suffolk as its global cyber-security officer.
Suffolk himself has pointed out that any fears about Huawei ought to equally apply to any firm that has a role in projects of national significance. “Believe no one and check everything,” he told the Economist.
Huawei’s problem appears to be that no matter how closely it is examined, the facts of its founder’s past – coupled with the global importance of telecoms – mean it can never be given the benefit of the doubt.
According to Ren, the company’s name comes from a patriotic slogan that he saw on a wall one day:
zhonghua youwei, or “China makes a difference”. Unfortunately for Huawei, that difference appears to be an aura of mistrust that is nigh-on impossible to escape.
‘There’s no way we can possibly penetrate into other people’s systems’
Ren Zhengfei, chief executive
Huawei’s stand at the Mobile World Congress in Barcelona last year.