The Chinese establishment has been hit by three major interlocking incidents since the beginning of December. On December 1, a much awaited meeting between Chinese President Xi Jinping and U.S. President Donald Trump, on the sidelines of the G-20 summit in Argentina, ended in applause. A truce in a bruising trade war between China and the U.S. had been achieved.
For the next 90 days, negotiators from the two countries were instructed to burn the midnight oil to define a blue print of reconciliation that would cover at least three areas — U.S. market access in China, a deal on intellectual property and reforms of China’s state-owned enterprises (SOEs). Washington has been complaining that these SOEs, enjoying subsidies and government support, have been edging out U.S. private companies in the international marketplace, by making them less competitive.
But at the heart of the U.S.-China friction is technology. Washington fears that China is winning the race of advanced technology, in cutting edge areas such as Artificial Intelligence (AI) and Big Data. Chinese companies are apparently ahead in 5G technology. Beijing’s Made-in-China 2025 plan, riding on core technologies such as 5G, can make a significant impact in raising China’s stature as a high-technology giant. U.S. officials, including Trade Representative Robert Lighthizer have made it plain that they are determined to deflate the Made-in-China 2025 plan.
Amid the race for the next wave of industrial leadership, the U.S. has attacked Huawei — the Chinese technology behemoth. While Mr. Xi and President Trump were toasting the success of the trade war truce over dinner at a Buenos Aires hotel, immigration officials at Vancouver airport in Canada were busy making a sensational arrest. The detainee was Meng Wanzhou, the chief financial officer of Huawei and the daughter of the company’s founder Ren Zhengfei.
The arrest of Meng Wanzhou, the chief financial officer of Huawei and the daughter of the company’s founder Ren Zhengfei, could fundamentally realign the course of the China-U.S. relationship Sanctions law
Ms. Meng is being reportedly accused of siphoning U.S. equipment to Iran, through a Hong Kong-based company, which Huawei purportedly controls. The transfers breach U.S. domestic sanctions law that targets Tehran. But The Washington Post reported that other companies such as Samsung of South Korea and Ericsson of Sweden had also sold items to Iran with U.S. content, in violation of the sanctions law. But unlike Huawei, U.S. authorities have spared them of penalisation.
The third, relatively under-reported, event that has rocked the Beijing elite has been the apparent suicide of Zhang Shoucheng. Zhang, a Chinese-American professor of physics at Stanford University, was known for his work in quantum science. Zhang had deep nodes in China’s ecosystem of high-technology development. The Hong Kong-based South China Morning Post reported that Zhang set up Danhua Capital, also known as Digital Horizon Capital, which focussed on funding AI, Big Data, robotics, and blockchain technology. Zhongguancun Development Group, a state-owned company funded by the Beijing municipal government, has been a major backer of the California-based firm.
Ms. Meng got bail later, but the arrest was a game-changing event that could fundamentally realign the course of the China-U.S. ties. In China’s blogosphere, the call for a “protracted war” against the U.S. is now routine.
A popular WeChat blogger, who uses the pseudonym of ‘Zhan Hao’ asserted that the incident of Ms. Meng’s arrest is “very important because the world knows that the real intention of the U.S. is to attack China’s entire hi-tech industry…”
Atul Aneja works for The Hindu and is based in Beijing.