The Arrest of Huawei's Meng: Full of Portent--and Irony

Duncan J. McCampbell

If you are, like me--interested in China, the law, politics, business—then the recent arrest in Canada of Huawei CFO Meng Wanzhou provides you with a virtual cornucopia of writing options. Though not a household name in the U.S., Huawei is one of China’s national champions (more on that later), making more mobile devices than Apple and—more importantly—battling with the likes of Ericksson (Sweden) and Nokia (Finland) to own global 5G network standards.  Meng, the daughter of Huawei’s founder, is correctly described as Chinese royalty. If Steve Jobs were still alive, still running Apple and his daughter was Apple CFO, you might have a rough equivalent.

Meng was detained last week by Canadian authorities at the request of the U.S. while changing planes in Vancouver.  The arrest warrant for Meng was issued months ago. American authorities want her extradited to the U.S. to face charges that Huawei violated sanctions against Iran. Meng’s bail hearing is tomorrow (9 December). The U.S., citing flight risk, doesn’t want her released, and filed papers revealing that Meng was in possession of no less than seven PRC and Hong Kong SAR passports.

So perhaps you’ve fired up your computer and brewed a pot, ready to write something insightful and timely about the issues raised by Meng’s arrest.

The first, obvious candidate would be about the curious timing of the arrest--whilst Presidents Trump and Xi dined in Buenos Aires. The Chinese are, of course, certain that Trump ordered the arrest to give him leverage in the trade war. Incidentally, do you remember the last time the two dined—at Mar-a-Lago right after the election. That was when Trump announced, over the chocolate cake, that the U.S. had just attacked Syria in retaliation for Assad’s use of chemical weapons. That was a very shabby way to treat a guest, in my opinion.

We learn, however, that Trump was not aware of the Meng situation. I find that quite plausible. It is the obligation of Trump’s staff to notify him of such matters. And indeed Trump’s National Security advisor John Bolton, was aware of the arrest. My sense is that Bolton, who is no friend of China’s, planned to brief Trump but correctly calculated that this piece of data in Trump’s hands—at that time--might lead to unfortunate results. You remember that Trump, much to the dismay of almost everyone in the U.S. government and defense communities, reversed the punitive sanctions against another huge and very badly behaved Chinese tech company, ZTE, in order to make nice with Xi. Trump loves to make deals and show that he’s in charge. Had Trump known about the arrest at the time that he met with Xi he would have told Xi not to worry, that he’d make a couple calls and get her released. Then all hell would have broken loose with the people who were merely adhering to the rule of law: the Canadians, the beleaguered Department of Justice and his intelligence communities. Bolton, to his credit, kept that from happening.

Next in line for China’s ire are the lovely Canadians who, respecting the rule of law and their extradition treaty obligations, arrested Meng at the request of their eternally grateful neighbors to the south. This act drips with irony. Relations between the leaders of the U.S. and Canada have not been brilliant since Trump slapped tariffs on Canadian steel and aluminum on the deeply insulting grounds of national defense. Stalwart Canadians have been fighting alongside Americans in almost every foreign military conflict of the prior century, most recently having our back in Iraq and Afghanistan. Together with the UK, Canada has been our most reliable military ally. But that didn’t save Canada from Trump’s tariffs. Let’s see how eager the Canadians will be the next time the U.S. gets into a tight spot around the world.

The Chinese, displaying a need to deepen their understanding of non-authoritarian government systems, demanded that Prime Minister Trudeau intervene and release Meng. Canadians can be proud of his response:

“We were advised by [law enforcement] with a few days notice that this was in the works but of course there was no engagement or involvement in the political level in this decision because we respect the independence of our judicial processes.” Washington, if you’re listening, this is how a prudent national leader expresses correct and confidence-building perceptions of his nation’s legal institutions.

Following our political discussion one might be inclined to make comparisons between the Chinese and Canadian legal systems.  But first let’s hear the breathless statement issuing from China’s Foreign Ministry. Meng’s arrest “severely violated the Chinese citizen’s legal and legitimate rights and interests, it is lawless, reasonless and ruthless, and is extremely vicious.” Yes, this spokesman works for the same government that recently made global news by detaining, without formal charges or access to a lawyer, famous Chinese actress Fan Bingbing for three months without bothering to tell anyone about it.  But here we have the Vancouver press reporting that Meng, seemingly recovered from her vicious arrest and, represented by counsel, appearing at her PUBLIC bail hearing, smiling and relaxed. I take this as affirmation of the widely held view that if one must be arrested, best to have it happen in Canada.

