Chinese theft of trade secrets on the rise

• The Justice Department launched the “China Initiative” with the aim of countering Chinese national security threats.
• “The issue is that their industrial policy, the way they try to accomplish that, is state-sponsored theft or creating an environment that rewards it,” U.S. Deputy Assistant Attorney General Adam Hickey told CNBC.

By Nancy Hungerford


China’s legal environment rewards intellectual property theft: DOJ

As President Donald Trump puts pressure on Beijing to end unfair business practices, the Department of Justice has a warning for companies: Bolster your defenses.
“More cases are being opened that implicate trade secret theft” — and more of them point to China, said U.S. Deputy Assistant Attorney General Adam Hickey.
Since 2012, more than 80% of economic espionage cases brought by the department’s National Security Division have implicated China. 

The frequency of cases has been rising in recent years, according to Hickey.
“That may be because the victims are more attentive to what’s happening, which is a good thing,” Hickey told CNBC in Singapore on Saturday. 

“They may be more comfortable reporting to law enforcement, which is a good thing. They may be fed up, which is also a good thing.”
The Justice Department launched the “China Initiative” in November 2018 with the aim of countering Chinese national security threats. 

It does so by identifying and prosecuting trade-secret and intellectual property (IP) theft, hacking and economic espionage.

‘State-sponsored theft’
Hickey is unequivocal in his defense of the Justice Department’s motives.
“We expect other nations will want to become self-sufficient in critical technologies. That’s what we’d expect of a responsible government,” he said. 

“The issue isn’t that China has set out to do that. It’s that part of their industrial policy, part of the way they try to accomplish that, is state-sponsored theft or creating an environment that rewards or turns a blind eye to it.”
He pointed to evidence of such behavior linked to the “Made in China 2025” strategic plan. 

The Chinese government introduced the plan in 2015, designed to reduce dependence on imported technology in 10 priority industries including robotics, IT, aviation, railway transport and biopharma. “We’ve charged cases, I believe, in eight of those 10 sectors, IP theft cases,” Hickey said.
The Justice Department’s China Initiative also puts an emphasis on cybersecurity threats and telecommunication vulnerabilities.
Hickey declined to comment on Chinese telecommunication giant Huawei as it is currently the subject of two prosecutions in the United States.
However, he weighed in on the threat to national security from telecom companies and supply chains more broadly. 

“It’s going to matter where that company is located and whether they can be leveraged to comply with an intelligence service without regard to the rule of law that has to be relevant,” he said.

Huawei CEO and founder, Ren Zhengfei, told CNBC in April that his company would “never install a back door” on its equipment — even if ordered by the Chinese government to do so. 

Ren said: “It would be impossible for us to provide customer information to any third party.”

Experts, however, have told CNBC that Huawei will have no choice but to comply with the Chinese government’s requests.
Hickey stressed the need to look not only at whether there is a so-called back door or an intentional vulnerability, but also at whether there’s intent and capability of a government to leverage that company.
“If you are looking for a smoking gun and you wait for it, you might end up with a gunshot,” Hickey warned.

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 and China Have Limited Ways to Answer U.S. Charges

By Paul Mozur and Raymond Zhong

Wilbur Ross, the United States secretary of commerce, speaking on Monday about charges of bank fraud and stealing trade secrets against Huawei of China.

SHANGHAI — Ever since Meng Wanzhou, the chief financial officer at the Chinese technology giant Huawei, was arrested in Canada nearly two months ago, Chinese officials have denounced the move as “wrongful” and “arbitrary” — a political affair cloaked in a judicial one.
Now that the United States has laid out its case against Meng in greater detail, neither Huawei nor the Chinese government has easy options for responding or retaliating.
Huawei, the world’s largest provider of the equipment that powers mobile phone and data networks, said on Tuesday that it was innocent of charges unveiled in Washington the day before that it had misled the United States government about its business in Iran, obstructed a criminal investigation and stolen American industrial secrets.
China’s Foreign Ministry called, once again, for the United States and Canada to release Meng, who is a daughter of Huawei’s founder and chief executive, Ren Zhengfei.
But should Meng be brought from Canada to the United States to face charges, as American officials say they plan to request before a deadline on Wednesday, Beijing will have few ways to force Washington’s hand.
China is in the middle of a trade war that it is anxious to end as its vast economy slows. 

