Is Huawai CFO arrest an indicator of how the US intends to rule the world?

This version slightly modified from the original posted on Asia Times.https://www.asiatimes.com/2018/12/opinion/huawei-cfos-arrest-a-sign-of-us-world-rule/?_=8502125

The arrest of Huawei chief financial officer Meng Wanzhou by the Canadian authorities at the request of the US was unprecedented. Meng was arrested at Vancouver International Airport on December 1 while on a layover en route to Mexico.

It is safe to say that no country other than the United States has such a long reach that it can get away with such a blatant breach of international protocol. From now on, anyone can be arrested anywhere in the world on orders from the US.

What are the possible reasons and explanations for this highly unusual arrest?

First of all, whose idea was this to begin with? Was it US President Donald Trump exercising his formidable talent to extract a better trade deal from China by arresting Meng? He did say that if he could get a better deal with China, he would let her go.

On the other hand, Trump did not seem to know that the arrest was in the works and was as surprised as the Chinese. Given the chaotic disarray plaguing the White House, for Trump to be in the dark would not be surprising. Perhaps the idea originated with national security adviser John Bolton.

Is this a Bolton ploy?

Bolton has always been an “America über alles” kind of a guy. When he was US ambassador to the United Nations, he made it eminently clear that he represented an America whose laws trumped the UN’s and not the reverse. To his way of thinking, the UN exists to serve American interests, not the other way around.

If he thought arresting Meng would slow Huawei down and give the US a strategic edge, he would do it, and the hell with the niceties of international law and order. He is fully capable of creating his own brand of global terrorism.

So what is the Trump/Bolton beef with Huawei? Supposedly, the accusation leveled against Meng was violating the sanctions against Iran by continuing to do business with that country.

However, during the administration of Barack Obama, the US, the UK, Russia, France and China along with Germany and the European Union struck a deal with Iran to roll back its nuclear program. Last January, Trump decided unilaterally to withdraw from the deal and reimpose sanctions on Iran, even as the other signatories to the deal continue to work with Tehran in an attempt to keep the agreement in place.

Therefore, even if Huawei does indeed continue to do business with Iran as a Chinese company, is it obliged to abide by the US sanctions, sanctions it is not party to?

Even if the US objects to Huawei’s business activities with Iran, does the US extraterritorial prerogative extend to arbitrary detention of senior executives of Huawei at the will of the White House?

Meng is the CFO and vice-chairwoman of Huawei and the daughter of Ren Zhengfei, founder and chairman of the company. In general, CFOs do not get involved with day-to-day business transactions. Is her arrest designed to put pressure on Chairman Ren?

Among the innuendos directed at the company, Huawei has also been accused of stealing US intellectual property. The basis of this accusation goes back to Huawei’s early days when US-based tech conglomerate Cisco Systems accused Huawei of infringements.

The disputes were settled out of the courts and Huawei has never been convicted of any intellectual-property theft.

Huawei has flourished despite US interference

Years later, Huawei offered to acquire what amounted to a garage sale of the remnants of a formerly high-flying networking company called 3Com. The US government turned down its bid.

The government would rather let the last remains of 3Com go down the drain than for Huawei to gain any potentially useful IP, and that was how 3Com disappeared.

In effect Huawei has been barred from participating in the US market to any significant extent. In recent years, the US government has been actively persuading allied countries that Huawei telecommunications equipment cannot be trusted because it could install back doors to facilitate cyber spying for China.

Then along comes a piece from IT Wire, an online publication based in Australia. This piece asked the rhetorical question: Where is the evidence that Huawei equipment is used for spying by Beijing? The answer seems to be: There is none.

Don’t do as Cisco does

The Australian piece goes on to observe: “For all the talk of spying by Huawei, one has yet to see any evidence of such activity. There have, however, been back doors disclosed in equipment from global networking vendor Cisco, one which the company buried therein. Yet there has never been any talk of banning Cisco equipment from the Internet.

“There has also been a verified account of the American NSA spy agency planting back doors in Cisco equipment when it was en route to certain customers.”

Looks like the Americans’ attribution of Huawei’s capacity for mischief is based on the knowledge of their own well-established practice with Cisco.

