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| "Free Meng Wangzhou" is the new PRC (technology) battle cry. |
In case you missed, it, Canadian authorities have detained Huawei's CFO Meng Wanzhou due to American pressure over that Chinese company dealing with Iran in violation of US sanctions. She is due for extradition to the United States. This major diplomatic dust-up comes on top of massive uncertainty over the fate of world trade as the United States slaps China silly with tariffs. Whereas the tariffs deal with supposedly unfair Chinese trade practices, these efforts to cut Chinese technology firms down to size are part of an effort to slow China's technological advancement, which Trump and company would argue come from "stealing" American know-how anyway.
Just as China has retailated against US tariffs by slapping some of its own on American products, what's to stop the PRC from harassing American executives, too? More than one nation can play the trumped-up economic harassment game. Bloomberg offers the following nightmare scenarios for American investors in China:
Imagine you’re a product engineer for a U.S. device brand based in China. You’ve had to submit your passport for annual visa renewal.Sounds fun, huh? Well, that's not the end of it...
Without it, you can’t travel. And with heightened concerns over security and a crackdown on VPNs (which enable users to bypass Chinese censorship of the internet) your company has decreed that all sensitive product discussions be done in-person back at HQ. But that visa renewal is taking a long time and you’re stuck in Shanghai, with your product cycle being extended by the day.
In Shenzhen, where your devices are assembled, the factory has just been raided for the third time that month. Inspectors are looking for breaches of occupational health and safety. You’ve worked hard to keep things up to code, though the rules seems to shift constantly. Minor rust on a pipe at the back of the site was all the authorities needed to shut you down pending a fix. Your site manager can’t even find any mention of rust in the regulations, and that pipe is in no worse condition than the previous two scheduled inspections. Now it’s a problem and production is halted.
A new focus on capital controls has frozen offshore remittances. Local profits can’t be sent overseas, and you’re having trouble getting money to suppliers in Japan and South Korea. They won’t ship to your China factory without it.I sympathize with China more on trying to move to more advanced, less polluting forms of production. As wages rise together with China's level of development, they will become less competitive with labor-rich countries cost-wise in making less-advanced products. It is only natural for the Chinese to attempt to move up in terms of development by making more advanced products. The Us stifling this understandable motive can have potentially dire consequences for the world economy.
You could try to get a loan from a Japanese bank to cover, but that takes time and the holiday shopping season is approaching. You might be forced to source locally, but nothing made in China matches your specs. To get local suppliers up to standard you’d need to invest considerable time and money, and probably purchase equipment on their behalf.
To paraphrase a certain saying, if China cannot obtain technological advancement through peaceful means, then it may have to resort to using force--a scenarion I think we should all want to avoid. How China's self-described "peaceful rise" can be accommodated in the technological realm is certainly a pressing matter, and this Huawei imbroglio may have brought it to a head.
