Criminal Company

Killing Huawei is more important than trade deal with China
By JUN MAI 

Former Trump strategist Steve Bannon said he talks to senior officials in the White House every day about wicked China.

Driving Huawei out of the United States and Europe is “10 times more important” than a trade deal with China, according to former White House chief strategist Steve Bannon.
He also said he would dedicate all his time to shutting Chinese companies out of U.S. capital markets.
The remark by Mr Bannon, a strong advocate of an all-encompassing war against China, came days after U.S. President Donald Trump signed an executive order effectively banning Huawei from the U.S. market and cutting off its vital components supply.
“Huawei is a massive national security issue to the West,” Mr Bannon said, in a phone interview on Saturday with the South China Morning Post. 

“The executive order is 10 times more important than walking away from the trade deal. Huawei is a major national security threat, not just to the US but to the rest of the world. We are going to shut it down.”
The U.S. ban on Huawei came as a shock to capital markets and the tech industry.
Jude Blanchette of the Crumpton Group, a business advisory and geopolitical risk firm based in the U.S., said that while there was “a broad consensus” in Washington on the security concerns over Huawei equipment, the president’s executive order had surprised the market.
“We’re entering uncharted territory where actions to defend against security risks cut at complex global supply chains,” Blanchette said.
But Mr Bannon is adamant that Huawei needs to be driven out of Western markets altogether, suggesting Trump made “a mistake” in lifting a similar sanction last July on ZTE — another Chinese telecommunications equipment maker.
The U.S. had imposed the ZTE ban on the grounds that it had broken the American sanctions on Iran. But, at Trump’s urging, the restrictions on ZTE were lifted after the Chinese company agreed to a number of terms and conditions for its future operations.
“During the trade talks’ early stage, Trump gave a waiver for ZTE, which was a mistake,” Mr Bannon said.
Mr Bannon, who was fired by Trump in August 2017, is also calling for shutting Chinese companies out of American capital markets.
“The next move we make is to cut off all the IPOs, unwind all the pension funds and insurance companies in the U.S. that provide capital to the Chinese Communist Party,” he said.
“We’ll see a big move on Wall Street to restrict access to capital markets to Chinese companies until [they agree to] this fundamental reform.”

In March this year Mr Bannon revived the cold war Committee on the Present Danger specifically to target China.

The CPD was first established in the early 1950s as a bulwark against the influence of communism in the U.S. 

The group disbanded after some leading members were drafted into the Dwight Eisenhower administration, but was reformed in 1976 by U.S. patriots to counter the Soviet Union during the cold war.
Without providing further details, Mr Bannon said he “talks to senior officials in the White House every day about China.” 

When asked if he meets Trump regularly, the right-wing populist said, “No, if I need to talk to him, I go through his lawyers.”
But he cited reports by The New York Times and POLITICO in the past couple of months which said Trump “liked Steve a lot."
“It is pretty well known I was the one who worked closest with President Trump,” Mr Bannon said. 

“I’m much farther to the right than President Trump on this [China]. And I pride myself with that. [I’m] the super hawk.”
Mr Bannon said the objective of what he called “an economic war” with China was to force Beijing to carry out fundamental reforms.
“I don’t think it’s going to be resolved quickly. This is the beginning of a very long and tough process,” he said.
“I have dedicated my life to this. This is what I do 24 hours a day. The pressure we are going to keep up will be relentless. We are not going to be quiet.”

Criminal Company

Inside the U.S. war on Huawei

By Cassell Bryan-Low, Colin Packham, David Lague, Steve Stecklow, Jack Stubbs

CANBERRA -- In early 2018, in a complex of low-rise buildings in the Australian capital, a team of government hackers was engaging in a destructive digital war game.
The operatives – agents of the Australian Signals Directorate, the nation’s top-secret eavesdropping agency – had been given a challenge. 

With all the offensive cyber tools at their disposal, what harm could they inflict if they had access to equipment installed in the 5G network, the next-generation mobile communications technology, of a target nation?
What the team found, say current and former government officials, was sobering for Australian security and political leaders: The offensive potential of 5G was so great that if Australia were on the receiving end of such attacks, the country could be seriously exposed. 

The understanding of how 5G could be exploited for spying and to sabotage critical infrastructure changed everything for the Australians, according to people familiar with the deliberations.
Mike Burgess, the head of the signals directorate, recently explained why the security of fifth generation, or 5G, technology was so important: It will be integral to the communications at the heart of a country’s critical infrastructure -- everything from electric power to water supplies to sewage, he said in a March speech at a Sydney research institute.
Washington is widely seen as having taken the initiative in the global campaign against Huawei Technologies Co Ltd, a tech juggernaut that in the three decades since its founding has become a pillar of Beijing’s bid to expand its global influence. 

Yet Reuters interviews with more than two dozen current and former Western officials show it was the Australians who led the way in pressing for action on 5G; that the United States was initially slow to act; and that Britain and other European countries are caught between security concerns and the competitive prices offered by Huawei.
The Australians had long harbored misgivings about Huawei in existing networks, but the 5G war game was a turning point. 

About six months after the simulation began, the Australian government effectively banned Huawei, the world’s largest maker of telecom networking gear, from any involvement in its 5G plans. 

An Australian government spokeswoman declined to comment on the war game.
After the Australians shared their findings with U.S. leaders, other countries, including the United States, moved to restrict Huawei.
The anti-Huawei campaign intensified last week, when President Donald Trump signed an executive order that effectively banned the use of Huawei equipment in U.S. telecom networks on national security grounds and the Commerce Department put limits on the firm’s purchasing of U.S. technology. 

Google’s parent, Alphabet, suspended some of its business with Huawei, Reuters reported.
Until the middle of last year, the U.S. government largely “wasn’t paying attention,” said retired U.S. Marine Corps General James Jones, who served as national security adviser to Barack Obama. 

What spurred senior U.S. officials into action? 

A sudden dawning of what 5G will bring, according to Jones.
“This has been a very, very fast-moving realization” in terms of understanding the technology, he said. 

“I think most people were treating it as a kind of evolutionary step as opposed to a revolutionary step. And now that light has come on.”
The Americans are now campaigning aggressively to contain Huawei as part of a much broader effort to check Beijing’s growing military might under Xi Jinping. 

Strengthening cyber operations is a key element in the sweeping military overhaul that Xi launched soon after taking power in 2012, according to official U.S. and Chinese military documents. 

The United States has accused China of widespread, state-sponsored hacking for strategic and commercial gain.

A THREAT TO CRITICAL INFRASTRUCTURE
If Huawei gains a foothold in global 5G networks, this will give Beijing an unprecedented opportunity to attack critical infrastructure and compromise intelligence sharing with key allies. 

This could involve cyber attacks on public utilities, communication networks and key financial centers.
In any military clash, such attacks would amount to a dramatic change in the nature of war, inflicting economic harm and disrupting civilian life far from the conflict without bullets, bombs or blockades.

However, blocking Huawei is a huge challenge for Washington and its closest allies, particularly the other members of the so-called Five Eyes intelligence-sharing group – Britain, Canada, Australia and New Zealand. 

From humble beginnings in the 1980s in the southern Chinese boom town of Shenzhen, Huawei has grown to become a technology giant that is deeply embedded in global communications networks and poised to dominate 5G infrastructure. 

There are few global alternatives to Huawei, which has financial muscle – the company reported revenue for 2018 jumped almost 20 percent to more than $100 billion – as well as competitive technology and the political backing of Beijing.
For countries that exclude Huawei there is a risk of retaliation from Beijing. 

Since Australia banned the company from its 5G networks last year, it has experienced disruption to its coal exports to China, including customs delays on the Chinese side. 