Despite Huawei being banned by the US government from the US market and under the US pressure on its allied countries not to buy from Huawei, the 30-year-old company has grown to become the world’s largest telecom-equipment firm.

This year’s sales are expected to exceed US$100 billion, commanding 28% of the world’s tech market, and Huawei is also the second-largest maker of mobile phones, next only to Samsung.

Someone like Republican US Senator Marco Rubio may well find Huawei bewildering. How can a mere Chinese company copy and steal its way to greatness, he may wonder.

The real answer is that throughout its existence, Huawei has invested heavily in research and development so as to offer its customers superior performance at a lower price than its rivals.

Weary of reputation assassination from the US, Huawei has recently and openly challenged anyone to present evidence of security leaks from Huawei equipment.

At present Huawei is racing to introduce its fifth-generation technologies for mobile phones around the world, many steps ahead of the telecom companies in the West. This is most likely the real reason behind the US efforts to suppress Huawei’s advances.

Winning the 5G race will be important to many applications based on mobile computing and artificial intelligence and the orders-of-magnitude increase in Internet speed will accelerate the introduction and proliferation of self-driving autos.

By treating Huawei as a pariah not allowed in the US and its allies, the American policy will divide the world into two parts.

In addition to China, most EU countries along with many others in the world find the value proposition from Huawei irresistible.

Others will continue to place their faith in America, pay more for their phones and get slower connections, but sleep well at nights knowing that only Uncle Sam’s operatives can or would spy on them.

Scholars urge "constructive vigilance" on Chinese activities in the US

This first appeared in Asia Times.https://www.asiatimes.com/2018/12/opinion/scholars-urge-constructive-vigilance-on-chinese-activities-in-the-us/?_=1563813

At the end of November, a group of 32 well-known China scholars and watchers co-chaired by Larry Diamond of the Hoover Institution at Stanford University and Orville Schell, director of the Asia Society’s Center on US-China Relations, published a report titled “Chinese Influence & American Interests: Promoting Constructive Vigilance.” The report, more than 200 pages long, was duly noted in the mainstream media.

Friends alerted me that I was mentioned in one of the footnotes – not a particularly accurate or flattering description at that. Naturally, I was curious and anxious to review the report as soon as possible. Having read it, I conclude that it aligns more with the adversarial thinking regarding China of Donald Trump’s White House than not.

Even though all the members of the Working Group on Chinese Influence Activities in the United States that produced the report have impressive academic or professional credentials, the document only represents a point of view on China, and by no means the definitive view. If we were to change the cast of participants with others of equivalent or more eminent qualifications, I can guarantee that the final report would read very differently in tone and content.

For example, the substitution of a handful of the participants with such people as Kishore Mahbubani, former United Nations ambassador from Singapore; Stephen Roach, former chairman of Morgan Stanley Asia; Yukon Huang, former China country director for the World Bank; Nicholas Lardy, economist and author; and James Fallows, correspondent for The Atlantic Monthly, as replacements would have resulted in a report that read differently.

Leaving out Lord would make a big difference

If I were organizing the study group, replacing Winston Lord, former ambassador to China (1985-89), would have been an obvious choice. For a fleeting moment in history, Lord thought he was going to be credited with leading China to democracy and, fair to say, was sorely disenchanted by the events in Tiananmen Square on June 4, 1989. Any subsequent US ambassadors to China would have offered a less fanciful and more reality-based view of China and the United States.

In Orville Schell’s place as co-chairman, I would have nominated Kevin Rudd, former prime minister of Australia and current president of the Asia Society Policy Institute. As for the other co-chairman, Larry Diamond, he is well known for his binary view of governments: A democratic government is good and a non-democratic is not. It would be hard to imagine that he could be objective about China and it would be a challenge to find an appropriate replacement for his chair. Perhaps Graham Allison, who knows Thucydides but is also not knowledgeable about China, would do.

I find the vacillating aspects of this report troubling. It discusses Chinese activities across many parts of US society from national and local government to universities, research laboratories and think-tanks. Invariably, a recommendation of “constructive” vigilance, meaning to keep a wary eye on the Chinese, is the end result. In reaching that conclusion, the discussion is full of “on the one hand and on the other” sort of conflicted ambivalence.