Any effort to get tough on the United States — such as by detaining American nationals, as it did to Canadians after Meng was arrested — could scuttle the negotiations. 

Those talks are set to resume on Wednesday.
And Huawei’s Washington operations have undergone drastic turnover as it appears to rein in its sales ambitions in America and shift tactics in its relations with the government. 

In the second shake-up of its American leadership in less than a year, the company is replacing Regent Zhang, its head of government affairs in Washington, with Joy Tan, currently its head of global communications.
The broad language of the Justice Department’s indictments suggests that other Huawei leaders, including Ren, a former officer in the People’s Liberation Army, might wish to exercise caution while traveling to countries that have an extradition treaty with the United States.
“If I was his lawyer, I would advise him to be careful,” said Julian Ku, a professor of law at Hofstra University.

Meng Wanzhou, Huawei’s chief financial officer, in Vancouver, British Columbia, in December. China and Huawei alike have few easy options if she is extradited to the United States.

But that kind of caution could make it more difficult still for Huawei to hold on to its business in places like Europe. 

Already, the United States has been applying pressure on all sides against Huawei, fearing that the Chinese government could use the company’s gear to sabotage other countries’ communication networks.
Previously, Canadian officials had said that Meng was accused of tricking financial institutions into making transactions that violated United States sanctions on Iran. 

One of the two indictments unsealed on Monday outlines a broader effort.
The indictment says that Huawei’s misrepresentations to the United States government and four multinational financial institutions began in 2007. 

It cites an interview between agents of the Federal Bureau of Investigation and Ren around July of that year, in which Ren said that his company complied with all American laws and that it had not dealt directly with any Iranian company.
The indictment also cites 2012 testimony before the United States Congress in which a Huawei executive said that the company’s business in Iran had not violated sanctions. 

That executive was Charles Ding, a corporate senior vice president. 

Ding, who was not mentioned by name in Monday’s indictment, couldn’t be reached for comment.
Also in the indictment is a reference to a file found on an electronic device that Meng was carrying when she arrived at New York’s John F. Kennedy International Airport in 2014. 

Officials detained her for a couple of hours when she arrived, according to a person with knowledge of the events. 

During that time, they briefly confiscated her electronic devices, said the person, who asked for anonymity because the events haven’t made public.
The file she was carrying, which the indictment said may have been deleted before being discovered, contained “suggested talking points” about Huawei’s relationship with Skycom, the company that prosecutors accuse Huawei of using as an unofficial subsidiary to obtain American-sourced goods, technology and services for its Iranian business.
The indictment also said that Skycom employed at least one United States citizen in Iran, a violation of American law. 

And it said that after Huawei found out that the United States was pursuing a criminal investigation in 2017, the company destroyed evidence and tried to move unspecified witnesses who knew about its Iranian business to China, beyond the reach of the American government.
The other indictment, which concerns the theft of trade secrets from the American wireless provider T-Mobile, refers to internal emails describing a plot to steal testing equipment from T-Mobile’s lab in Bellevue, Wash.
Huawei has contended that its employees were acting on their own to learn more about a robot that T-Mobile used to test smartphones, nicknamed Tappy because it could rapidly tap a phone screen. 

But the indictment cites multiple emails exchanged between Huawei engineers urging those with access to Tappy to take increasingly precise measurements.
Eventually, the indictment says, a Huawei engineer was sneaked into the Tappy laboratory by other Huawei employees who had access. 

He was caught and thrown out but returned, the indictment said.

Ren Zhengfei, the founder and chief executive of Huawei, is Meng’s father.

Later, after all but one Huawei employee had their access to the robot revoked, the employee took a Tappy robotic arm home for closer study, according to the indictment. 

A Huawei investigation into the issue, which concluded there was minimal coordination among the engineers, contained false statements, the indictment said.
The indictment also cites a Huawei program started in 2013 to reward employees for stealing confidential information from competitors. 

They were directed to post such information to an internal Huawei website, or in special cases to an encrypted email address, the indictment said. 