Tension over Huawei is also exposing divisions in the Five Eyes group, which has been a foundation of the post-Second World War Western security architecture. 

During a trip to London on May 8, U.S. Secretary of State Mike Pompeo issued a stark warning to Britain, which has not ruled out using Huawei in its 5G networks. 

“Insufficient security will impede the United States’ ability to share certain information within trusted networks,” he said. 

“This is exactly what China wants; they want to divide Western alliances through bits and bytes, not bullets and bombs.”

Washington argues that surreptitious backdoors aren’t necessarily needed to wreak havoc in 5G systems. 

The systems will rely heavily on software updates pushed out by equipment suppliers -- and that access to the 5G network, says the United States, could be used to deploy malicious code.
Asked whether the United States was slow to react to potential threats posed by 5G, Robert Strayer, the State Department’s lead cyber policy diplomat, told Reuters that America had long been concerned about Chinese telecom companies, but that over the past year, as 5G loomed closer, “we were starting to talk more and more with our allies.” 

Banning Huawei from 5G networks remains “an end goal,” he said.
The West has long harbored concerns about Chinese telecom equipment. 

In 2012, a U.S. House Intelligence Committee report concluded Chinese tech companies posed a national security threat. 
Despite such concerns, the U.S. government’s response to the threats posed by 5G only took shape more recently.
In February 2018, Malcolm Turnbull, then prime minister of Australia, flew to Washington D.C. 

Even before Australia’s eavesdropping agency had run its war game, Turnbull was already raising red flags in Washington. 

A former technology entrepreneur, he believed 5G presented significant risks and wanted to press allies to act against Huawei.
“He was warning about how important 5G networks would be and the security risks we all needed to think about around countries that had capability, form and intent, as well as coercive laws,” a senior Australian source told Reuters.
A spokesman for Turnbull declined to comment.
Turnbull and his advisers met U.S. officials, including Kirstjen Nielsen, then U.S. secretary of homeland security, and Michael Rogers, then head of the U.S. National Security Agency, the U.S. signals-intelligence operation. 

The Australians said they believed Beijing could compel Huawei to do its bidding and that this posed a threat should tensions with China rise in the future, said two of the Australian officials familiar with the meeting.
The U.S. officials were receptive to the Australian message, but imposing restrictions on the world’s largest maker of mobile network gear didn’t appear to be a high priority, according to the two Australian officials. 

“They didn’t share our concern with the same urgency,” said one.
Rogers declined to comment. 

A Department of Homeland Security official did not elaborate on the meeting, but said the agency works closely with Australia on security issues and that “China will continue to use cyber espionage and bolster cyber-attack capabilities to support its national security priorities.”
5G technology is expected to deliver a huge leap in the speed and capacity of communications. Downloading data may be up to 100 times faster than on current networks.
But 5G isn’t only about faster data. 

The upgrade will see an exponential spike in the number of connections between the billions of devices, from smart fridges to driverless cars, that are expected to run on the 5G network. 

“It’s not just that there will be more people with multiple devices, but it will be machines talking to machines, devices talking to devices – all enabled by 5G,” said Burgess, the Australian Signals Directorate chief, in his March address.
This configuration of 5G networks means there are many more points of entry for a hostile power or group to conduct cyber warfare against the critical infrastructure of a target nation or community. 

That threat is magnified if an adversary has supplied equipment in the network, U.S. officials say.

In July 2018, Britain delivered a blow to Huawei. 

A government-led panel that includes senior intelligence officials said it was no longer fully confident it could manage national security risks posed by the Chinese telecom equipment giant.
That panel oversees the work of a laboratory that was set up by the British government in 2010 and is funded by Huawei to vet the company’s equipment used in the UK. 

The facility was established because even then Huawei was perceived as a security risk. 

The oversight panel said serious problems it had identified with Huawei’s engineering processes “exposed new risks in the UK telecommunication networks and long-term challenges in mitigation and management.”
That report was a “bombshell,” shaping how the Americans viewed the Huawei 5G risk, said one U.S. official.
U.S. officials also point to Chinese laws enacted in recent years that they say could compel individuals and companies to assist the Chinese government in conducting espionage.

THE WEST AWAKES
Through the middle of last year, the Australians continued to apprise other countries of their worries about 5G. 

“We were sharing our concerns about security with many allies, not just the U.S. and not just the traditional partners,” said one of the senior Australian officials. 

“We shared our thoughts with Japan, Germany, other European countries and South Korea.”
In Washington, the administration began imposing restrictions on Huawei. 

In August, Trump signed a bill banning federal agencies and their contractors from using equipment from Huawei and ZTE Corp, another Chinese telecom equipment maker. 

Huawei has since filed a lawsuit in federal court in Texas challenging the ban.
In late August, the Australians went further: They banned companies that didn’t meet their security requirements, which included Huawei, from supplying any equipment for the country’s 5G network, whether run by the government or by private firms.
In November, New Zealand’s intelligence agency blocked the country’s first request by a telecom service provider to use Huawei kit for a 5G network, citing national security concerns.
Like the Australians and Americans, British security officials had concerns over China’s potential use of Huawei as a channel for conducting espionage. 

But the options are limited. 

Huawei is one of only three major global companies that analysts say can supply a broad range of advanced mobile network equipment at scale. 

The other two are Ericsson and Nokia. 

And Huawei has a reputation among telecom operators for supplying cost-effective equipment promptly.
Nevertheless, British security officials were becoming increasingly frustrated with Huawei’s failure to fix software flaws in its equipment, particularly discrepancies in the source code – the programs’ underlying set of instructions.
This problem means the laboratory near Oxford set up to vet Huawei equipment can not even be sure that the code it is testing is exactly the same as the code Huawei deploys in its real-world equipment.
This makes it difficult to provide safety assurances about the company’s gear.

British officials say the array of flaws could be exploited by malevolent China.

Ian Levy, a British security official who oversees the UK’s review of Huawei equipment, told Reuters the company’s software engineering is like something from 20 years ago. 

“The chance of a vulnerability with a Huawei piece of kit is much higher than other vendors,” he said.
The company said it has pledged to spend at least $2 billion “over the next five years” to improve its software engineering capabilities.
British ministers have agreed to allow Huawei a restricted role in building parts of its 5G network, but the government has yet to announce its final decision. 

The European Union has left it to individual governments to decide whether to ban any company on national security grounds. 

Some European security officials say banning one supplier doesn’t address the broader issue of the risks posed by Chinese technology in general.

As the tensions between the West and Huawei intensified through last year, they suddenly took a personal turn. 

U.S. law enforcement officials had for some time been investigating links between Huawei and Iran, including the involvement of Meng Wanzhou, Huawei’s chief financial officer, who is the daughter of the company’s founder. 

The probe followed Reuters stories in 2012 and 2013 that revealed links between Huawei, Meng and another company that attempted to violate U.S. sanctions on Iran.
When U.S. officials became aware that Meng would be traveling through Vancouver in December, they pounced, asking Canada to detain her on allegations of bank and wire fraud. 

Meng remains free on bail in Canada while the U.S. government tries to have her extradited. 

The Huawei conflict isn’t only about U.S.-China superpower rivalry: The activities of Meng and Huawei were under scrutiny by U.S. authorities long before Trump began a trade war with China, according to interviews with people familiar with those probes. 

But there is no doubt the wider showdown with Huawei has now become intensely geopolitical.
In recent months, the U.S. has ramped up diplomatic efforts to urge allies to sideline Huawei. 

5G is a “game-changing technology with implications across all aspects of society from business, government, military and beyond,” Gordon Sondland, U.S. ambassador to the European Union, told Reuters in February. 