Professor Shirk begs to differ

Professor Susan Shirk, chairwoman of the China Center at the University of California, San Diego and a member of the working group, said in her dissenting opinion: “The report discusses a very broad range of Chinese activities, only some of which constitute coercive, covert, or corrupt interference in American society and none of which actually undermines our democratic political institutions. Not distinguishing the legitimate from the illegitimate activities detracts from the credibility of the report.”

I could not have summarized it more succinctly than that.

Ironically, the report is actually quite a useful compendium of “who, what and when” developments in US-China bilateral relations since Richard Nixon’s visit to China in 1972. Unlike the infamous Cox congressional investigation report published at the end of Bill Clinton’s administration that accused China of having tens of thousands of storefronts just to spy on America, this Hoover report carefully listed names of many Chinese and Chinese-American organizations in the US and what they do. There’s no blanket accusation of nefarious activities, just the caution of “constructive vigilance.”

Just one sample quotation, however, would fairly illustrate the report’s slant. One of the appendices is a compilation and description of the “Chinese-language media landscape” in the US. The last section is a list of independent media, and here is what the report says: “The Epoch Times (大记元), the Hope Radio, and New Tang Dynasty TV … are either owned or operated by adherents to the Falun Gong sect, which is banned in China. Their reporting on China is uneven.” (Emphasis is mine.)

Anyone with passing familiarity of Falun Gong’s venomous anti-China propaganda in the US would find the understated description of “uneven” most amusing.

Influence of the financial crisis not noted

The consensus of this Hoover report – whose working group, bear in mind, mostly consisted of academics – seems to focus on the lack of reciprocity and tightening access in China since President Xi Jinping came to power. The report does not look beyond his rise and examine the impact of the 2008 financial crisis. That’s a serious omission.

Before the Wall Street debacle and for 30 years since Deng Xiaoping launched reforms, China looked up to the US as the older brother, laodage, and admired a society governed by rules and regulations. The crash precipitated by the collapse of Lehman Brothers shook China’s confidence in the US to the core.

Emissaries from China began to hint and suggest that Washington should share the burden of world leadership with Beijing. Barack Obama when he first entered the White House might have been inclined to listen but was soon overtaken by the idea that America is exceptional.

It is too bad that after the Sunnylands summit in Rancho Mirage, California, in 2013 Obama and Xi did not seize the opportunity to embark on a new path of collaboration and move the US and China closer. Both sides bear responsibility for passing up the opportunity.

That distinguished scholars can continue to see America as the flawless fortress on the hill and have the proverbial beam in their eyes is unfortunate. Rather than continuing to heap criticism on China, justified or not, we need well-reasoned voices to examine the matter with a fresh perspective.

How can figuring out how to get along peacefully with China possibly be harmful to America?

Lessons from recent Taiwan election

This was first posted in Asia Times.

Taiwan concluded its version of midterm elections about two weeks ago. The defeat of the ruling Democratic Progressive Party (DPP) was as one-sided as was the reverse outcome four years earlier when it beat the Kuomintang (KMT).

Among 22 seats at the mayoral level for counties and cities, the DPP lost seven after holding 13 seats in 2014, while the KMT gained nine, to end up with 15 seats, from six in 2014. The mayor of Taipei municipality remains a non-affiliated Independent.

In terms of total votes cast, the KMT got 6.1 million while the DPP garnered fewer than 4.9 million. Four years earlier, the DPP got 5.8 million votes while the KMT received nearly 5 million.

Prominent American observers of Taiwan such as Kharis Templeman at Stanford University and Richard Bush at the Brookings Institution were quick to claim that the results were not because of external factors linked to cross-Strait relations but were strictly because of domestic issues.

I beg to differ.

When Tsai Ing-wen ran for president in 2016, she ran on an uncompromising platform of independence for the island and Taiwan not being part of “one China.”

After she won the election, she tried to walk back from being out so far on a limb, but so long as she was unwilling to recognize the “1992 Consensus,” Beijing was not going to throw her a lifeline.

