The arrest and possible extradition of a high-rankling Huawei official should be of concern to anyone doing business abroad. It is bound to have a domino effect as other nations line up to wreak havoc on strategic competitors to their respective domestically based corporations.
Or will it? This has been standard operating procedure for China for years. Whereas Moscow specializes in kidnappings for ransom, that’s Finance 101 compared with the Bear’s doctoral dissertation. China’s motive is longer in range — and the detainment longer in duration. What prevents many countries from acting in such rash fashion is the inevitable broadside to their reputation. China doesn’t mind the public relations hit, provided its broader objectives are met. And that objective is complete control over its economy and security. To the Chinese government, gulags are a feature, not a bug.
Canada rolled up Meng Wanzhou at the request of the US government, which cited an unsealed indictment against the Huawei CFO. It is widely believed Huawei is a front for the Chinese government, in part because its founder (Meng’s father) is a former Chinese intelligence office. Huawei denies the charges, but the US knows of what it accuses: In 1999, no less an entity than the Taliban had approved a plan for Afghan Wireless Communications — essentially a front for the American government — to build out the phone and Internet system in Afghanistan. If not for infighting in the US government, America could have had the entire country tapped.
When contemplating these latest events, consider these issues:
- The US has not yet indicated why it wants Meng. (The early buzz is the company is shipping illicit gear to Iran, in violation of international sanctions.) What happens the next time an adversary decides to nab an American? Who has the moral high ground? Do we trust the government — any government — enough to take it at its word? Or is Meng a pawn in a bigger, as-yet to be disclosed play?
- What will be the cost to US businesses that do (or want to do) business in China?
- How far is the US willing to go in terms of disclosing what it knows about Huawei’s operations? Sometimes it’s more useful to allow the behavior to continue in order to monitor it surreptitiously. Also, alerting others could give them a leg up on determining where their vulnerabilities lie, and lead them to close those gaps.
- There’s a trade war ongoing between the US and China (really), causing several major electronics ODMs to consider relocating factories from both nations, not to mention higher costs to consumers. Some, like Foxconn chairman Terry Gou, think the effects will last for years. Will Meng’s arrest lead to further economic isolation and barriers among the world’s two largest economies?