Finished Intelligence

SUMMARY

Meng Wanzhou, the Chief Financial Officer of Huawei Technologies, was arrested at the Vancouver Airport on 1 December 2018 at the request of US authorities.  The US seeks her extradition so that she can face charges of US sanction violations in America court.  After being held for ten days, Meng was released on bail and is staying in Vancouver while the extradition request is adjudicated by the Canadian government.

The Chinese government has reacted strongly to her arrest and has deployed its controlled media outlets in a strong push for her release.  The English editions of the official and semi-official outlets People’s Daily, China Daily, and Global Times have published a version of events that claims Meng has essentially been kidnapped and held for ransom in a US ploy to influence the ongoing trade dispute with China.  Many commentators claim the timing of the arrest, during a 90-period of negotiations to settle the tariff-based conflict with the US, is an indicator that the US is using Meng as leverage to get a trade resolution advantageous to the US.  Alternatively, some commentators are claiming that the US is motivated by fears that China is on the rise in technological innovation, even surpassing the US in some areas, and Huawei is a target for attack because it is one of China’s most prominent tech firms.

Apple has been incorporated into this dispute due to the apparently coincidental timing of a Chinese court injunction, made public on 10 December, blocking Apple sales in China.  The suit against Apple was by Qualcomm, a US based company, and is itself unrelated to Huawei.  However, Chinese popular support being expressed for Huawei in the Meng case has included calls for boycotting iPhone sales, since Huawei and Apple are key competitors in the Chinese smartphone market.

BACKGROUND: CHINESE MEDIA

China has long been a country where the media has been subject to government control.  This situation helps the government keep control over dissent and any stories that would threaten the current regime.  As in previous decades, Chinese media in the age of Xi Jinping is controlled by an army of censors monitoring print and online news media, and content is screened for topics that might challenge or simply embarrass the government.

In addition, a handful of prominent Chinese news outlets are controlled to the point that their content is seen as the government itself speaking.  Among these are People’s Daily, China Daily, and Global Times, the last being more independent but still usually reflecting the government position.  All three of these have English-language versions useful for carrying the government view to the outside world.  One of the key advantages of the English language versions are that the media content and commentary appear to be voices other than the Chinese government, but in actuality still convey the government message.

The arrest of Huawei’s Meng Wanzhou injected more friction into a US -Chinese relationship already on edge over trade issues and charges of intellectual property theft conducted by China.  The key facts of this matter have been prominent in Western pronounced media for weeks.  However, the Chinese version of events and their rationale behind the arrest are understandably different from that of the West.  This report tells the story as it has appeared in Chinese media. 

The version of events as reported by the Chinese is not necessarily what they believe about the case.  It is a version they would like their readers in the West to believe so that the conflict is resolved on China’s terms.

THE ARREST OF MENG WANZHOU

Meng Wanzhou is the Chief Financial Officer of Huawei Technologies Company Ltd., the world’s largest telecommunications equipment manufacturer and second largest manufacturer of smartphones.  She is also the daughter of Huawei’s founder, Ren Zhengfei. 

Huawei has been the target of an investigation by the US Justice Department over its alleged violation of US sanctions involving the transfer of equipment to Iran and other countries. An arrest warrant for Meng Wanzhou was issued in New York on 22 August 2018.  At the request of US authorities, Meng was arrested by Canadian police on 1 December as she changed planes at Vancouver Airport.  The US is seeking her extradition so that she can face charges in the United States. She was granted bail in Canada on 11 December and is staying in Vancouver while Canada decides on her extradition.

CHINESE COVERAGE

People’s Daily carried the initial statements by Foreign Ministry spokesperson Geng Shuang that “China has made its position clear to Canada and the United States and has demanded that Meng Wanzhou be released immediately,” and that “the two countries are required to immediately clarify the reasons for her detention and must protect her legitimate rights and interests.”[1]  People’s Daily also covered the statement on 6 December by China's embassy in Canada, urging Canada to immediately release Meng Wanzhou, and for the United States to drop any potential extradition charges.[2]

The Chinese government called in the US Ambassador to China, Terry Branstad, on 9 December over the detention of Meng Wanzhou, and strongly protested against the US "unreasonably demanding" Canada detain Meng.  The Foreign Ministry was quoted in Chinese media as stating that the US act “seriously violates the legitimate and justified rights and interests of a Chinese citizen, and the violation is extremely serious in nature.”  Chinese media also reported that the Foreign Ministry summoned Canadian Ambassador to China John McCallum on 10 December, telling him that Meng's detention was "unreasonable, unconscionable and vile in nature."[3]