Her predecessor as president, the KMT’s Ma Ying-jeou, had quite willingly abided by the Consensus, meaning that both sides of the Strait believe there is “one China” but each side is free to make its own interpretation as to what that means.

With a one-China agreement under Ma, cross-Strait trade flourished and a healthy surplus accrued to Taiwan. Without that agreement under Tsai, mainland tourists stopped coming and trade slowed to a trickle.

Taiwan’s cream of the crop goes to Shanghai

A professor friend in Taiwan tells me that as many as 30% of the annual university graduates now leave an economically depressed Taiwan for the Greater Shanghai area to seek entry-level jobs and the start of their careers. The salaries are better and the future prospects more promising.

The best and most advanced Taiwanese companies have already established factories and service centers on the mainland, some have even completely moved off the island.

If the best and brightest talents have left Taiwan, for China or even the US, and if the most promising companies are focused elsewhere, then Taiwan is left with second-rate talent and enterprises, a mere shadow of its former “little tiger” self.

Tsai Ing-wen does understand what’s going on and has been making conciliatory gestures toward Beijing, but to recant and mouth the line, “I buy the one-China consensus,” is simply too much to ask for, and her hardcore support base would abandon her. She is indeed between a rock and a hard place.

Just as earlier president Lee Teng-hui tried to do in the late 1990s, Tsai is promoting the idea of Taiwanese companies expanding to the south and west, meaning the Philippines, Indonesia, Vietnam and Thailand.

But Taiwanese companies enjoy the advantages of common language and culture with the mainland, not to mention favorable policy; those advantages do not exist in other countries.

Just as it was under Lee, Taiwanese companies diversifying to other countries have not met with success.

So while American pundits like to hold up Taiwan as Asia’s shining beacon for democracy, the recent election result still boils down to one universal condition needed for democracy to succeed. “It’s the economy, stupid.”

Han Kuo-yu represents a new approach

No election result bears this simple truth more emphatically than the election of Han Kuo-yu as mayor of Kaohsiung, the second-largest city in Taiwan.

At the start of the election season, nobody gave Han a remote chance of winning, not even his own party, the KMT.

The DPP has been firmly entrenched in Kaohsiung for two decades. The KMT nominated a political nobody as a pro forma placeholder candidate and gave him no support. He literally was unemployed at the time he was picked to run.

But Han ran hard based on his promise to make Kaohsiung rich again and create jobs so that the young people don’t have to go to Taipei to look for employment.

Han won with 54% of the vote. He immediately declared that he looked forward to working with the mainland and regardless of Tsai’s position, he has no problem with the 1992 one-China consensus.

Other newly elected KMT mayors also declared that they were ready to follow Han’s lead and work directly with the mainland.

This election in Taiwan was an important lesson for Beijing as well. Past missile threats and rhetorical bluster only stiffen the Taiwanese people’s back.

The pro-independence Sunflower Movement born of resentment toward Beijing that disrupted the Ma Ying-jeou administration has been a non-factor in this election. Young people today are ignoring the Sunflower Movement as irrelevant. They are more concerned about their careers and making money.

Let the Han Kuo-yus of Taiwan show the people that working with the mainland is the win-win solution. The widespread recognition of the benefits of positive cross-Strait relations will bring both sides closer together until that day when de facto unification becomes a reality.

Will history remember the coming Trump-Xi dinner party?

This first appeared in Asia Times, Nov 17, 2018 

Whether it's hamburgers or humble pie, there is a strong chance the host will make a meal of it

By GEORGE KOO NOVEMBER 17, 2018 3:17 PM (UTC+8)

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One of US President Donald Trump's favorite meals. Photo: iStock

President Trump has invited China’s President Xi to stick around after the G20 Summit in Buenos Aires so that Trump can host a dinner party – “maybe hamburgers, maybe more; it’ll be just great, great,” he might have said.

Xi has tentatively accepted and the world can assume that the two leaders will engage in substantial conversation about the trade war, tension in the South China Seas and other subjects of deep concern to both countries.

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While the Dow Jones seems to flutter up and down depending whether the pre-summit preparatory talks by officials are perceived to be going well or not, most observers following Trump closely are not expecting much to come out of the coming summit.

