C. Custer
C. Custer
10:00 am on Dec 28, 2012

Image via Reuters

It’s no secret that the US and China have a bit of a disagreement on their hands when it comes to Huawei, the ostensibly-private Chinese telecommunications company. Today, though, I came across this article in the Legal Weekly — a state-run newsweekly — that I think is very indicative of how the Huawei scandal is being packaged domestically and why this isn’t likely to be resolved anytime soon. Here’s a key passage from the article:

This [Huawei’s R&D investments in the US] have also made the Americans cry “the wolves are coming,” and America’s “worries” about Huawei were laid bare in 2012. In addition to the US Congress’s investigation into Huawei and ZTE over “national security”, a US International Trade Commission member launched a number of “337” investigations into the two companies, saying that Huawei and ZTE had stolen American companies’ intellectual property. Whether it’s the Congress’s suspicions or the 337 investigations, the intention is to prevent Huawei and ZTE’s products from entering the United States.

Of course, it’s no surprise that official state media would imply that American (and other countries’) suspicions about Huawei and ZTE are nothing more than protectionism. But I think this article illustrates the larger problem on both sides that will prevent this situation from being resolved any time soon, and a problem that all Chinese and American companies will face when trying to expand into the opposite markets: mutual suspicion that borders on paranoia.

As an American, I’ll admit that I’m probably a bit biased about this; I think that in the case of Huawei, the US is very right to be suspicious. I still haven’t heard a good explanation for why Huawei — ostensibly private company — has a Party office located in its headquarters, and I think both Huawei and ZTE have a lot of answer for when it comes to their business engagements with Iran. That said, though, other Chinese companies far less deserving of suspicion are going to be met with it anyway. We’ve written a lot about this before, but that’s only one side of the story.

The other side is that the suspicions now go both ways. If the US investigates Huawei, China will investigate Cisco. But the article I’ve quoted above goes beyond that; it indicates a complete lack of unwillingness to accept that at least in Huawei’s case, there might be some grounds for suspicion.

Of course, I would never expect state media to imply that Huawei might be helping the government spy on foreign countries. But if it wanted to, state media could characterize the US allegations as a misunderstanding of Huawei; ‘Americans misunderstand China’ is a well-worn and not entirely inaccurate story, and that would provide a foundation upon which to lay out a defense of Huawei; a clear explanation of its government connections. But instead, the article above — and many others like it — adopt a confrontational tone, suggesting that there is no question whatsoever that American motivation for keeping Huawei out of the US is strictly commercial.

(It probably goes without saying, but that argument is also hugely misleading; Huawei and ZTE products are already widely available within the United States and there has been no attempt to kick the companies out wholesale. Mostly, what has actually motivated the US investigations is an interest in limiting Huawei’s access to “sensitive” sectors of the US economy, like government and defense contract work).

In short, then, each side is now fully convinced that the other is operating with ulterior motives. The US believes Huawei to be, at the very least, a bit too cozy with the Chinese government, and China believes the US’s suspicions are politically and commercially motivated. Neither side has a completely convincing argument, and it’s hard to see much progress in either direction as both sides are no longer even speaking a common language. Instead, they are simply trading mostly-unfounded allegations back and forth, ignoring what the other side has to say.

There is blame on both sides here, and no real end in sight. A similar tone is already swirling over the SEC’s probe of accounting firms and PCAOB reports that might ultimately result in the delisting of Chinese companies from US stock exchanges, with some Chinese media suggesting that these investigations are the result of anti-China bias rather than the result of the SEC trying to enforce American laws. We can — and will — argue more in the days and months to come about who is in the right, but it is probably mostly academic at this point. The suspicions on both sides run quite deep, and it’s difficult for me to even imagine a way to establish at least some mutual trust again. That’s bad news for Huawei, but it’s also bad news for other Chinese companies, from startups up to the tech giants, that are interested in entering the US market. It’s also bad news for American tech companies looking to move into China, as they are likely to be met with similar suspicions going forward.

  • http://www.huawei.com John Suffolk

    Dear Sir thank you for taking an interest in my writings. I have to say I am a little more optimistic than you appear to be. In any walk of life where there is conflict the more that people can talk about their hopes, aspirations, issues and concerns the more likely a solution will be found.

    I do agree with you however that we must be careful not to be over emotive on the issue and whilst we may not agree with others we should be respectful of their point of view and drive forward the debate based on facts and evidence rather than guesswork and opinion.

    From my perspective I believe we need to learn how the world has changed because of technology and globalisation. The historic serotypes we carry around become our own personal barriers to change and we must all spend time listening and learning about the New World.
    I am not an expert on China (or any other country come to think of it) but I sense that the China of 2012 is very different to the China of 2000 or indeed 30 years ago – this is not just a China phenomenon just look at the old eastern bloc countries or Indonesia or Africa or brazil or even America – everyone has changed from culture, economy, technology and its place on the world stage.
    Turning back to Huawei, we fully understand and support any Government who wishes to understand any potential risks due to the adoption of technology from companies who may not be as well-known as other companies; citizens would think less of their Government if they did not do this. All of us in the technology industry also recognise that the adoption of technology that is driving forward improved health, wealth and economic prosperity around the world is also bringing a security challenge, a challenge that cannot be addressed by one country or one supplier, we must all collaborate to reduce any risks.

    So at Huawei we will continue to be open and transparent; we will continue working with our friends around the world to satisfy any concerns they might have on security and importantly collaborating with as many people as we can to establish common protocols, standards and approaches that gives all Governments and companies faith that the technology they adopt is as safe as it can be.

  • http://www.outcastjournalist.com Wei Ling Chua

    Mr. Custer is indeed bias against China. What Mr. Custer fail to mention in his article are that,

    1) a leaked US government document indicated that there was no evidence to suggest that Huawei engaged in spying:

    2) In addition, Huawei also offered unrestricted access to it software code to prove its innocent:

    US is a country run by paranoid people who are shortsighted and arrogant. Such attitude must change to avoid missing out opportunity across the world in the 21st century.

  • stentor tropicalia

    Suffolk, you can’t “continue to be open and transparent” when you never were to start with. It appears you’ve been genetically modified with “Chinese characteristics” to make your Chamberlainian optimism even more useful.

    Mr. Custer, in case you missed it, check out the July Defcon 20 show (can be found on youtube, keywords: defcon hacking redacted routers) where FX and Co. #%&! all the holes in some Huawei routers. The punchline is about the plausible deniability vs honestly bad coding. Huawei’s claims of world class security standards are just the kind of thing Suffolk might still be mouthing off about, even now, without blinking. Maybe a paycheck would something to do with it.

  • http://www.techinasia.com C. Custer

    @ Wei: I’m not biased against China. Whether or not there are issues with Huawei’s code is irrelevant; as I said in my article, what concerns me personally is (a) its business ties to Iran and (b) why there is a CCP office in a “private” company’s headquarters.

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