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Anyone But Huawei

by Adam Segal
October 12, 2011

Headquarters of Huawei Technologies Co. Ltd. in Shenzhen, Guangdong province June 29, 2009. (Stringer Shanghai/Courtesy Reuters)

A new report about Huawei’s connections to the Chinese military and intelligence agencies will make it even more unlikely that the telecomm company will ever be approved for a major acquistition in the United States (it should be noted that Huawei already supplies many smaller companies throughout the United States). Actually, given all the previous reports on Huawei, the letter eight Republican senators sent to the Obama administration urging an investigation of the company, and given that Rick Perry’s presence at a ribbon-cutting ceremony in Texas has become a campaign issue, the claim that Huawei has links to the Ministry of State Security just seems like unnecessary piling on.

Huawei has mounted a vigorous PR campaign against the charges, and I would not lend too much credence to some of the sources that are cited in the report tying Huawei to the MSS, but we need to change this story line. The fact is there are good reasons why the United States should welcome Chinese investment, even in technology sectors. As Daniel Rosen and Thilo Hanemann’s report on Chinese foreign direct investment notes, Chinese investment totaled more than $5 billion in 2010 and was probably responsible for creating more than 10,000 American jobs. A new CFR Task Force on U.S. Trade and Investment Policy concludes, “If the United States is to prosper in today’s global economy, it must enhance its ability to attract the investment and jobs linked to producing goods and services for these large and prospering markets [in Asia and Latin America].”

We also have to think about what is happening within China. Policies are not the result of the decisions of a few powerful leaders but rather of bargaining among different bureaucracies and commercial interests. For any serious economic issue there are a series of mini-debates between those who have a more mercantilistic view of the world, and those willing to pursue Chinese goals through more open trade. The constant rejection of Huawei in the United States is likely to undermine this second group. To eliminate the narrative that the United States is not open to Chinese investment, we need to see a big Chinese company buy a U.S. technology firm with no calls for investigations or claims that the sale is a threat to national security. Basically we need a sale to almost anyone but Huawei.

Post a Comment 4 Comments

  • Posted by Bill Hagestad

    Indeed – stating that Huawei is linked to the People’s Liberation Army is akin to saying HP or Cisco has ties to the US Senate – it is preposterous.
    Granted, founder Ren Zhengfei was a PLA communications soldier, but the fact is his parents backed the wrong political party when Mao Tse Tung & Chiang Kai Shek were battling for China in 1948…..essentially Ren Zhengfei could never have rsien in the army because of his filial piety…and his parent’s mistake…he never was allowed to join the Communist Party of China (CPC)….

  • Posted by Chen

    Its just another US protectism and lame excuse, what if China do the same to US companies?? Sometimes its better to do things the way sometimes China does – simple and straight forward and not fabricating lies as excuse.

  • Posted by David Wolf

    Superb post, Adam.

    The problem, of course, is that the trust issue is not limited to Huawei, but extends to one degree or another to every sizable Chinese enterprise. Americans and our elected leaders do not make distinctions between SOEs and private Chinese companies. They simply see one, big red dragon.

    Here’s a test: would a bid by Alibaba to buy all of Yahoo! make it through the U.S. court of public opinion, much less past the CFIUS?

  • Posted by Adam Segal

    David,

    Thanks for the comment. You are probably right that the level of mistrust makes big deals, like an Alibaba bid for Yahoo!, very difficult. But perhaps a series of smaller ones, and a statement from the administration, could energize the sense that the United States was open to investment.

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