A major reason for low expectation is Trump’s notorious negotiating style. He says one thing and means another. He always reserves the right to abruptly change his position at any time.

This approach might have proven effective in his real estate dealings, keeping his competitor off balance, but is not any good for building trust and confidence with foreign countries.

He has also made a list of harsh demands and expects China to come to Washington, hat in hand, with a list of concessions in exchange for the privilege to sit down and negotiate. Trump seems to think the Chinese would accept his upside down process, namely for China to concede first, and then negotiate.

Trump objects to Made in China 2025

Probably the most surprising among all this is Trump’s indignation that he finds China’s Made in China 2025 “insulting” and demands China retracts the national plan.

Made in China 2025 is meant to be an aspirational document to encourage the Chinese people to aim high based on excellence in STEM and by the dint of their own efforts.

It’s puzzling as to why MiC 2025 is any of Trump’s business and that he should find it offensive.

Nothing in the document says anything about commandeering US technology or about pushing American heads under water in order to advance China.

Instead, it’s China that should feel offended that Trump finds China’s aspirations insulting. Instead of spelling out his own set of national aspirations to compete with China, Trump is trying to push the Chinese underwater as a way for the US to stay on top.

Thus we are left to speculate as to the possible outcome of the dinner discussion in Argentina. Will it presage the beginning of a cold war between China and the US? Or will it make some advances in the trade war negotiation?

The hostile tone of speeches given by Vice-President Pence as a stand-in for Trump suggests that the US is heading toward confrontation. He accuses China of militarizing the South China Sea. Yet it’s the American Navy that regularly patrols the water in the name of exercising Freedom of Navigation.

Apparently sending your warships thousands of mile away from your home base to sail around China’s territorial waters is friendly but for China to develop military bases on its offshore islands is unfriendly.

Hijacking intellectual property

Pence and the rest of Trump’s China team accuse China of forcing the transfer of intellectual property in order for US companies to do business in China.

It’s true in the early days when China joined the WTO, China as a developing country with backward technology was allowed to protect certain key industries. Protection included the requirement that the foreign company must form a joint venture with a Chinese company. In the process, foreign know-how was shared with the local entity.

There is no denying that the strategy was helpful for China to catch up. Now as the second largest economy with its mounting collection of native-grown intellectual property, China should no longer need to insist on forming JVs to access foreign technology.

Removing this stipulation as a condition for doing business in China would take away a sensitive bone of contention.

However, as usual, the Americans have blown the matter out of proportion and acted as if a denied access to IP from the US would cause China to dry up and wither on the vine.

An indication of Trump’s irrational arrogance is his policy to restrict visas for students from China. His rationale is that the students are there to steal national secrets and receive valuable training to bring back to China.

He is apparently ignorant of what elite American universities already know – that Chinese students make contributions far exceeding their numbers. Furthermore, most choose to remain and work in the US.

Trump’s new policy actually encourages the best and brightest to go back to China. His track record suggests that he likes to sock himself in the eye and then declare himself a winner.

Trump: trade surplus is evil

Trump’s original trade dispute with China rests on the simplistic idea that anyone enjoying a trade surplus with the US is “insulting” and must be stealing from the US.

In his ideal world, each trading partner would sell to the US no more than what they can buy from the US, a ludicrous and impractical proposition that makes no sense economically.

In one of the early discussions, the US side demanded that China buy more from America to reduce the trade surplus by US$100 billion. Upon looking around, the US negotiating team to their chagrin discovered that China may be ready to buy, but the US doesn’t have enough products to sell.

In Trump’s view, China’s top-down allocation of resources in favor of state-owned enterprises give the SOEs unfair advantage in competing with American companies without such a subsidy.

Actually, a recent report by the Rhodium Group for the Asia Society revealed that SOEs make up only 5% of all the companies in China, but account for 28% of the industrial assets and generate only 18% of the total profits. Their return on assets is a woeful 2.9% vs 9.9% for private enterprises. At a minimum, Trump’s fear of China’s SOEs has been misplaced.

