The case of Huawei CFO Meng Wanzhou: what happens when both the US and China play the victim

  • Drew Thompson says the US has its own narrative of victimisation to counter the Chinese one: it sees itself as the victim of intellectual property theft. The arrest of Meng Wanzhou is just the biggest case, so far, in the Justice Department’s campaign
PUBLISHED : Thursday, 20 December, 2018, 1:01am
UPDATED : Thursday, 20 December, 2018, 4:11am

The arrest of Huawei chief financial officer Sabrina Meng Wanzhou is the highest-profile salvo in an increasingly tense economic and technological competition between the United States and China. At the heart of this competition are two duelling national narratives of victimisation that justify each country’s approach to bilateral competition, including in the realm of intellectual property and technology. Importantly, these opposing narratives entrench each side’s position and reduce the potential for a simple or satisfactory resolution.

China’s narrative of victimisation at the hands of Western powers is central to Xi Jinping’s Chinese dream, but hardly a new story. China has long seen itself as the aggrieved underdog seeking to catch up with the West, which justifies gathering knowledge, intellectual property and technology – and achieving the objective of national rejuvenation – by any means necessary.

Visitors to China in the 1980s and early 1990s will recall how the upper floors of Xinhua bookstores were off-limits to foreigners: tables and shelves were laden with photocopied texts of Western classics and unlicensed reproductions of technical books because the authorities believed China needed the knowledge but could not afford to pay royalties to wealthy Western intellectual property owners. Decades ago, the stakes were lower; intellectual property theft was an irritant to the bilateral relationship but it was tolerated because there were larger issues.

However, that culture of intellectual property and technology acquisition continues unabated to this day, and has become a major cause of friction between the two countries. The Trump administration, like its predecessors, has detailed its grievances against China, including high duties and technology thefts that have cost the United States billions of dollars, caused economic damage and hurt competitiveness.

The scope and scale of the illicit acquisition of technology has expanded along with China’s economy, with perpetrators using both hi-tech and low-tech means to acquire increasingly high-value technologies.

History has caught up with the bilateral relationship, however, as the textbook pirates of yore are replaced by cybertheft and insiders with thumb drives. The Trump administration has decided that enough is enough: the US has been a victim of theft and predatory economic practices for long enough, and can no longer afford to turn a blind eye to China’s misconduct.

The US is responding comprehensively, using political and legal tools to hold Chinese people and organisations accountable in an effort to change behaviour. Armed with tariffs and the threat of more, the US Trade Representative is leading negotiations with its Chinese counterpart to address US objections to practices and policies that disadvantage US companies and workers.

How China’s blatant IP theft, long overlooked by US, sparked trade war

The Justice Department has launched a law enforcement campaign called the China Initiative, empowering prosecutors and law enforcement bodies to share evidence, conduct investigations and bring cases against individuals and companies breaking US laws. Meng Wanzhou is the highest-profile target of this legal effort, but she will doubtless not be the last.

Congress is also playing a role, crafting legislation that empowers the executive branch of government to protect US technology. Even in a deeply polarised Washington, stopping the Chinese theft of intellectual property and technology is a bipartisan issue with no detractors.

In August, Donald Trump signed into law the Export Control Reform Act of 2018 and the Foreign Investment Risk Review Modernisation Act, updating export controls and scrutinising the release of critical technologies.

While China is not specifically mentioned in either act, there is little question that the laws are a reaction to concerted Chinese efforts to acquire high-end technology through US exports or acquisition of US companies that developed it.

Both the US and China have been overt about their intentions and strategies. Xi has proselytised his Chinese dream of national rejuvenation, his intent to make China a global power. High-profile plans, such as “Made in China 2025”, have articulated China’s goal of dominating the world in advanced technological and industrial sectors.

To accomplish this, the Chinese government and companies have invested billions in research and development, but have also been unable to wean themselves off Western technology, bought or stolen. This behaviour is justified by the national narrative of victimisation. The US, however, has a narrative of its own.

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The Trump administration has declared its intent to compete with China, a critical component of which includes preventing the theft or inappropriate transfer of US technology. This strategy is not the act of a declining power seeking to prevent the rise of a competitor, nor an attempt to contain China, despite suspicions in Beijing.

The October arrest of a Chinese Ministry of State Security officer on charges of economic espionage, and the November indictment of China’s Fujian Jinhua Integrated Circuit and Taiwan’s United Microelectronics Corporation for theft of semiconductor chip designs from Micron, are the most recent fruits of the Justice Department’s China Initiative. The arrest of the Huawei CFO is not a political act but a legal case, exposing weak corporate governance and disregard for US law.

There is no indication that Beijing’s and Washington’s competing narratives of victimhood will conclude, or that Beijing will stop seeing Washington’s moves as attempts to subjugate, divide or contain China. China’s economic nationalism is seen in the West as economic aggression, however, and the Trump administration has decided it no longer wants to be the victim.

Drew Thompson was the director for China at the US Department of Defence. He is currently a visiting senior research fellow at the Lee Kuan Yew School of Public Policy at the National University of Singapore. He can be followed on Twitter: @TangAnZhu