Bonuses were apportioned to those who stole the most valuable information, it said.
The evidence presented in this week’s indictments bolsters the American case for extraditing Meng, said Mr. Ku of Hofstra University.
“The standard for extradition is whether a Canadian court would send her to trial,” Mr. Ku said. “Essentially, is there enough evidence to indict someone? I think this will help meet that standard.”
Prosecutors redacted the identity of at least one of the defendants, most likely to leave open the option of arresting that person. 

That person isn’t likely to be Ren, said Mr. Ku, because he is mentioned later in the indictment. 

But that doesn’t guarantee prosectors won’t target him later.
Huawei has worked for a reset in Washington as relations with the American government have worsened. 

Last year it cut staff in Washington after investigations into the company deepened and AT&T walked away from a deal to sell Huawei’s phones. 

Further personnel shifts in recent weeks appear to be focused on improving its image in America.
Tan, Huawei’s incoming head of government affairs in Washington, has for years played a key role in the company’s media relations. 

She will be tasked with engaging an American administration that has grown hawkish on China. 

Her predecessor in Washington, Zhang, had previously been responsible for sales in Mexico.
The mounting global skepticism toward Huawei and other Chinese tech suppliers is starting to have practical effects on the telecommunications industry.
On Tuesday, TPG Telecom, an internet provider in Australia, said it has been forced to cancel the construction of its mobile network because of the Australian government’s decision last year to forbid Huawei from supplying 5G equipment.
In a stock-exchange filing, TPG said that it had already spent around $70 million on its new network, largely on Huawei gear. 

But the company said that it did not make sense to invest further in a network that could not later be upgraded to 5G.

Justice Department Details Charges Against Chinese Huawei and Its CFO

By MICHAEL BALSAMO 

FBI Director Christopher Wray, standing with Commerce Secretary Wilbur Ross (left) and Acting Attorney General Matthew Whitaker, remarks on the charges against Huawei during a press conference today at the Department of Justice in Washington, D.C.

WASHINGTON — The Justice Department unsealed criminal charges Monday against Chinese tech giant Huawei, two of its subsidiaries and a top executive, who are accused of misleading banks about the company’s business and violating U.S. sanctions.
The company is also charged in a separate case with stealing trade secrets from T-Mobile, according to federal prosecutors.
Prosecutors are seeking to extradite the company’s chief financial officer, Meng Wanzhou, and allege she committed fraud by misleading banks about Huawei’s business dealings in Iran.

She was arrested on Dec. 1 in Canada.
The criminal charges in Brooklyn and Seattle come as trade talks between China and the U.S. are scheduled for this week.
“As I told high-level Chinese law enforcement officials in August we need more law enforcement cooperation with China,” acting Attorney General Matt Whitaker said at a news conference with other Cabinet officials, including Commerce Secretary Wilbur Ross and Homeland Security Secretary Kirstjen Nielsen. 

“China should be concerned about criminal activities by Chinese companies and China should take action.”
U.S. prosecutors charge that Huawei used a Hong Kong shell company to sell equipment in Iran in violation of U.S. sanctions. 

Huawei had done business in Iran through a Hong Kong company called Skycom and Meng misled U.S. banks into believing the two companies were separate, according to the Justice Department.
The announcement Monday includes a 10-count grand jury indictment in Seattle, and a separate 13-count case from prosecutors in the Eastern District of New York.
“As you can tell from the number and magnitude of the charges, Huawei and its senior executives repeatedly refused to respect U.S. law and standard international business practices,” said FBI Director Chris Wray.
A Huawei spokesman did not immediately return phone messages seeking comment.
Huawei is the world’s biggest supplier of network gear used by phone and internet companies and has long been a front for spying by the Chinese military and security services.
Prosecutors also allege that Huawei stole trade secrets, including the technology behind a robotic device that T-Mobile used to test smartphones, prosecutors said. 

A jury in Seattle ruled that Huawei had misappropriated the robotic technology from T-Mobile’s lab in Washington state.
Meng was arrested in Canada because the U.S. and China don’t have an extradition treaty. 

