Ever since news broke of the arrest in Canada of Meng Wanzhou, a top executive of the Chinese telecommunications giant Huawei, at the behest of the United States, there has been an abundance of chest-pounding and hand-wringing in Chinese state media and social media about the implications for the already troubled relations between Beijing and Washington.
In particular, it has stoked fear and anger among Chinese political and business elites who suspect the arrest was politically motivated and Meng was effectively used as leverage in the ongoing trade negotiations between the countries.
For many of them, the case sets a dangerous precedent. They are worried that they could be next to be affected by America’s infamous long-arm jurisdiction which, at a time of increasingly fraught relations between the countries, enables US authorities to use extraterritorial powers to ensnare foreign nationals suspected of violating its domestic laws.
Until her arrest, Meng may not have been well-known to the outside world, but in China she represents the crème de la crème of the country’s booming tech industry, the well-educated heir apparent to a vast tech empire. On top of that, Huawei has long been a source of national pride in China, not unlike how Apple is viewed in America. Hence some overseas media reports compared Meng’s arrest to China arresting the daughter of Steve Jobs had she helped run Apple.
Since then, US officials have argued that her arrest is a law enforcement issue, free from politics, but ensuing details have confirmed suspicion in China that the timing was more than coincidental. Senior US officials were informed of the decision to detain her before the Xi-Trump dinner and a warrant for her arrest was in fact issued more than three months ago, on August 22. US authorities chose to have her arrested on December 1 when she stopped in Vancouver en route to Mexico.
Judging by the reaction, the debate in China seems to be split between those who urge Beijing to directly link Meng’s arrest with its trade talks with Washington to force the latter to release Meng by threatening to retaliate against US and Canadian companies, and those who believe that the Chinese authorities should separate the two issues and ensure that the tenuous trade negotiations are not derailed for the sake of the greater good.
The Chinese leadership seems to have tilted towards the option of continuing a thaw in trade relations while adopting a tough public stance against US and Canada to pacify nationalist anger at home.
The latest sign of China’s intent occurred on Tuesday morning when Liu He, China’s vice-premier in charge of trade talks with the US, called US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer to “exchange views on the timetable and road map to push forward the trade talks”, according to official media.
The overseas media later reported that Liu told American officials China would lower auto tariffs and buy more American products, as earlier flagged by Trump.
After the US and other major international stock markets plunged on the news of Meng’s arrest last week, Trump chipped in, trying to show optimism for a continuing thaw on trade.
On Tuesday, Trump said he would intervene in Meng’s case if it would serve national security interests or help close a trade deal with China. His remarks came after a number of his tweets endorsing an optimistic Chinese official prediction that an agreement could be reached within the 90-day truce period.
While Trump’s latest remarks raised optimism about a trade deal, they again confirmed the suspicion that Meng’s case was intended as leverage, contrary to the claims of other US officials.
Meanwhile, China’s actions have been carefully planned to ensure trade deal negotiations are not disrupted, with Beijing’s wrath more targeted at Canada, the facilitator, rather than the US, the instigator.
Last weekend, Le Yucheng, one of China’s vice-foreign ministers, separately summoned the Canadian and American ambassadors to lodge protests, according to official media reports.
But the subtly different tones in the two reports revealed Beijing’s intentions. While Le slammed both countries for the “vile” move of having Meng arrested, he reserved the harsher language for Canada, telling the Canadian ambassador that his country would face “grave consequences” if she was not released immediately. As it later transpired, Chinese authorities detained two Canadians in a clear act of retaliation. As for the US ambassador, Le merely warned that “China will respond further according to the US side’s actions”.
Xi could have put more pressure on Trump to gain leverage in the trade talks so that he would not be seen as weak in China but there are concerns that doing that could play into hands of China hawks in his administration who may not have wanted a trade deal in the first place.
After Meng was released on bail on Tuesday night, she posted on social media that she was proud of Huawei and her motherland. But the drama surrounding her case is unlikely to end any time soon.
Already, there are suggestions that some Chinese business elites, many of whom have studied and worked in the United States, have started to rethink their travel plans and investment strategies. Such developments do not speak well for the future of business ties between the world’s two largest economies.
Meanwhile, Meng’s case has focused attention on moves by the US and its Western allies to block Huawei and ZTE, another Chinese telecom giant, from their domestic markets. There is growing concern that the campaign could spill over to other Chinese companies in less sensitive industries.
There are lessons here for both Chinese firms and the Chinese government.
First of all, as they expand overseas, Chinese businesses must boost their legal resources to better protect themselves in foreign countries. Huawei and ZTE are already two of China’s most international companies, engaging top-rate overseas firms and advisers, but they still got into trouble.
It does not augur well for other less sophisticated Chinese firms which are used to the old ways of bending rules and cutting corners in China.
Secondly, the Chinese government should take measures to protect Chinese companies as they compete in an increasingly hostile international market.
For instance, the government could do private businesses a big favour by weaning itself off the current campaign to impose ideological controls on them.
In recent years, the Communist Party has forced private businesses to set up party branches and appoint party secretaries to strengthen its control over society.
The move is folly and counterproductive, to say the least. First and foremost, they are businesses through and through, and should not be treated as branches of the party.
Most entrepreneurs have paid friendly party members as nominal party secretaries to run the branches and make sure they keep out of the way.
But such impositions pose another layer of difficulty for firms when they expand overseas.
It gives foreign critics an excuse to paint private firms and their owners as tools of influence for the party, making expansion even more difficult.
It is highly ironic that while for years foreign businesses have called for a level playing field in China, Chinese officials have started to call for the equal treatment of Chinese firms in overseas markets.
More Chinese firms are likely to be caught up in the power politics between China and Western countries but the Chinese government can make the life of those firms easier if it eases up its ideological campaign, for a start. ■
Wang Xiangwei is the former editor-in-chief of the South China Morning Post. He is now based in Beijing as editorial adviser to the paper