In addition to carrying official statements by the government, the official media outlets began their own series of commentaries.  People’s Daily condemned the actions of Canada and the U.S., saying “the detention of an individual without clear reason constitutes a flagrant violation of human rights.” It also said “Canadian police even ignored the spirit of the law by presuming Meng Wanzhou guilty without trial, trampling on her basic human rights, and insulted her personal dignity by handcuffing and shackling her like she was some kind of notorious criminal.”[4]  People’s Daily further stated:

“Rather than frequently act like America’s trusty sidekick, Canada should exercise its sovereign right to reject the underlying anti-China bias driving the US government’s plan to crush Huawei.  Canada must correct its mistake and immediately stop violating her lawful rights and interests, as well as give the Chinese people a proper explanation for this disgusting and vile act made at the behest of the United States.  Otherwise, as the Chinese side has warned, Canada will pay a heavy price.”[5]

China Daily also put the blame for the crisis on Canada’s shoulders, saying:

“Having an extradition treaty with the US, Ottawa might feel it is caught in the middle of the conflict between Washington and Beijing, but to be frank that is the position it has chosen to put itself in. Since by detaining Huawei's chief financial officer, Ottawa is not upholding the law but instead letting itself be used as a tool of US law enforcement.”[6]

To bolster China’s position, China Daily used a common tactic: reporting Western commentary that agreed with the Chinese position.  An extensive article on 12 December included the following citations:

"The US is trying to target Huawei especially because of the company's success in marketing cutting-edge 5G technologies globally" (Jeffrey Sachs, Columbia University).

 "The quest against Huawei is a ridiculous overreach—predicated on an assumption that the United States can dictate how foreign competitors conduct business" (author Zachary Karabell, in The Washington Post).

"What I didn't expect was the absence of any outcry in the U.S. No one seems outraged at the possibility that the US nabbed a top Chinese executive as a proxy for a company it may want to punish" (Joe Nocera, writing for Bloomberg Opinion).[7]

POPULAR RESPONSE IN CHINA

Global Times claimed that “outrage spread across China's social media over what some Internet users dubbed as a ‘rude and violent’ move by the US and Canada.”[8]  Chinese media reported that its citizens were also expressing their outrage on the Weibo microblog account of the US Embassy, where one posting stated, “Are you that afraid of China’s rise?  Is this really how the world’s most powerful country should act?”  Postings on the official account of the Canadian Embassy in China also claimed that “Canada has violated the human rights of a Chinese citizen and demand that the Canadian side release Meng right away.”  Other postings charged that Canada had gone from being a sovereign state to “America’s hired thug.”[9]

Global Times also covered acts of sympathy for Huawei by other Chinese entities, including Chinese companies offering incentives to their employees to buy Huawei devices.[10]  Global Times also reported that:

  • “Sichuan-based IT company, Chengdu RYD Information Technology Company, announced that it is requiring all of the company's equipment to be Huawei products. The company is also offering a subsidy to those who buy Huawei products.”

 

  • “Shaanxi-based Li'an Development Group said in a statement that the group's data center only allows equipment purchases from Huawei, unless the products are irreplaceable. The company also requires its mid-level management to use Huawei products and offers a subsidy of at least 20 percent to its employees who buy Huawei products.”[11]

The incorporation of Apple into the Huawei story appears to have started with calls to boycott Apple as a sign to the United States, that China was angry with US policy.  Global Times highlighted this trend, stating that many Chinese postings on social media were calling for a boycott of iPhones and also Canada Goose winter jackets. They reported on 11 December that Canadian Goose’s stock price slumped 18 percent during the week.[12]

Hong Kong press is outside of Chinese government control, but it also reported that Menpad, a computer display manufacturer in Shenzhen, said it will punish any employee that buys an iPhone with a fine equivalent to the phone’s market price.[13]

MENG’S RELEASE

Chinese media gave extensive coverage when Meng Wanzhou was granted bail in Canada on 11 December.  China Daily reported that “on Wednesday afternoon, Huawei released a screenshot of Meng's latest entry on her WeChat account, a popular Chinese social media platform.  ‘I'm in Vancouver and back with my family.  I'm proud of Huawei and my country!’ ”[14]

Huawei itself issued a statement after her release, saying "We have every confidence that the Canadian and US legal systems will reach a just conclusion in the following proceedings."[15]  However, even after Meng Wanzhou was released on bail, China Daily was warning that “Washington is mistaken if it thinks it can take Meng hostage and ransom her for concessions in the upcoming trade talks.”[16]

CHINA’S EXPLANATION OF THE ARREST

Two primary explanations of the US-Canadian action have been put forward in Chinese media: gaining leverage in current trade negotiations and attempting to “contain” China’s technological rise.  China Daily commentary tied the arrest of Meng Wanzhou to the trade dispute between China and the United States.  On 11 December, they wrote:

“Washington is using the Meng case to put more pressure on China and increase US leverage in the ongoing trade negotiations. In the remaining days before the deadline of 90 days, China should focus on the negotiations and avoid being distracted by such incidents staged by the US.  The recently gained momentum in the trade talks should not be derailed, although the US is likely to create more troubles to realize its goal.”[17]

China’s official media outlets also seized on remarks by President Trump as evidence that the Meng arrest was a ploy to gain leverage in the ongoing trade dispute.  China Daily stated:

“The conjecture that her detention is a bargaining chip in the 90-day deadline trade negotiations between the US and China was seemingly given substance by the remarks of US President Donald Trump on Tuesday, when in an interview with Reuters, he said he would intervene in the case if it would help seal a trade deal with China.”[18]

China Daily also cited comments by Shen Yi, a political scientist at Fudan University in Shanghai, calling the arrest of Meng Wanzhou a “political kidnap.”  Shen also said:

“Obviously, Washington intended to use Meng as a weight to gain an upper hand in the 90-day trade negotiations with China.  Facing a rising China, the anxiety of Washington is understandable.  The relative decline of the U.S.' power prompted it to act hysterically under the influence of domestic politics.”[19]

Global Times stated that “Meng's arrest has been widely interpreted by Chinese experts as the latest sign of all-out efforts by the US to contain China's technological rise.  The US has a clear strategy to rein in China that employs diplomatic, legal and political means."  They also said that the injunction by the Chinese court in the Apple case “was widely interpreted as a signal that China could target US companies for retaliation.”[20]

MISSING CANADIANS

One additional twist to this story was the disappearance of a former Canadian diplomat, Michael Kovrig, reported on the same day as Meng Wanzhou’s bail hearing.  Kovrig had been working in China for International Crisis Group,  a non-government organization (NGO).  Publicly, China has attempted to decouple the disappearance in China from the Meng arrest.  China Daily claimed that there was no linkage, quoting Chinese Foreign Ministry spokesman Lu Kang’s statement that “Michael Kovrig has been detained for questioning about possible illegal activities in China.”[21]  Global Times reporting on 12 December cited the Beijing State Security Bureau as saying that Michael Kovrig was “under investigation on suspicion of jeopardizing China's national security,” and that the NGO he was working for in China was not registered in China, so that “its employees' activities in the mainland would be in violation of Chinese law.”[22]

Chrystia Freeland, the Canadian Foreign Minister, announced on 12 December that Canada had lost contact with a second citizen in China on the same day that Kovrig went missing.  Michael Spavor, a Canadian consultant on North Korean trade, was identified on 13 December and later confirmed by Canada’s Foreign Ministry.  Western press reports indicate that Chinese authorities confirmed his arrest in Dandong, which borders North Korea, stating that he was also being investigated on suspicion of conducting activities that “endanger China’s national security.”[23]  The seizure of a second Canadian suggests that China is attempting to apply additional pressure on Canada for the resolution of the Meng Wanzhou case.

APPLE AND HUAWEI

In the midst of this conflict over Meng’s arrest, a separate event involving Huawei and Apple products took the stage.  People’s Daily and other official media covered the 10 December announcement of “a preliminary order from a Chinese court banning the importation and sale of several Apple Inc iPhone models,” in response to a lawsuit by Qualcomm.[24]  Qualcomm had filed the case in late 2017.  The case involved iPhone models 6s through X but not models announced in late 2018.

China Daily reported on Apple’s 11 December response, a request for reconsideration of the preliminary injunction against the company by the Chinese court, and said Apple had stated to China Daily that “the request for reconsideration is the first step in appealing the preliminary order.”[25]  However, as of 12 December, Qualcomm claimed that Apple was still selling iPhones in China in violation of the court order.[26]

Apple is in head-to-head competition with Huawei in the Chinese smartphone market, and official media plays a supporting role for Huawei.  After the September launch event for the new generation of iPhones, Chinese official media claimed that Apple was “on a downward trend when it comes to innovation” and touted the challenge Apple faces from Huawei’s Mate 20 smartphone series, which had its own launch event in October.[27]

According to Western reporting, Qualcomm has been trying to pressure Apple by claiming patent infringement and theft of proprietary Qualcomm software by Apple.  Apple has said Qualcomm had failed to provide evidence to support their claims.[28]  In fact, Apple has sued Qualcomm for $1 billion in a dispute over the amount that Qualcomm was charging for the rights to use Qualcomm licensing.  Apple has started turning to Intel as a chip source rather than Qualcomm.[29]  Market analysts have stated that Qualcomm’s revenue stream has been hurt by the loss of Apple payments, and that its overall revenue is in decline.[30]