But new rules enacted in the past few years have made it easier for U.S. prosecutors to indict overseas corporate defendants without coordinating with foreign governments, said Ronald Cheng, a partner with the O’Melveny and Myers law office in Los Angeles and former U.S. judicial attache in Beijing.
Because it’s usually difficult to go after corporate officers, Chinese companies accused of IP theft need to worry more about asset forfeiture, which has in some cases been considerable. 

In July, the Chinese wind turbine maker Sinovel Wind Group LLC was ordered to pay more than $50 million in restitution after being convicted of stealing trade secrets from the U.S. company AMSC.
Cheng, who was reached in Hong Kong, said there’s considerable concern among Chinese business executives about stepped up enforcement in such cases, which began in earnest with the Obama administration, including a 2014 indictment alleging theft of solar power trade secrets.
“I think the government would say that this is part of a large pattern of conduct” by Chinese companies, Cheng said of Monday’s indictments.
The Huawei case has set off a diplomatic spat with the three nations, which has threatened to complicate ties between the U.S. and Canada. 

Donald Trump said he would get involved in the Huawei case if it would help produce a trade agreement with China and told Reuters in an interview in December that he would “intervene if I thought it was necessary.”
The arrest of Meng, the daughter of Huawei’s founder at Vancouver’s airport, has in particular led to the worst relations between Canada and China since the Tiananmen Square massacre in 1989. 

China detained two Canadians shortly after Meng’s arrest in an apparent attempt to pressure Canada to release her. 

A Chinese court also sentenced a third Canadian to death in a sudden retrial of a drug case, overturning a 15-year prison term handed down earlier.
David Martin, Meng’s lawyer in Canada, didn’t immediately respond to a message seeking comment. 

Meng is out on bail in Vancouver and is due back in court Feb. 6 as she awaits extradition proceedings to begin.
Canada arrested Meng at the request of the United States. 

The Chinese have been furious at Canada ever since and arrested Canadian ex-diplomat Michael Kovrig and businessman Michael Spavor on Dec. 10 on vague allegations of endangering national security.

Criminal Company

US unveils criminal charges against Huawei and Meng Wanzhou 
By Kiran Stacey in Washington and Tom Mitchell in Beijing

Acting US Attorney General Matthew Whitaker reiterated the Justice Department’s desire to have Huawei CFO Meng Wanzhou extradited to the United States.

The US has accused China’s Huawei and its chief financial officer of stealing American technology and breaking US sanctions against Iran, in a criminal indictment that sharply escalates the two countries’ technological rivalry.
 The move will overshadow trade talks this week aimed at averting an all-out trade war between the world’s two largest economies.
 Matthew Whitaker, acting attorney-general, announced the action against the world’s biggest telecoms equipment maker on Monday as China’s trade negotiators, led by Vice-Premier Liu He, arrived in Washington for talks scheduled to open on Wednesday.
 Depending on the penalties sought by the justice department, the Trump administration’s salvo could disrupt the global operations of a Chinese corporate champion and land its chief financial officer, Meng Wanzhou, in prison.
 Meng is the daughter of Huawei’s founder, Ren Zhengfei, and is currently in Vancouver as she fights a US extradition request in Canadian courts.
Canada’s justice department late Monday said it had received a formal extradition request from the US, the Canadian Broadcasting Corporation reported.
 Mr Whitaker told a press conference: “These are very serious actions by a company that appears to be using corporate espionage and sanctions violations not only to enhance their bottom line, but also to compete in the world economy. This is something the United States will not stand for.”
 He added: “This goes back 10 years and goes all the way to the top of the company.” 
 Huawei said it was “disappointed to learn of the charges brought against the company today”, adding that it had sought discussions with the US justice department after Meng’s arrest but “the request was rejected”.
 US officials said the investigations into Huawei had been going on for years.
But they began to come to a head in December, when Canadian officials arrested Meng in Vancouver on US charges, a move that triggered protests from China, which has since detained at least two Canadian citizens.
 Mr Whitaker said the US would formally lodge an extradition request with Canada in the coming days. 
 Meng’s arrest is a particularly sensitive political issue given Huawei’s status as a Chinese national champion.
 Eswar Prasad, a professor of trade policy at Cornell University, predicted the charges would make an eventual trade deal less likely.
 It is also likely to give the US further leverage when urging allies to do more to shut the Chinese company out of their markets. 
 Mark Warner, the Democratic vice-chairman of the Senate intelligence committee, said: “This is a reminder that we need to take seriously the risks of doing business with companies like Huawei and allowing them access to our markets. I will continue to strongly urge our ally Canada to reconsider Huawei’s inclusion in any aspect of its 5G infrastructure.” 
 US officials including Wilbur Ross, the commerce secretary, outlined on Monday the charges being brought against both Meng and the company.
 The charges of corporate espionage, they said, related to Huawei’s attempts to steal the technology used by T-Mobile, one of its US business partners, in a robot called Tappy, which was used to test mobile telephones.
 Annette Hayes, first assistant US attorney for the western district of Washington state, said US officials had internal emails from Huawei showing this was a “determined and unrelenting effort”, and not a rogue operation by some within the company.
“This was Huawei’s modus operandi,” she said.
 T-Mobile declined to comment.
The sanctions-busting charges relate to Huawei’s ownership of a company called Skycom, which was reported to have offered to sell embargoed Hewlett-Packard equipment to Iran’s Mobile Telecommunication Co in 2013.
The indictment filed in the eastern district of New York alleges that Skycom illegally employed a US citizen in Iran, and that Huawei lied to US banks about its financial interest in Skycom.
As a result, the indictment says, US funds were illegally funnelled to Iran. 
 US officials said they had evidence that Meng was personally involved in these criminal actions. 
 The legal action might have additional consequences for the company as a whole.
 One lawyer involved in action against Huawei in the US said: “The fact that Wilbur Ross was at the press conference indicates the US might end up putting Huawei on the export control list.”
 Banning US companies from exporting to Huawei is seen in Washington as the “nuclear option” against the Chinese company, given its reliance on US software and microchips.
 Stocks in China turned sharply lower following the filing of the charges and declines on Wall Street on Monday.
The Shenzhen Composite fell as much as 2.6 per cent by mid-morning, but later erased some of that decline to trade down 1 per cent in the late afternoon.

