The U.S. Department of Justice filed criminal charges Monday against Huawei Technologies, China’s biggest technology company. The charges include an allegation that the company stole trade secrets from TMobile and that Huawei committed bank fraud by violating sanctions against doing business with Iran.
The timing of the filing of criminal charges seems, well, either stupid or designed to sink U.S.-China trade talks scheduled to resume on Wednesday in Washington.
Stupid because China has already objected to what it clearly regards as the persecution of a Chinese company by the United States and its allies. Hard to see how this makes those trade talks go easier.
Or intended to sink those talks by making any offer from China a non-starter if it doesn’t include big steps to protect intellectual property in China and to end government subsidies to Chinese sector champions while at the same time making it really hard for China to make an offer in those areas without seeming to cave in to the United States.
Good, ol’ cynical me tilts strongly to the second interpretation. To me this seems like a move by the administration’s China hardliners such as Peter Navarro to make sure that this round of trade talks fails. If I understand their worldview correctly, they think that would increase China’s willingness to come to the table with proposals that would, essentially, promised to restructure the Chinese economy and seriously weaken the Communist Party’s control of that economy.
My cynicism is reinforced by the details of the filing. In a 13-count indictment, the U.S. government accuses not just Huawei and two affiliated companies of bank and wire fraud, but also names Chief Financial Officer Meng Wanzhou as guilty of the same actions. Meng “personally made a presentation in August 2013 to an executive of one of Huawei’s major banking partners in which she repeatedly lied about the relationship,” prosecutors said in a statement announcing the charges. Meng, the daughter of the company’s founder, was arrested December 1 in Canada on allegations that she committed fraud to sidestep sanctions against Iran. She is fighting extradition to the United States. (As I understand it, Canada’s legal system makes it very difficult for Canada to refuse the extradition request. Canadian judges approve 90% of extradition requests.) China has already retaliated for Weng’s arrest in Canada by arresting two Canadian citizens in China, former Canadian diplomat Michale Kovrig and entrepreneur Michael Spavor.
At best the indictment will turn trade talks frosty. At worst China will either not show up or leave early. And this all comes at a time when the U.S. stock market has demonstrated its sensitivity to progress or the lack thereof on ending the tariff wars.