“It seems common sense to me to not hand over the keys to your entire society to an actor that has … demonstrated malign conduct.”
Asked whether there is evidence of Huawei equipment having been used for espionage, Sondland said “there is classified evidence.” 

He declined to expand on the nature of the material beyond saying there was no doubt that Huawei had “the capability to hack a system” and “the mandate by the government to do so upon request.”
Pompeo has publicly gone further than most U.S. officials by directly linking the company to Beijing. “Huawei is owned by the state of China and has deep connections to their intelligence service,” he said in March. 

“That should send off flares for everybody who understands what the Chinese military and Chinese intelligence services do.”

While Huawei was initially muted in its public response, it too has become more combative. 

In late February, the company confronted the United States at a major annual gathering of mobile industry executives in Barcelona, where Huawei’s red logo was ubiquitous. 

Top American officials arrived intent on warning government and industry representatives off Huawei. 

But the company had flown in a team of senior executives to offer customers and representatives of European governments reassurance in the face of the U.S. accusations.
In a keynote speech, Guo Ping, a deputy chairman at Huawei, took aim at America’s own spying operations. 

Europeans pushed back, too. 

During one closed-door session, senior representatives from European telecom operators pressed a U.S. official for hard evidence that Huawei presented a security risk. 

One executive demanded to see a smoking gun, recalled the U.S. official.
The American official fired back: “If the gun is smoking, you’ve already been shot. I don’t know why you’re lining up in front of a loaded weapon.”

Huawei’s U.S. Restrictions Expose a High-Tech Achilles’ Heel for China

China is heavily reliant on imported computer chips, despite efforts to develop its own semiconductor industry.

By Raymond Zhong

A Huawei store in Beijing. The company had stockpiled computer chips for emergencies like the trade restrictions announced last week by the United States.

BEIJING — For all of China’s efforts to become a global force in high technology rivaling the United States, it has mostly failed to produce top-flight contenders in one crucial area: the industry that gave Silicon Valley its name.
Last year, China imported more than $300 billion worth of computer chips, the backbone of all digital products. 

That is more than it spent on crude oil from abroad.
Washington has now turned China’s reliance on American microchips against Huawei, the Chinese telecommunications giant that is labeled a national security threat. 

The Commerce Department last week restricted American firms from selling components and technology to the company, essentially cutting Huawei off from Google software, Qualcomm chips and more.
The department said Monday that it would allow Huawei to continue doing business with American suppliers for 90 days to prevent disruption to mobile networks that use the company’s equipment. 

Yet Washington’s move still strikes at a national soft spot for China that has weighed on the minds of the country’s leaders for decades.
Desperate to reduce the dependence on imports, the authorities in China have pledged tens of billions of dollars to help foster homegrown chip champions. 

The country’s dreams of semiconductor hegemony have added to the trade tensions with the United States, which wants Beijing to scale back what it considers unfair government support for Chinese firms.
Washington has found reason to directly punish one state-backed chip maker, Fujian Jinhua Integrated Circuit Company. 

After Micron Technology, an American rival, accused the Chinese company of pilfering chip designs, the Commerce Department blocked it from buying American components.

Last year, China imported more than $300 billion worth of computer chips, the backbone of all digital products. That is more than it spent on crude oil from abroad.

The fruits of China’s chip drive have been mixed at best. 

Chinese firms’ market share remains modest in most areas of semiconductor production. 

Nearly all of the most complex chips must still be imported. 

Several Chinese state-backed makers of memory chips, which store data, have announced big production plans. 

But the global market for such chips is currently saturated, suggesting grim prospects for turning a profit.
On the whole, government support has helped the Chinese industry, said Gu Wenjun, chief analyst at ICwise, a semiconductor market research firm in Shanghai. 

“But now that the market has become overheated and fickle, the negative effects are increasingly apparent,” he said.
Local governments in China “don’t understand the industry,” Mr. Gu said. 

They are merely using up resources that private companies know how to spend more effectively, he added.
China’s role as the world’s leading assembler of electronics, and its vast consumer market for electronics, has convinced some observers that given enough time, the country would inevitably attract or foster the knowledge for producing advanced chips. 

If China could catch up in making toys and then in producing cellphones, the thinking goes, then why not in semiconductors someday?
For now, surviving without American chips promises to be the ultimate test for Huawei, despite the company’s recent strides in developing its own processors.
In an interview with Chinese media on Tuesday, Huawei’s founder and chief executive, Ren Zhengfei, said that in “peaceful times,” half of Huawei’s chips came from American companies, and the other half it developed itself. 

Huawei has stockpiled chips for emergencies like this, Mr. Ren said.
But the company could never entirely reject American technology, he said. 

Even members of his own family, he said, are iPhone users.
“We will not recklessly get rid of American chips,” Mr. Ren said. 

“We need to grow together.”
Beijing’s angst over foreign semiconductors has a long pedigree.
As Japan, South Korea and Taiwan emerged with formidable chip industries in the 1980s and ’90s, China experimented with various forms of state planning to develop its own abilities. 

In 2014, Beijing set a goal of becoming a global leader in all segments of the chip industry by 2030, and national and local government semiconductor investment funds began springing up across the country.
The results of those efforts are hard to spot, however, in the innards of leading Chinese tech companies’ products.
To crack open one of Huawei’s smartphones or cellular base stations is to see the extent to which advanced technology is a truly globalized endeavor, even as Beijing and Washington have come to distrust each other’s tech providers.
In Huawei’s new P30 Pro flagship phone, for example, American firms supply a number of key components, including parts that help process the radio signals that carry calls and data through the air, according to an analysis by System Plus Consulting, a research firm in France.
The P30 Pro’s memory chips are from Micron and the Japanese company Toshiba. 

The camera technology is from Sony of Japan. 

The processor, the brains of the phone, was developed by Huawei itself.
Huawei’s semiconductor division, HiSilicon, has surprised industry observers with the progress it has made in developing processors and baseband chips, which connect phones to data networks. 

Yet even HiSilicon may be affected by the Commerce Department’s restriction. 

Many of the leading providers of chip design software are American.
For other kinds of components, Huawei should not have much trouble finding non-American substitutes if it is fully cut off from American suppliers. 

In memory chips, for instance, Micron is a leading global supplier, but so are Samsung and SK Hynix of South Korea.
In general, the more advanced the silicon, the more likely it is that Huawei will have to compromise on quality to avoid American providers like Broadcom, which supplies specialized chips for Huawei’s data centers, and Nvidia, which makes high-end graphics processors for Huawei’s laptops.
The company’s options may also be limited when it comes to the critical components that help smartphones process radio signals. 

American companies, including Skyworks and Qorvo, lead the market for these “radio frequency” parts, which are technologically demanding to produce.
“It’s just very difficult unless this is your bread and butter,” Liam K. Griffin, Skyworks’s president and chief executive, said on a conference call this month with analysts. 

“We have years and years of experience here working with this.”

Pariah Company

Huawei Was a Czech Favorite. Now? It’s a National Security Threat.

By Marc Santora and Hana de Goeij

A security directive could severely restrict the role Huawei plays in building the country’s 5G network.

PRAGUE — For more than 1,000 years, the sprawling castle complex perched high above Prague has been the seat of power for Holy Roman emperors, the kings of Bohemia and, now, the Czech president, Milos Zeman. 

And for the last four years, the Chinese technology giant Huawei has had a contract to fulfill the communication needs of the president and his staff.
The presidential contract is the most visible symbol of how deeply Huawei has established itself in the Czech Republic, long viewed by China as a springboard country for its interests across the European Union.
So when the Czech government’s cybersecurity agency issued a directive in December warning that Huawei represented a national security threat, company officials were shocked — as was Zeman, known for his closeness to China. 

