China sought to reassure US executives on Friday on rising concerns over a possible government response to the arrest of Huawei chief financial officer Sabrina Meng Wanzhou in Canada at the behest of the United States.
Anxiety is growing that US executives may be targeted by China in retaliation for the “aggressive” US action, fuelled by analysts warning of a possible China response.
Asked by the South China Morning Post whether China would retaliate against foreign business executives in China, Chinese foreign ministry spokesman Geng Shuang said China “has always protected the legitimate rights and interests of foreign nationals in China and they should obey Chinese laws [when they are in China]”.
Jason Wright, founder of Argo Associates, a Hong Kong intelligence firm, said the arrest was an “aggressive act” and China would be obliged to retaliate.
“Any retaliation would be carefully considered. It might take the form of an antitrust investigation, or claims of corruption. There are many ways to retaliate,” Wright said.
Chinese corporate executives are also concerned. They fear that the arrest of an individual executive at a prominent Chinese firm means the US has become more aggressive in its strategy to erode China’s technological advances and so could take aim at any executive at any Chinese tech firm at any time.
A business consultant who has had contact with senior executives at Huawei and other mainland Chinese tech companies said that even though the arrest targeted an individual, other senior executives might curtail their overseas travels in the coming months to lower their business risks.
“They will be worried if they are safe to go overseas,” he said.
The consultant, who asked not to be identified, said he had been advising Chinese tech firms to beware of the risks of being targeted by the US. He urged them to involve American investors in their operations to reduce the risk and gain an ally in any conflict with the US government.
It is unclear what, if any, impact the arrest will have on US-China trade negotiations that are expected to start later this month. Chinese official media has played down the incident, with Xinhua News Agency stressing again on Friday that the success of the meeting between Chinese President Xi Jinping and his US counterpart Donald Trump on December 1. But US national security adviser John Bolton said on Thursday that the Huawei case would play a part in the trade talks.
“This can make our trade friction more complicated. Emotions may run high,” said William Zarit, chairman of the American Chamber of Commerce in China.
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However, the Chinese government would be too fearful of the long-term implications on investor sentiment that might accompany any further chilling in the business climate, Zarit said.
In Beijing, Geng said China was not giving out any further information about Meng’s arrest.
The arrest comes as Huawei faces rising hostility in the international marketplace. Allegedly under pressure from the US, the Chinese technology giant has been frozen out of 5G projects in Australia, New Zealand and, most recently, Britain and Japan.
The charges were related to alleged breaches of America’s Iran Sanctions Act, which forbids US institutions and their allies from conducting commerce with Iran, according to Senator Ben Sasse, a member of the US Armed Services Committee.
Bill Bishop, China watcher and producer of the Sinocism newsletter, said Chinese retaliation in tit-for-tat form would be “explosive”.
“I am not sure Beijing would do that without a very clear legal case as it would undermine the massive propaganda campaign the [Communist] Party has undertaken to portray [China] as open for foreign business and as the defender of the global trading system. However, if I were a US tech executive I would delay travel to China for a bit or go on a vacation if were based there,” Bishop wrote.
US ‘was probing Huawei for an alleged global banking scheme to evade US sanctions on Iran before it arrested Sabrina Meng Wanzhou’
In 2010, the then head of Australian mining company Rio Tinto’s iron ore business was jailed for 10 years on charges of corruption and stealing commercial secrets. Stern Hu, an Australian citizen, was released earlier this year after serving eight years. His incarceration came as Rio Tinto and China were engaged in a heated negotiation over the iron ore benchmark price.
In 2016, three Australian employees of casino operator Crown Resorts were arrested and jailed in China. They admitted illegally promoting gambling on the mainland and their arrest happened as the government was cracking down on corruption.
Peter Cai, group chief adviser of Virgin Australia and non-resident fellow at the Lowy Institute, said the examples would be “fresh in the minds” of Australian executives. While the executives in these examples had broken Chinese laws, their detention sent a chill through the foreign business community.
“In the case of American tech executives going to China, if I put myself in their shoes, I would be worried. I remember reading at the time of the Rio Tinto arrest that some other Australian mining executives left the country as quickly as possible. I suspect people will always be worried about their own personal safety,” Cai said.
Huawei has been in the cross hairs of US authorities for some time. After the US government imposed a seven-year ban on US firms selling supplies and components to Chinese technology giant ZTE in April over sales to Iran, there was speculation that Huawei would be next.
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It is unclear whether a similar fate awaits Huawei, with further information on Meng’s arrest and the charges she faces expected to be divulged during an extradition hearing on Friday.
Huawei denied that it breached any US regulations. “Huawei complies with all applicable laws and regulations where it operates, including applicable export control and sanction laws and regulations of the United Nations, US and European Union.”
A Guangzhou-based supplier for Huawei said any sanctions by the US on the Chinese smartphone and telecommunications equipment maker would have a devastating impact on the industry, as upstream and downstream suppliers would be affected.
“If Huawei is blocked [from accessing the US chip market], our company will suffer a sudden death,” the supplier said. “We already received significantly fewer orders after countries like Australia and New Zealand imposed bans on the company.
“Huawei is China’s largest and the world’s second-largest manufacturer of communication equipment. Many upstream and downstream companies in China have been growing along with Huawei’s rapid expansion in the past 10 years.”
Additional reporting by Catherine Wong