As president, Trump has materially changed the bilateral conversation with China. As Hank Paulson pointed out in his speech in Singapore, Trump is leading the US on a divergent path away from China.

Rather than seeking to work together based on common interests, the US is putting down China as best as it could. For example, the White House is clearly intimidated by China’s Belt and Road Initiative.

Pence: Beware BRI projects

Pence, in particular, has been going around warning third world countries of China’s predatory financing associated with the BRI projects.

It’s true that the BRI projects in Sri Lanka did not work out. But Sri Lanka was an exception. Most third world countries continue to want to be part of China’s BRI. However, the negative publicity should prompt China to calculate the financial viability of every new project with more care.

On the other hand, projects financed by the Asian Infrastructure Investment Bank have followed the discipline of World Bank financing. AIIB founded by China has a multinational staff and practice of transparency.

To date, India has been the largest beneficiary of BRI projects funded by the AIIB, and there have been no complaints about predatory terms.

In his speech, Paulson notes that there are no winners in a trade war and suggests that Trump is dropping an iron curtain between China and the US, and forcing other countries to choose sides.

China offers collaboration and assistance on infrastructure projects along with free and open trade. The US is known to focus on “America first,” and does not have a priority to help others. If forced, which side do you think these countries would choose?

Navarro takes on Paulson

In response, Peter Navarro proclaimed that the US was winning the trade war with China and President Trump does not need shuttle diplomacy. Clearly, in reference to Paulson, Navarro said: “Wall Street, get out of those negotiations.”

Before Paulson became the US Secretary of Treasurer under the George W Bush administration, he was chairman of Goldman Sachs. He worked closely with China’s leadership during the financial crisis of 2008 to prevent the total collapse of the US banking system and the global economy. His credentials are well established.

Navarro’s credentials? He was five times loser for political office and in one post-election pout, he said: “I don’t have any concerns at all about making stuff up about my opponent that isn’t exactly true.” Sound familiar?

For Trump’s 2016 campaign, Navarro co-authored with Wilbur Ross an economic roadmap on dealing with China. A public letter signed by 370 economists including 19 Nobel laureates called the plan an unmitigated disaster. So true, now the disaster is nigh.

Aside from keeping Trump’s boots in spit shine condition, Navarro has apparently been Trump’s main China whisperer as well as running around unilaterally declaring that the US is winning the trade war.

Other than finding demonizing China a lucrative profession, he does not have much else of a track record. Supposedly, to bring manufacturing back to America, Navarro has been tasked to import and recreate the many supply chains and put them back in the US. Want to bet if he can do it?

California winemakers, Iowa soybean farmers and Maine lobster fishermen are among many businesses wondering when and how winning this war is going to give them the business they used to enjoy with China.

Life of Anson Burlingame, a Celebration

On Friday, November 16, 2018, a ceremony to honor the memory of Anson Burlingame was held at the library of the city of Burlingame, the Bay Area city named after him. This is a project my friend David Chai and I have been working on for many years. It’s most gratifying to see this come to being. His contribution to the US China relations has been unique in the history of modern civilization.

One local coverage is https://www.burlingamevoice.com/

A national coverage in the Chinese language is http://video.sinovision.net/?id=47573

A Silicon Valley coverage on Dingding TV is https://youtu.be/lMZPwpC4azk

A full set of photos taken by the Burlingame city photographer can be seen at https://drive.google.com/open?id=1HxJD37SnslIcDG_BVt4nyVWWozwxqBo5

As reported in online Asia Times
http://www.asiatimes.com/tribute-to-anson-burlingame-ambassador-to-and-from-china/

Archive of relevant research material are kept at
https://www.burlingame.cmain.org/ 

Part of the standing room only audience

Co-instigators David Chai and George Koo with sculptor Limin Zhou (center)

Mayor Michael Brownrigg

On March 23, 2022, the City of Burlingame celebrated Anson Burlingame and the Principles of Eternal Justice. https://www.smdailyjournal.com/news/local/homage-to-burlingame-s-namesake/article_7d547914-ab2a-11ec-bd49-1b26effe9370.html?utm_medium=social&utm_source=email&utm_campaign=user-share