Huawei has threatened legal and financial retaliation. 

Zeman has accused his own intelligence services, including the cybersecurity agency, known as Nukib, of “dirty tricks.”
The unexpected confrontation in the Czech Republic comes as Huawei, already entangled in the trade war between China and the United States, is running into deepening problems in European Union countries, where it has worked for years to build inroads. 

Only weeks after Nukib issued its directive against Huawei, Polish authorities in January arrested a Huawei employee in Warsaw on charges of spying.
Looming above everything is the question of which companies will build the infrastructure of the fifth generation of wireless technology, known as 5G. 

American officials regard the technology as a national security issue and have moved aggressively to limit the role of Chinese companies, especially Huawei.
Speaking in Budapest on Monday, Secretary of State Mike Pompeo, who is touring Central Europe, warned about “risks that Huawei’s presence in their networks present — actual risks to their people, to the loss of privacy protections.”

Milos Zeman right, met in Prague in 2016 with his Chinese protector Xi Jinping.

Huawei is already hitting problems in Germany and Britain, traditional American allies. 

Yet few people would have predicted that the most direct action against the company would come from the Czech Republic, where Zeman has long courted Chinese investment and is planning to make his fifth visit to China in the spring. 

The Nukib directive has infuriated the president and driven a wedge into the Czech government.
In an interview, Dusan Navratil, the head of the agency, said the stakes are high because 5G “will change the whole way societies function.” 

While the public might think of 5G as simply a matter of faster download times, the system is designed to be far more, linking everything from the cars we drive to the hospitals we visit in a way unimaginable only a decade ago.
Mr. Navratil said one reason his agency penalized Huawei was China’s National Intelligence Law, which was passed in 2017 and requires Chinese companies to support, provide assistance and cooperate in the authoritarian nation’s national intelligence work, wherever they operate. 

While declining to discuss classified intelligence, he offered an analogy.
“Imagine there is a restaurant where the hygiene is filthy rotten,” Mr. Navratil said. 

“The agency overseeing the restaurant has no evidence someone has gotten sick or died. But does that mean you should eat there?”
As a result of the agency’s move, Huawei’s business in the Czech Republic could be devastated. 

The directive doesn’t affect consumer products, such as mobile phones, but it aims to severely restrict the role Huawei can play in 5G, and to block it from supplying equipment to public and private entities deemed critical to national security.
“This is the first time we have ever issued such a warning,” Mr. Navratil said.
Since then, the Ministries of Health and Justice announced that they would not honor existing contracts to buy servers from Huawei. 

The country’s largest carmaker, Skoda, has temporarily stopped Huawei from bidding on projects as it undergoes a security review demanded by the new cyberdirective.
Even Huawei’s contract with the presidential offices is under review.
In turn, Huawei has been hitting back.

Last week, the company threatened litigation against the cyberagency, as well as economic retaliation. 

It also has intensified lobbying campaigns with some lawmakers and others in the political elite, including a Czech delegation that the company hosted in China last month.

“We cannot just rush headlong into this,” Dusan Navratil, the head of the Czech cybersecurity agency, said of the country’s relationship with Huawei.

“The Chinese believe they are one to two years ahead of everyone and they see this as an effort to slow them down,” said Jaroslav Roman, a Czech Communist Party official on the visit. 

“They wanted us to know that if the discrimination continued, there would be repercussions.”
The threat of economic retaliation has most alarmed many business leaders and lawmakers, given how ardently Zeman has built economic ties between the two countries. 

One example is PPF Group, the largest Czech company, which has focused on China in recent years.
Its home lending business counts some 15 million Chinese customers, which is not much in Chinese terms but hugely important for the Czech-owned company. 

PPF also controls the country’s largest telecom provider, O2, and had signed a memorandum of understanding with Huawei regarding future projects before the security agency issued its warning. That will now have to be reviewed.
Mel Carvill, a board member for Home Credit, a consumer loan company that is a part of the PPF Group, said the Chinese regulatory agency overseeing the home lending business had not taken any action against the company.
“Of course, if relations between countries deteriorate, things might become difficult,” he said.
Huawei officials, for their part, were so confident in their standing in the Czech Republic that in June, they decided to push for Czech security clearance to work on critical infrastructure — a move that may have contributed to the cyberagency’s decision to more closely scrutinize the Chinese company.
“It was overreach on their part,” said Jakub Janda, the director at the Prague-based think-tank, European Values.

Huawei’s offices in Warsaw. The company has threatened litigation against the cyberagency and economic retaliation against the country.

Mr. Janda said there was particular concern about the dozens of technology assistants working for Huawei who had unlimited access to all the data gathered by their mobile partners.
Unlike cases involving Russians accused of spying in the Czech Republic, Mr. Janda noted, concerns about Chinese espionage are kept quiet for diplomatic reasons. 

No one has been charged with spying in the country.
Even as Huawei is trying to regain footing in the Czech Republic, the company is also mounting a public relations counteroffensive in Poland, after the arrest in January of the company executive. 

Last week, Huawei issued a news release in Poland, warning that communication services would increase by 300 percent if the company were excluded from the market.
Meanwhile, Huawei has sought to ease Polish security concerns by promising to spend hundreds of millions on a new cybersecurity center. 

It has also offered the Polish government access to Huawei’s source code in order to prove that its equipment does not have a “back door” for the Chinese intelligence services.
However, experts have said such gestures are hollow, given how often codes can be updated or changed.
For Mr. Navratil, the head of the Czech cyberagency, the issue facing security officials was as evident as it was urgent.
“We are a sovereign country and we have a right to say what is in our security interest,” he said. 

It would be helpful, he said, if NATO or the E.U. would offer some specific guidance since it would give small nations greater ability to act without fear of retaliation.
That does not appear to be happening anytime soon.
“Given the stakes,” Mr. Navratil said, “we cannot just rush headlong into this.”

Rogue Nation, Rogue Company

Huawei and Meng Wanzhou Face Criminal Charges
By David E. Sanger, Katie Benner and Matthew Goldstein

The Justice Department unveiled charges against Meng Wanzhou, the chief financial officer of Huawei, for helping evade American sanctions on Iran.