I believe that the Meng arrest stands as a milepost for a much bigger idea: that we may have reached the limit of accommodation between China and the West. In short, the Chinese have gotten big enough and strong enough to demand respect (though not always, as in diplomacy and rule of law issues, actually earning it) and systems favorable to them. I lived and worked in Beijing at a time (2007-08) when the popular view was that the Chinese were moving in more liberal directions (i.e. towards us) in many ways. But since Xi amended the Chinese constitution to provide for an indefinite term in office, and as we have been learning recently in the realm of national industrial policy, the more China interacts with the West, the more the fundamental incompatibilities emerge. I believe that the way forward is not to demand concessions or changes in the other’s system, but to sensibly manage the conflicts which arise out of system incompatibilities.

China’s legal system was always fundamentally incompatible with Western legal systems built around something quite foreign to China: inviolable individual rights and the bottom-up sovereignty of the people.  One cannot study Chinese law and history, however, without having a deep appreciation of its unique and remarkable contributions to the law. While Rome declined and Europe slid into the Dark Ages, China was strong and vibrant, producing the world’s first permanent legal code. The Tang Code 唐律 was created in 624. Like all ancient Chinese codes, the Tang and its successor, the Great Qing (大清律例) were primarily proscriptive penal codes, detailing the relationship between the Emperor, who held all power, and the people, over whom he ruled. People in such top-down cultures can’t understand that President Trump probably didn’t order the arrest of Meng. People from bottom-up cultures like ours can’t imagine a place where you can be arrested by a government and no one knows where you are—for months.

As in law, I believe the West and China are approaching the limit of commercial integration, with technical dis-integration a still distant, but not inconceivable prospect. China’s leaders have decided that instead of the world always following American technical leadership, they want tomorrow’s global technical standards to be created and owned by Chinese companies. Why not? Why should the whole world (except North Korea) use, for example, Intel processors or Microsoft Office software?

So the Chinese government, taking a page out of Japan’s post-World War II playbook, has created a vision for global dominance in a number or key areas called Made in China 2025. The Japanese rebuilt their war-ravaged economy by creating national champions—companies and industries that receive generous government support and protection, and which later achieved world leadership. We know them today: autos, with Datsun (later Nissan) and Toyota; consumer electronics with Sony and Panasonic, cameras and imaging with Canon and Nikon.

This brings us back to Huawei, the world’s largest telecommunication equipment supplier and a Chinese national champion of the highest order. Western analysts often point suspiciously to the fact that Ms. Meng’s father, Ren Zhengfei, was once an officer in the People’s Liberation Army. What’s more important is that Huawei equipment and technology, if misused, could give the Chinese government and military unprecedented access to western network communications. Remember that a Chinese national champion is not just a big company; it is a company chosen by the Chinese government to advance Chinese national interests by becoming the dominant player in its industry, globally.  These companies are controlled by the Party, receive generous government subsidies and draw only the brightest scientists and engineers from China’s top universities. Australia this year banned Huawei from providing 5G network technologies, citing espionage fears. New Zealand followed suit shortly afterwards, as has Japan.

Huawei is the perfect bogey-man for the China hawks in the Trump administration, and they may be right. It is obvious to me, however, that they have little genuine appreciation of Chinese culture and the role of politics in China’s industrial policy. They believe that by imposing tariffs and causing economic pain they can get the Chinese to change their behavior and play by Western rules. That will never happen. Oh, the Chinese will try to reduce tension and conflict by making minor concessions. But what the Trumpists don’t understand is that Chinese industrial policy is cooked into their system of political control—a system with one over-arching goal: to keep the Party in power. 

In China there is no separation between public and private sectors. Most large companies in China are owned by a unit of the Chinese government. If you are the head of that company it is likely because you are able and energetic. The Chinese are nothing if not practical. But you never forget that you enjoy the trappings of wealth and power because you are a reliable servant of the Party and you do things that the government believes are good for China. The Trump Administration wants China to treat foreign companies fairly, but that will never happen because foreign companies are outside of China’s system of political control.

I don’t think president Xi believes that Trump had Meng arrested to get a leg-up in the trade war. But if he does, we will know soon enough. They’ll arrest an American executive.