US Reserves Right to Punish China Firms Working With North Korea

By MATTHEW PENNINGTON, WASHINGTON
In this Feb. 26, 2016 photo, Assistant Secretary of State for East Asian and Pacific Affairs Daniel Russel meets with reporters after the meeting with South Korean senior officials at the Foreign Ministry in Seoul, South Korea. Russel said that Washington reserves the right to punish Chinese companies that violate U.N. sanctions on North Korea if Chinese authorities don’t take action.

The United States reserves the right to punish Chinese companies that violate U.N. sanctions on North Korea if Chinese authorities don't take action, a senior U.S. official said Wednesday.
Top U.S. diplomat for East Asia, Daniel Russel, said that since most of North Korea's illegal activities are conducted through neighboring China, companies are "going to have to tighten up and shut down operations." 

The U.S. is looking to cooperate with international partners in cutting revenue sources for the North's nuclear and missile programs.
North Korea has conducted two nuclear test explosions and more than 20 missile launches this year, intensifying concern that it is closer to having a nuclear-tipped missile that could reach America.
The Justice Department last month unsealed criminal charges against a China-based company, Dandong Hongxiang Industrial Development Co., and four of its executives for conspiring to evade sanctions, and the Treasury Department barred them from business dealings with the U.S. Chinese authorities have also said they were investigating Hongxiang on suspicion of unspecified "serious economic crimes."
"To the extent that the Chinese authorities themselves take action against North Korea malefactors or Chinese companies that are collaborating with North Korea then there's no cause for action by the United States or others," Russel told reporters.
"Where they don't take action, the United States reserves the right under U.N. Security Council resolution 2270 or under our own national authorities to take action," he said, referring to the most recent sanctions resolution against North Korea, adopted in March.
Russel said while there's "frustration and differences of view" between Washington and Beijing, they do cooperate on North Korea. 

The U.S. is constantly "scanning the horizon" for evidence of sanctions violations and makes a point of sharing with China first any information they have about "bad actors" there, he said.
China is the North's traditional ally and main trading partner. 

The U.S. is currently pushing for tighter U.N. sanctions that would impose additional restrictions on North Korea's exports of coal that account for about one-third of its export income and mostly go to China.
A succession of U.N. sanctions resolutions and U.S. sanctions have failed to stop North Korea's weapons development and to force it to return to negotiations on giving up its nuclear program in exchange for aid. 