WASHINGTON — The Justice Department unveiled sweeping charges on Monday against the Chinese telecom firm Huawei and its chief financial officer, Meng Wanzhou, outlining a decade-long attempt by the company to steal trade secrets, obstruct a criminal investigation and evade economic sanctions on Iran.
The pair of indictments, which were partly unsealed on Monday, come amid a broad campaign by the United States to thwart China’s biggest telecom equipment maker.
Officials have long suspected Huawei of working to advance Beijing’s global ambitions and undermine America’s interests and have begun taking steps to curb its international presence.
The charges underscore Washington’s determination to prove that Huawei poses a national security threat and to convince other nations that it cannot be trusted to build their next generation of wireless networks, known as 5G. 
The indictments, based in part on the company’s internal emails, describe a plot to steal testing equipment from T-Mobile laboratories in Bellevue, Wash.
They also cite internal memos, obtained from Meng, that link her to an elaborate bank fraud that helped Huawei profit by evading Iran sanctions.
The acting attorney general, Matthew G. Whitaker, flanked by the heads of several other cabinet agencies, said the United States would seek to have Meng extradited from Canada, where she was detained last year at the request of the United States.
The charges outlined Monday come at a sensitive diplomatic moment, as top officials from China are expected to arrive in Washington this week for two days of talks aimed at resolving a months long trade war between the world’s two largest economies.
Trump administration officials have insisted that Meng’s detention will not affect the trade talks, but the timing of the indictment coming so close to in-person discussions is likely to further strain relations between the two countries.
Meng is the daughter of Huawei’s founder and one of the most powerful industrialists in the country. Her arrest has outraged the Chinese government, which has since arrested two Canadians in retaliation.
The indictment now presents Canada with a politically charged decision: whether to extradite Meng to face the fraud charges, or make a political determination to send her back to Beijing.
A spokesman for Huawei, Joe Kelly, said it “is not aware of any wrongdoing by Meng, and believes the U.S. courts will ultimately reach the same conclusion.”
The indictment unsealed against Meng is similar to the charges leveled against the Huawei executive in filings made by federal prosecutors in connection with the bail hearing in Canada.
It claimed that Huawei defrauded four large banks into clearing transactions with Iran in violation of international sanctions through a subsidiary called Skycom.
Federal authorities did not identify the banks, but in an earlier court proceeding in Canada after Meng’s arrest, prosecutors had identified one of the banks as HSBC.
The most serious new allegation in the indictment, which could have bearing on the extradition proceeding in Canada, is the contention by federal prosecutors that Huawei sought to impede the investigation into the telecom company’s attempt to evade economic sanctions on Iran by destroying or concealing evidence.
Huawei moved employees out of the United States so they could not be called as witnesses before a grand jury in Brooklyn. 
The company destroyed evidence in order to hinder the inquiry.
Richard P. Donoghue, the United States attorney for the Eastern District of New York, said that the telecom firm’s actions began in 2007 and “allowed Iran to evade sanctions imposed by the United States and to allow Huawei to profit.”
The arrest of a top executive for sanctions evasion is unusual.
In 2015, Deutsche Bank was fined $258 million for violating American sanctions on Iran and Syria. No executives involved in the scheme were indicted, though six employees were fired.
Meng is under house arrest at one of two residences that she owns in Vancouver.
American officials said Monday that they will request her extradition before a deadline on Wednesday. 
The next stage of her case will be decided at the Supreme Court of British Columbia.
“Companies like Huawei pose a dual threat to both our economic and national security,” said Christopher A. Wray, the F.B.I. director, who joined Mr. Whitaker and two other cabinet members, Wilbur Ross, the commerce secretary, and Kirstjen Nielsen, the homeland security secretary.
Mr. Wray argued that “the magnitude of these charges make clear just how seriously the F.B.I. takes this threat.”
“Today should serve as a warning that we will not tolerate businesses that violate our laws, obstruct justice or jeopardize national and economic well-being,” he added.
Parts of the indictment were redacted and left open the question of whether the United States had secretly indicted Meng’s father, Ren Zhengfei, a former People’s Liberation Army officer and member of the Communist Party.
A United States government interview with Ren from 2007 is cited in one of the indictments, to make the case that he misled investigators, and the name of at least one of those indicted is blacked out from the publicly filed version of the indictment.
Mr. Whitaker fueled the speculation about an indictment of Ren when he told reporters on Monday that the criminal activity “goes all the way to the top of the company.”
The Justice Department also accused Huawei of conspiring to steal trade secrets from a competitor, T-Mobile.
The charges relate to a criminal investigation that stemmed from a 2014 civil suit between the two companies.
In that case, T-Mobile accused Huawei of stealing proprietary robotics technology that the telecom company used to diagnose quality-control issues in cellphones.
Huawei was found guilty in May 2017.
The indictment cited internal emails from Huawei and its American subsidiary that set up a bonus system for employees who could illicitly obtain the T-Mobile testing system.
“These are very serious actions by a company that appears to be using corporate espionage not only to enhance their bottom line but to compete in the world economy,” Mr. Whitaker said.
The legal drama now shifts to Canada, where the government has warned that it will not extradite Meng if it appears that the request is being made for political reasons.
Trump said after her arrest that he would consider using her case for leverage in the upcoming trade negotiations, which fueled speculation that the United States may be more interested in Meng’s value in winning trade concessions than in obtaining a conviction.
Canada’s ambassador to Beijing was fired over the weekend by Prime Minister Justin Trudeau for suggesting that the case against Meng was political and that Canada might accede to Chinese demands and return her home.
Mr. Whitaker declined to say Monday whether the White House would interfere in the criminal case against Meng.
But the array of officials present at the announcement was clearly intended to demonstrate a coordinated government effort to go after Huawei.
“Given the seriousness of these charges, and the direct involvement of cabinet officials in their rollout, today’s announcements underscore that there is a unified full-court press by the administration to hold China accountable for the theft of proprietary U.S. technology and violations of U.S. export control and sanctions laws,” said David Laufman, the former chief of the Justice Department’s counterintelligence and export control section.
The indictments could further complicate the trade talks that the administration is holding this week with Beijing.
The Trump administration is seeking significant changes to China’s trade practices, including what it says is a pattern of Beijing pressuring American companies to hand over valuable technology and outright theft of intellectual property.
“The Americans are not going to surrender global technological supremacy without a fight, and the indictment of Huawei is the opening shot in that struggle,” said Michael Pillsbury, a China scholar at the Hudson Institute who advises the Trump administration.
Lawmakers like Senator Mark Warner, Democrat of Virginia, who have long argued for action to be taken against Chinese technology providers including Huawei and ZTE, a smaller firm that has faced similar accusations, called the indictment “a reminder that we need to take seriously the risks of doing business with companies like Huawei and allowing them access to our markets.”
Mr. Warner said that he would continue to press Canada to reconsider using any Huawei technology as it upgrades its telecommunications network.
On Tuesday, American intelligence officials are expected to cite 5G investments by Chinese telecom companies, including Huawei, as a worldwide threat. 
And the United States has been drafting an executive order, expected in the coming weeks, that would effectively ban American companies from using Chinese-origin equipment in critical telecommunications networks.

Huawei espionage

The list of countries with espionage fears about China’s Huawei is growing — fast
By Adam Taylor

Huawei Technologies has been one of the most successful Chinese conglomerates of the modern era. The telecoms company recently surpassed Apple as the world’s second-biggest supplier of cellphones globally. 

As a key part of Beijing’s “digital Silk Road” initiative, it claims that its services are used in more than 170 countries.
But the company is attracting growing scrutiny internationally. 

A number of governments are concerned that the company still has ties with the Chinese security services — prompting a number of those governments to put the company under scrutiny. 

There are particular concerns about the use of Huawei’s technology in upgrades to fifth-generation (5G) mobile networks.
The company’s background is another factor that worries some governments. 

Huawei was founded by Ren Zhengfei, a former engineer in China’s People’s Liberation Army, in the 1980s. 

It has become notorious for its military-like corporate culture.
Though the privately owned company denies there is any threat of spying, pressure on Huawei has increased recently as the United States has pushed its allies to think twice about using Huawei’s technology. 

Here is how some countries are dealing with the national security threat from Huawei.

The United States
U.S. skepticism of Huawei goes back to at least 2012, when the House Intelligence Committee issued a report that said that the company’s equipment could be used to spy on Americans and should be deemed a national security threat.
After that, most U.S. firms avoided the use of its technology, though the company does have a small American presence. 

Education Secretary Betsy DeVos is facing bipartisan pressure from lawmakers to look into Huawei’s research partnerships with U.S. entities, for example.
In addition to scrutiny of its role in espionage, the company has also been accused of violating U.S. sanctions laws: In 2016 it was subpoenaed by the Commerce and Treasury departments over violations of sanctions on the export or re-export of U.S. technology to Cuba, Iran, North Korea, Sudan and Syria.
Last month, at the request of the U.S. government, Canadian authorities arrested Huawei executive Meng Wanzhou as she changed flights in Vancouver. 