The relationship, if any, between the Huawei case and the Apple-Qualcomm conflict remains unclear.  Global Times stated that “the Qualcomm-Apple case has nothing to do with the arrest of Huawei's CFO in Canada,” but at the same time quoted Liu Dingding, who they called a Beijing-based analyst, who said "we're capable of exerting some pressure on US tech giants as well."[31]

The timing of the court injunction appears to be unrelated to the Meng Wanzhou arrest on 1 December.  The case brought by Qualcomm against Apple has been under consideration for a year.  The injunction against Apple was issued by the Fuzhou court on 30 November 2018, but was not made public until Qualcomm announced the result on 10 December.[32]  Since it was Qualcomm rather than the Chinese government that brought this case into the public conversation, it seems unlikely that the Chinese government was using this event as leverage for resolving the Huawei arrest.

CONCLUSION

Huawei has worked hard against the Western narrative that it is somehow an agent of the Chinese government or its intelligence services.  In this instance, the Chinese government has leapt to its defense.  However, the seriousness of the Chinese government response to Meng’s arrest appears to reflect their defense of Huawei as a premier Chinese industry rather than as a government entity. 

The case illustrates the means by which the Chinese government employs its official media to shape a conflict.  People’s Daily, China Daily, and Global Times all speak to the outside world in English.  By quoting Chinese experts and foreign sources that agree with the Chinese position, by publishing editorial comments that characterize the conflict, these media outlets make the government’s case as a set of voices that appear to be in addition to the government itself.  In the Huawei case, they have been used to add pressure on the US and Canadian governments to shape the public commentary in a way that supports the Chinese position.  Until the question of Meng’s extradition to the United States is resolved, ostensibly within the next 60 days, extensive pressure through Chinese media should be expected.

Contact the Wapack Labs for more information: 603-606-1246, or feedback@wapacklabs.com

Prepared: Silkworm
Reviewed: B. Schenkelberg
Approved: J. McKee

[1] en.people.cn/n3/2018/1206/c90000-9526144.html.
[2] en.people.cn/n3/2018/1206/c90000-9525912.html.
[3] en.people.cn/n3/2018/1210/c90000-9526740.html.
[4] en.people.cn/n3/2018/1210/c90000-9526941.html.
[5] en.people.cn/n3/2018/1210/c90000-9526941.html.
[6] www.chinadaily.com.cn/cndy/2018-12/11/content_37385832.htm.
[7] www.chinadaily.com.cn/a/201812/12/WS5c112306a310eff303290ab3.html.
[8] www.globaltimes.cn/content/1131259.shtml.
[9] en.people.cn/n3/2018/1206/c90000-9526144.html.
[10] www.globaltimes.cn/content/1131417.shtml.
[11] www.globaltimes.cn/content/1131236.shtml.
[12] www.globaltimes.cn/content/1131417.shtml.
[13] www.scmp.com/business/companies/article/2177290/chinese-huawei-supplier-will-punish-staff-buying-apple-iphone.
[14] usa.chinadaily.com.cn/a/201812/13/WS5c115f2aa310eff303290ad3.html.
[15] en.people.cn/n3/2018/1212/c90000-9527562.html.
[16] www.chinadaily.com.cn/a/201812/12/WS5c10fcf8a310eff303290aa0.html.
[17] www.chinadaily.com.cn/a/201812/11/WS5c0f26afa310eff30329053f_2.html.
[18] www.chinadaily.com.cn/a/201812/12/WS5c10fcf8a310eff303290aa0.html.
[19] www.chinadaily.com.cn/a/201812/13/WS5c119aa6a310eff303290b0e.html.
[20] www.globaltimes.cn/content/1131417.shtml.
[21] www.chinadaily.com.cn/a/201812/12/WS5c10fcf8a310eff303290aa0.html.
[22] www.globaltimes.cn/content/1131616.shtml.
[23] https://www.telegraph.co.uk/news/2018/12/13/second-canadian-arrested-china-amid-ongoing-huawei-spat.
[24] en.people.cn/n3/2018/1211/c90000-9527465.html/
[25] www.chinadaily.com.cn/a/201812/11/WS5c0f1853a310eff30329045e.html.
[26] www.cnbc.com/2018/12/12/qualcomm-says-apple-still-selling-iphones-in-china-breaching-court-order.html.
[27] en.people.cn/n3/2018/0914/c90000-9500362.html
[28] www.nytimes.com/2018/12/10/technology/apple-qualcomm-patents-ruling.html.
[29] www.nytimes.com/2018/12/10/technology/apple-qualcomm-patents-ruling.html
[30] seekingalpha.com/article/4227933-qualcomms-challenges-may-get-worse.
[31] www.globaltimes.cn/content/1131244.shtml.
[32] www.nytimes.com/2018/12/10/technology/apple-qualcomm-patents-ruling.html.

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