The North argues that it needs nuclear weapons to deter a U.S. invasion. 

Russel called that "absurd."
He argued that the nuclear program has only diminished the security of North Korea and its dictatorial leader Kim Jong Un and hurt its diplomatic and economic standing.
"Put yourself in Kim Jong Un's place. That is not a good place to be. Perhaps he's got an enhanced capacity to conduct a nuclear attack and then immediately die. But that can't be plan A," Russel said.
The U.S. retains 28,000 troops in South Korea, a legacy of the 1950-53 Korean War which ended without a formal peace treaty.

Media Censorship

Justice Dept. Is Asked to Review Chinese Company’s Hollywood Purchases
By MICHAEL FORSYTHE

Wang Jianlin, chairman of Dalian Wanda Group, in Beijing in August. 

HONG KONG — The aggressive expansion of the Chinese company Dalian Wanda Group into the American film industry drew increased scrutiny from Congress this week as a prominent lawmaker asked the Justice Department to review a spate of recent purchases by the company, which has close financial ties to relatives of senior Chinese Communist leaders.
The congressman, John Culberson, Republican of Texas and chairman of a subcommittee overseeing the Justice Department in the House Appropriations Committee, asked the department in a letter to review Wanda’s acquisitions as part of an effort to overhaul and possibly broaden rules on foreign purchases of United States companies and to review decades-old laws governing foreign agents in the country.
Wanda, now the world’s biggest owner of movie theaters, bought AMC Entertainment Holdings, a chain based in the United States, in 2012 and is bidding to buy its rival Carmike Cinemas. 

In January, Wanda bought Legendary Entertainment, a Hollywood production company, and Wanda’s billionaire chairman, Wang Jianlin, is seeking to buy a major Hollywood studio.
The concern of Mr. Culberson and others is that Wanda’s purchases are part of a move by the Communist Party to expand its global influence to try to ensure that any portrayal of China in Hollywood movies is favorable. 

It has been more than a decade since a Hollywood studio made a major movie critical of China’s authoritarian government.
“These acquisitions, as well as many more cofinancing arrangements, allow Chinese state-controlled companies a significant degree of control over the financing and content of American media that raises serious concerns about how this may be used for propaganda purposes,” Mr. Culberson said in the letter, dated Oct. 6, to John P. Carlin, the assistant attorney general for national security. 

The letter also mentioned recent Hollywood purchases by other Chinese companies.
A spokeswoman for Wanda North America said Friday in an e-mailed statement, “Wanda has and will continue to comply with all applicable U.S. law in connection with its media and entertainment investments in the United States including without limitation making the appropriate filings with the Federal Trade Commission and the Department of Justice.”
The Communist Party ties of Wanda and Mr. Wang were the subject of a New York Times investigation in April 2015. 

The report found that relatives or business associates of four members of the party’s ruling Politburo, including relatives of Xi Jinping, were among the company’s earliest outside investors. 

All appear to have earned spectacular returns.
Shares held in the name of a niece of one Politburo member, Wang Zhaoguo, multiplied in value by more than 1,000, from less than $500,000 at the time they were acquired in 2007 to more than $600 million in early 2015, the Times investigation found.
Wang Jianlin, a longtime Communist Party member, was a delegate to the 2007 congress that chose the next generation of party leaders, including Xi. 

From 2008 to 2013, he was a member of the standing committee of the Chinese People’s Political Consultative Conference, a high-level advisory body to China’s legislature. 

A company owned by an employee of the son-in-law of the body’s chairman at the time, Jia Qinglin, had acquired a stake in Wang’s family holding company only weeks before the 2007 party conclave, The Times found.
By early 2015, those shares were worth more than $250 million, and a stake in Wanda’s Chinese cinema company that was owned by the son-in-law’s investment company was worth more than $130 million.
Late last month, Wanda fired an executive after he was found to have bribed a local official in the northeastern city of Dalian in 2008 and 2009. 

The official helped the company obtain government approval to complete its transition from a state-owned company to a private enterprise, according to a court judgment.