Meng, daughter of the company’s founder, faces extradition to the United States, where she is expected to face charges on sanctions violations concerning Iran.

Canada
Canada’s arrest of Meng has sparked a diplomatic standoff with Beijing, and soon afterward, a number of Canadian citizens in China were placed under arrest. 

The Canadian government is also facing bipartisan pressure from the United States to block Huawei technology from its 5G network infrastructure.
“These Chinese telecom companies are directly influenced by the Chinese government. 

They are not necessarily direct arms of the government,” Sen. Mark R. Warner (D-Va.) told CBC News last week. 

“The government and the Communist Party [have] the ability to influence their capabilities.”
U.S. lawmakers have said they are concerned about Huawei in Canada, as the U.S. telecoms system is intertwined with Canada’s. 

The Canadian government has said speculation that it would ban Huawei and other Chinese tech firms was speculation.

Poland
Polish authorities announced this week that they had detained an employee of Huawei and charged him with spying on behalf of China. 

A Polish citizen who worked for the company’s main business partner in the country was also arrested.
The moves are especially notable as Huawei had a considerable footprint in Poland, which had not limited its partnership with the company in the way some other European nations have. 

Last year, the Polish government said it would collaborate with the company on a 5G cellular network.
Poland’s counterintelligence agency told reporters that it searched Huawei’s Polish offices Tuesday and seized documents and electronics.

Australia
In August, the Australian government announced it was barring Huawei and another Chinese company, ZTE, from providing 5G technology in the country. 

In later comments, a top Australian intelligence official explained that the technology involved in 5G networks was what made Huawei a security threat to the country.
“This is about more than just protecting the confidentiality of our information — it is also about integrity and availability of the data and systems on which we depend. Getting security right for our critical infrastructure is paramount,” Australian Signals Directorate director-general Mike Burgess told the Australian Strategic Policy Institute’s national security dinner in October.

New Zealand
Authorities in New Zealand followed Australia’s lead in November and banned the use of Huawei’s 5G equipment in the country. 

A local company named Spark New Zealand announced Nov. 28 that its proposal to use the Chinese technology had been blocked by the director general of the Government Communications Security Bureau, New Zealand’s national security agency.
“The Director-General has informed Spark today that he considers Spark’s proposal to use Huawei 5G equipment in Spark’s planned 5G RAN would, if implemented, raise significant national security risks,” Spark New Zealand said in a statement.

Japan
Though the firms were not named directly, the Japanese government in December effectively banned Huawei and ZTE from official contracts in the country. 

“In order to secure cybersecurity, we are aware that it is extremely important to make sure we would not procure equipment with functions of malicious intention,” Japanese Prime Minister Shinzo Abe said at a news conference Monday.
Kyodo News later reported that the big three telecom operators in Japan — NTT Docomo, KDDI and SoftBank — also would not use technology from Huawei and ZTE in their networks.

The Fate of Huawei Foreshadows the Fate of China

Both the United States and the European Union have introduced new policies aimed at keeping high-tech know-how out of evil Chinese hands

By MICHAEL SCHUMAN

Visitors walk past a Huawei stand at the 2017 Mobile World Congress in Barcelona, Spain.

As Ken Hu, the “rotating” chairman at Huawei Technologies, made the case during a briefing in southern China that his company’s telecom equipment was trustworthy and above board, he did something mundane for many global executives, yet remarkable for the embattled Chinese giant: He took questions from foreign journalists.
Hu’s press conference on Tuesday was an all-too-rare attempt by Huawei’s top brass to engage with the world—and it comes at a critical moment. 

This month, Hu’s colleague and the company’s chief financial officer, Meng Wanzhou, was arrested in Canada, accused of misleading financial institutions to break U.S. sanctions on Iran. 

Meng’s arrest is the latest front in a multipronged standoff between Washington and Beijing, one that encompasses disputes over trade, intellectual property, naval lanes, and much else.
In that broader context, focusing on Huawei may appear, at first glance, to be a narrow lens. 

After all, the company makes telecom gear that its critics can buy elsewhere. 

But what happens to Huawei matters—for China and the world. 

One of Beijing’s top goals is transforming China into a technology powerhouse able to innovate and control the vital know-how powering future industries, and to free itself from, and then challenge, the United States. 

Huawei, as one of China’s most prominent global enterprises, will be a key part of that quest. 

Hence, its problems are China’s problems, and the fate of the company could foreshadow the fate of the country.
Huawei has always insisted that it has never had ties to the Chinese government or military. 

Still, its critics remain unconvinced. 

The suspicion that Huawei is a threat to American national security has become indelibly marked on the minds of many Americans. 

Sales of its major equipment in the United States have been stymied, its acquisitions of American assets have been blocked, and President Donald Trump’s administration, determined to defend American technology, has taken an especially hostile position on the company.
All of that, to a degree, is Huawei’s own fault. 

The problem starts with its mysterious corporate culture, which has left policy makers and security experts hazy about its background and intentions.
Huawei markets itself as a miracle of modern entrepreneurship, a rags-to-riches fairy tale of a regular guy who launched a business empire on hard work and chutzpah. 

In the company’s narrative, its founder, Ren Zhengfei, was a mere soldier-engineer who, after leaving the military, started Huawei in 1987 with no government connections, state aid, personal wealth, or experience in telecommunications. 

Somehow, despite this lack of expertise and resources, Ren managed to bring a complex technical system to market in a mere handful of years, an impressive achievement in what was then a decidedly low-tech China. 

Officially, the company is owned by its employees, who vote in their own management team. 

Ren, whom the company calls its “natural person shareholder,” controls only 1.4 percent of Huawei but has served as its chief executive for 30 years, and his daughter, the arrested Meng, now helps him run the company.
But Ren has done a miserable job of selling this extravagant myth.

As Huawei has risen to worldwide fame, he remains an enigma. 

Rarely appearing in public, he has made little effort to refute his critics or build confidence in himself and his company. 

Though other Huawei executives reach out to an international audience here and there—as Hu did on Tuesday—Ren mostly delegates the talking to lobbyists and public-relations officers.
On the rare occasions he has personally tried to influence public opinion, he seems to only reinforce his persona. 

In 2012, Ren met with members of a U.S. congressional committee, but they came away frustrated with incomplete answers and information. 

Based on how he responded to questions during a public interview at the World Economic Forum in 2015, it’s not hard to see why. 

Asked point-blank if his company had links to the Chinese government or military, Ren never offered the requisite, emphatic “No,” and broke into a roundabout response, saying: “There’s no need to exert ourselves to explain who we are.”
Eric Harwit, an Asian-studies professor at the University of Hawaii at Manoa and the author of the book China’s Telecommunications Revolution, argues that Huawei’s fortunes have been damaged by Ren’s inability to schmooze and sell.

“You need a Jack Ma who can stand up with Trump and shake hands, and Trump can say you’re a great guy,” Harwit said, referring to the effusive founder of the Chinese e-commerce firm Alibaba. “They don’t have a Jack Ma.”

Compounding Huawei’s woes is a history of suspicious behavior. 

American companies, including Cisco Systems, have accused Huawei of pilfering their intellectual property. 

Now comes the Meng case, which, according to Harwit, “puts Huawei in the headlines.”
“You jump from sanctions violations to what kind of company is Huawei overall,” he said. 

“Are they some kind of evil company that is doing the bidding of the Chinese government no matter what?”

With nearly $93 billion in revenues in 2017, Huawei has done business successfully with a wide range of countries. 

