US-China Tensions Heighten As US Charges Huawei With Fraud And Theft

On 28 January, the United States Department of Justice charged Chinese telecommunications giant Huawei with fraud and theft, further escalating tensions between Washington and Beijing. Huawei was charged for having violated sanctions against Iran by selling equipment and for having stolen trade secrets and US technologies, particularly from American telecommunications company T-Mobile.  Meanwhile, Huawei’s Chief Financial Officer Meng Wanzhou has been accused of committing fraud and misleading banks into believing Hong Kong-based shell corporation Skycom Tech was separate from Huawei.

Christopher Wray, director of the US Federal Bureau of Investigation (FBI), has said that the cases “expose Huawei’s brazen and persistent actions to exploit American companies and financial institutions, and to threaten the free and fair global marketplace.”  Another American official, US Secretary of Commerce Wilbur Ross, has said, “For years, Chinese firms have broken our export laws and undermined sanctions, often using US financial systems to facilitate their illegal activities.  This will end.”  Huawei has responded by saying that it didn’t commit “any of the asserted violations,” and that it “is not aware of any wrongdoing by Ms. Meng.”

Tensions were first aroused over the arrest of the corporation’s CFO Meng Wanzhou on 1 December 2018. At the request of US justice officials, Royal Canadian Mounted Police arrested Ms. Meng as she was waiting for a flight at Vancouver International Airport.  Her arrest sparked immediate outrage in China, with Chinese officials denouncing the arrest and Canada’s role in it.  On 8 December, the Canadian ambassador to China, John McCallum, was summoned by the Chinese government and was told that Canada would face the consequences.  A few days later, on 11 December, Canadian Michael Kovrig was detained by Chinese authorities and Ms. Meng was released on bail.

The next day, Canadian businessman Michael Spavor was also detained on suspicion of endangering national security.  On 21 December, Canadian Foreign Affairs Minister Chrystia Freeland called for the immediate release of the two Canadians and accused China of detaining them without cause.  On 8 January 2019, Reuters reported on the connections between Huawei and Iran and Syria.  From then on, a series of diplomatic spats between China and Canada took place, including fears over the equipment used to run Huawei’s 5G mobile network system.  During this two-month situation, Canada-China and US-China relations have rapidly deteriorated.

The Huawei affair represents the latest manifestation of growing distrust among political and business circles in China and the United States.  Though US Commerce Secretary Ross insists that the affair is separate from other ongoing trade disputes, the magnitude of the affair can only be understood by placing it in the context of the trade war. Thus, if the Huawei affair is not amicably resolved in due time, then it is unlikely that Washington and Beijing could reach any sort of consensus on other aspects of their trade relationship, much less the more serious security issues such as the South China Sea or the Korean Peninsula.  In effect, the Huawei affair is the tip of the iceberg that both China and the United States must chip at in order for relations to markedly improve.

With tensions between Washington and Beijing already running high, both powers must seriously consider the ramifications of their continued disputes.  With a world facing a myriad of problems, from climate change to terrorism, now is not the time to be engaged in such trivial matters.  Now more than ever, cooperation among the world’s great powers is essential to maintain peace, stability, and prosperity.  Both countries should be clear that they will uphold international norms and international law when it comes to trade relations.  Both countries should harness their vast economic resources to work towards mutual prosperity and act as the anchors of the global economy.  It is hoped that the two superpowers resolve their differences and repair what is described as “the most important diplomatic relationship.”