Yet distrust of Huawei is spreading. 

New Zealand and Australia recently barred it from providing the equipment for cutting-edge 5G cellular networks.
This widening concern about Huawei is representative of increasing wariness of China. 

The more assertive Beijing has become in pressing its diplomatic and economic goals—from its state-led ambitions to conquer world manufacturing to the sizable expansion of its military capabilities—the more threatening a rising China has appeared. 

Foreign governments are, in response, standing in China’s path. 

Both the United States and the European Union have introduced new policies to more carefully scrutinize foreign investments, an effort clearly aimed at keeping high-tech know-how out of Chinese hands. 

In Malaysia, Prime Minister Mahathir Mohamad recently halted high-profile infrastructure projects backed by Beijing while warning of a new “colonialism.”
In the Huawei case, American security experts fret that in China, where the distinction between state and society is, at best, blurred, intelligence services could and would exploit the company’s equipment, no matter what its executives promise. 

“Most of it is a China problem, and it’s gotten worse,” William Reinsch, a senior adviser in international business at the Center for Strategic and International Studies in Washington, D.C., said of Huawei’s issues. 

“If Huawei was an Indian company, I think that the attitude toward it would be very different.”
Thus China and Huawei are in a reinforcing loop of escalating distrust. 

The difficulties the company is facing in the United States and elsewhere should be a signal to Beijing’s top leadership that it needs to do more to ease fears about its ascent and ambitions. 

If not, both could find doors closing that they badly need open.
At the two-hour-long press conference at the company’s campus in Dongguan, Hu declined to comment on Meng’s legal situation, instead arguing that Huawei’s sales figures offered proof of how much its customers trusted it. 

Still, even at the briefing, the company could stomach only so much openness. 

Though television correspondents were invited, their cameras were not.
It was probably too little, too late anyway.
“They made a huge foray a while back to try to change their image here and it didn’t work,” Reinsch noted, referring to a past Huawei public-relations effort. 

Now, he added, “I don’t think it is possible.”

National Security Threat

Huawei exec's arrest opens a new front in the US-China trade war

By Jethro Mullen

Hong Kong -- The conflict between the United States and China over trade and technology is expanding.
The arrest of a top executive at Chinese tech giant Huawei at the request of the US government has raised new doubts about the fragile truce that the leaders of the world's top two economies reached just days ago.
"You have to see this as a significant escalation in the trade war," said Christopher Balding, a China expert at the Fulbright University Vietnam in Saigon.
Viewed by the US as a national security threat, Huawei sells more smartphones than Apple and builds telecommunications networks in countries around the world.
Huawei CFO Meng Wanzhou arrested in Canada, faces extradition to United States

Canadian authorities said late Wednesday that Huawei's chief financial officer, Meng Wanzhou, had been arrested in Vancouver and that the United States is seeking her extradition.
The US and Canadian governments haven't specified what charges Meng faces, but her arrest follows reports this year that the US Justice Department was investigating whether Huawei violated American sanctions on Iran.
"Under the Obama administration, the US indicted Chinese personnel on similar charges, but was reluctant to take more drastic action such as arresting the individuals in third countries, over fear that Beijing would retaliate against US interests in China or in other countries," Eurasia Group political risk analysts wrote in a note.
Meng's arrest "suggests that the gloves are now fully off in this arena," the analysts said.
What happens next to Meng, the daughter of Huawei's reclusive founder, could have huge repercussions for Huawei's business.

What does it mean for the trade war?
The arrest comes as the US and Chinese governments are discussing ways to tackle problems that led to their trade conflict, which has resulted in new tariffs on hundreds of billions of dollars of goods.
"This type of action will affect the atmosphere around the negotiations," the Eurasia Group analysts said.

China's Commerce Ministry said Thursday it was confident a trade agreement with the United States could still be reached in time to hit a 90-day deadline set by President Donald Trump.
But the Chinese government is clearly angry about Meng's arrest. 

The big question is what Beijing and Washington do now. 

Analysts suggest China could retaliate, and the Trump administration may be preparing other moves against Chinese interests.
The stakes are extremely high.
"This case is like a sharp tug on a loose thread that could be part of an unraveling of the relationship," said Scott Kennedy, an expert on the Chinese economy at the Center for Strategic & International Studies in Washington. 

Technology is at the heart of the trade war. 

The Trump administration says the huge waves of tariffs it has slapped on Chinese goods are part of an effort to stop China from getting its hands on American technology unfairly through practices like cybertheft and forcing companies to hand over trade secrets.
The return to the negotiating table follows a ceasefire reached at a dinner between President Trump and Xi Jinping on Saturday.
Balding pointed out that the deal was reached the same day that Meng was arrested in Canada.
"That is very politically embarrassing to Xi," he said. 

"It has to be considered an escalation."

What does it mean for Huawei?
The arrest is one of the strongest moves yet against Huawei by US authorities.
The company is largely shut out of supplying telecommunications equipment to US carriers. American officials have repeatedly said that the Chinese government uses Huawei products for espionage.
Huawei's no good, very bad year just got even worse

Meng's case "could be a prelude to further action against the firm and its senior officials," Eurasia Group analysts said.
Huawei's smaller rival, ZTE, provides an example of how the US government could go further. 

The Chinese company was crippled for months after the US Commerce Department blocked it from buying vital parts from American companies.
The ban threatened to put ZTE out of business and highlighted China's continued reliance on American technology, a vulnerability Beijing is eager to reduce. 

ZTE eventually got a reprieve after Xi personally asked Trump for help. 

But the crisis caused disruption for telecommunications carriers ZTE supplies around the world.
A similar ban on Huawei would have a bigger impact because its equipment is more widely used.

A Huawei stand at an artificial intelligence conference in Shanghai.

The next moves in Meng's case are key.
"There is a lot of legal and diplomatic wrangling ahead," Balding said. 

"The US and Canada would not have taken this move lightly and it puts everything in a brand new light."

A Roadmap for the Great U.S.-China Divorce

Washington needs allies if it really wants to decouple.

By Christopher Balding

As the trade war between the U.S. and China drags on with new tariffs and no end in sight, we need to ask ourselves: What do they want? 

A fundamental objective for both is to become less reliant on the other. 

The trade war should thus be reframed as a conscious uncoupling.
Behind the rhetoric from both sides lies a profound distrust. U.S. suspicion stems from two specific issues. 

China is increasingly seen as a national security threat that fails to play by the rules. 

The Trump administration’s stance has spurred debate over whether it was a mistake to allow admittance of a highly protectionist Communist country to the World Trade Organization. 

Democrats may dislike Trump’s methods, but few will disagree with his view of China as a mortal rival.
For its part, the government of Xi Jinping is concerned about China’s dependence on U.S. technology and finished manufactured products. 

The focus of its Made In China 2025 plan is to shift Chinese consumption of high-tech products away from foreign, specifically American, manufacturers and toward domestic companies.
So how will they decouple? 

There’s little historical precedent to consider how this might look. 

Two major powers have never been so closely intertwined. 

However, there are some patterns emerging. 

First, alliances are slowly evolving into more cohesive forms. 

Just as the new U.S.-Mexico agreement (likely to include Canada) seeks to divert more trade into Nafta, other countries have started reconsidering their reliance on Chinese telecom-equipment makers for the rollout of 5G wireless networks.
Second, there’s a reassessment of where key products should be made. 

The second batch of Trump’s tariffs focuses on low-end intermediate exports with the intention of reducing China’s role in the global value chain and pushing reshoring to the U.S. and other locations, as a recent Natixis report noted.
Though it’s unlikely that Apple Inc. will start making iPhones in the U.S., shifting factories to allies is probable and builds upon existing trends. 

China is no longer a low-cost producer, and both foreign and locally owned firms there are actively considering plans to relocate operations. 

As Samsung Electronics Co. has shown in Vietnam, it isn’t necessary to make a final product in a country that manufactures the specific inputs. 

Chinese exports are dominated by electronics and basic machinery that rely on global supply chains, so it’s certain many companies are reevaluating their long-term sourcing plans.
If the Trump administration is intent on shifting supply chains away from what it considers a strategic adversary, it should accelerate plans to encourage this trend. 

Trade agreements that grant allied countries special access to U.S. markets with higher-quality governance and legal systems will increase the appeal for firms of moving out of China. 

That could mean revisiting the Trans-Pacific Partnership.
Washington must also actively open its domestic markets to Africa, Latin America and emerging Asian economies in lower-skilled products, where China dominates. 

The primary competitor for Chinese export market share isn’t North Carolina but Mexico, Vietnam and South Africa. 

For an administration seeking to reduce its dependence on Chinese garment and textile exports, raising tariffs on Rwandan garment exports is self-defeating.
The U.S. and China have talked officially of resolution, but realistically, the red lines laid out by both sides make a negotiated settlement difficult to envision. 

The Trump administration requires much broader market access and more changes to China’s socialist model than Beijing is willing to grant. 

The U.S. government, with bipartisan support, is likely to pass an updated foreign investment oversight bill that targets China in all but name.
If Washington really wants to reduce its dependence, it needs better planning to trade with allied countries and must allow other emerging-market economies to benefit from its tariffs on China. 

Garment manufacturing won’t be moving from Guangdong to Georgia, but many other countries would love that business. 

Such a shift would be a strategic win in a trade war that so far has shown little planning.

Tech Quisling

Senators Demand Answers from Mark Zuckerberg over Huawei Data Sharing Scandal
By Allum Bokhari 

Sens. John Thune (R-SD) and Bill Nelson (D-FL), the chairman and ranking member of the Senate Commerce Committee, have sent a letter to Mark Zuckerberg demanding answers on Facebook’s latest data scandal.
Earlier this week it was revealed that Facebook shared user data with “at least 60” phone manufacturers including Huawei, a company linked to the Chinese government and flagged as a national security threat by the CIA, FBI, and NSA.
A Democrat lawmaker has since accused Zuckerberg of lying to Congress when he told them that users had “complete control” over who sees their data on the platform.
Among the questions asked by Sens. Thune and Nelson, which can be read in full here, is whether Zuckerberg would like to amend his statement on this, given that the New York Times reported that phone manufacturers had access to data from Facebook users’ friends even when those friends denied them the permission to share their data with third parties.
The Senators also asked Zuckerberg if Facebook verified whether the phone companies complied with the social network’s rules on data-sharing, and if there was even any method to check.
The Senators also demanded transparency: a full list of the device manufacturers that Facebook granted data access to, including manufacturers with whom it has since ended partnerships with.
The letter requests a response from Zuckerberg by no later than 5:00 p.m. on June 18, 2018.

Tech Quisling

Facebook Gave Data Access to Huawei, Rogue Chinese Firm Flagged by U.S. Intelligence

By Michael LaForgia and Gabriel J.X. Dance

Facebook’s logo at an internet conference in Beijing in April. The social network has struck data-sharing partnerships with at least four companies in China.
Facebook has data-sharing partnerships with at least four Chinese electronics companies, including a manufacturing giant that has a close relationship with China’s government, the social media company said on Tuesday.
The agreements, which date to at least 2010, gave private access to user data to Huawei, a telecommunications equipment company that has been flagged by American intelligence officials as a national security threat, as well as to Lenovo, Oppo and TCL.
The four partnerships remain in effect, but Facebook officials said in an interview that the company would wind down the Huawei deal by the end of the week.
Facebook gave access to the Chinese device makers along with other manufacturers — including Amazon, Apple, BlackBerry and Samsung — whose agreements were disclosed by The New York Times on Sunday.
The deals were part of an effort to push more mobile users onto the social network starting in 2007, before stand-alone Facebook apps worked well on phones. 

The agreements allowed device makers to offer some Facebook features, such as address books, “like” buttons and status updates.
Facebook officials said the agreements with the Chinese companies allowed them access similar to what was offered to BlackBerry, which could retrieve detailed information on both device users and all of their friends — including religious and political leanings, work and education history and relationship status.
Huawei used its private access to feed a “social phone” app that let users view messages and social media accounts in one place, according to the officials.
Facebook representatives said the data shared with Huawei stayed on its phones, not the company’s servers.
Senator John Thune, the South Dakota Republican who leads the Commerce Committee, has demanded that Facebook provide Congress with details about its data partnerships. 

“Facebook is learning hard lessons that meaningful transparency is a high standard to meet,” Mr. Thune said.
His committee also oversees the Federal Trade Commission, which is investigating Facebook to determine whether the company’s data policies violate a 2011 consent decree with the commission.
Senator Mark Warner of Virginia pointed out that concerns about Huawei were not new, citing a 2012 congressional report on the “close relationships between the Chinese Communist Party and equipment makers like Huawei.”
“I look forward to learning more about how Facebook ensured that information about their users was not sent to Chinese servers,” said Mr. Warner, the top Democrat on the Intelligence Committee.
“All Facebook’s integrations with Huawei, Lenovo, Oppo and TCL were controlled from the get-go — and Facebook approved everything that was built,” said Francisco Varela, a Facebook vice president. 

“Given the interest from Congress, we wanted to make clear that all the information from these integrations with Huawei was stored on the device, not on Huawei’s servers.”
Banned in China since 2009, Facebook in recent years has quietly sought to re-establish itself there. The company’s chief executive, Mark Zuckerberg, has tried to cultivate a relationship with Chinese dictator Xi Jinping, and put in an appearance at one of the country’s top universities.
Last year, Facebook released a photo-sharing app in China that was a near replica of its Moments app, but did not put its name on it. 

And the company has worked on a tool that allowed targeted censorship, prompting some employees to quit over the project.
Still, Facebook has struggled to gain momentum, and in January an executive in charge of courting China’s government left after spending three years on a charm campaign to get the social media service back in the country.
None of the Chinese device makers who have partnerships with Facebook responded to requests for comment on Tuesday.
Huawei, one of the largest smartphone manufacturers in the world, is a point of national pride for China and is at the vanguard of the country’s efforts to expand its influence abroad. 

The company was the recipient of billions of dollars in lines of credit from China’s state-owned policy banks, helping to fuel its overseas expansion in Africa, Europe and Latin America. 

Its founder, Ren Zhengfei, is a former engineer in the People’s Liberation Army.
The United States government has long regarded the company with suspicion, and lawmakers have recommended that American carriers avoid buying the network gear it makes. 

In January, AT&T walked away from a deal to sell a new Huawei smartphone, the Mate 10.
United States officials are investigating whether Huawei broke American trade controls by dealing with Cuba, Iran, Sudan and Syria. 

The Trump administration has taken aim at Huawei and its rival ZTE in recent weeks, and in April the Federal Communications Commission advanced a plan to bar federally subsidized telecom companies from using suppliers that are considered national security threats.
Facebook has not entered into a data-sharing agreement with ZTE, officials at the social network said.
TCL, a consumer electronics firm, has accused the Trump administration of bias against Chinese companies and last June dropped a bid to buy a San Diego-based company that makes routers and other hardware.
Lenovo, a maker of computers and other devices, recently shelved ambitions to acquire BlackBerry after the Canadian government signaled that such a deal could compromise national security.