America’s way or Huawei

October 26, 2012

If you watched the third presidential debate this week, you got the sense that in the U.S.-China relationship, there are only good guys and bad guys, and all the bad guys are in China. The Americans are the valiant defenders of well-paying jobs; the Chinese are the ones who make tires so cheap it hurts the Americans. The Americans have a currency so free it’s the envy of the world; China’s is so manipulated it stunts competition the world over. But the squabbling isn’t limited to what you heard at the debate or just the two governments. It’s also happening between governments and private companies.

For years, Huawei, a Chinese telecom giant, has been trying to break into the U.S. market. Huawei wants to provide communication infrastructure to the U.S., but the U.S. wants to make sure Huawei, founded by former members of the People’s Liberation Army, isn’t actually a spy organization. Huawei claims to be just like any other Silicon Valley tech giant. U.S. intelligence agencies, despite finding no evidence of spying, view Huawei’s technology as too vulnerable to hackers. The House Intelligence Committee classified Huawei as a national security threat. State capitalism and the challenge it poses have expanded enough that the government is officially worried about them.

The U.S. appears to be coordinating with the Canadians to resist Huawei’s advances. Stephen Harper, the Canadian Prime Minister, called his country’s relationship with China “complex” and acknowledged that there’s a national security dimension to its dealings with Huawei. In the midst of investing in cyber security, the Canadian government is also considering whether to allow Huawei to bid on building a new national email system.

The challenge for the U.S. is in developing even broader coordination against Huawei’s advances — and it won’t come easy. Granted, Britain’s Parliament is investigating the relationship between Huawei and British Telecom, but that doesn’t mean the U.K. will adopt the American stance. In response to the U.S. committee’s anti-Huawei announcement, British Prime Minister David Cameron came out and said his government would not change its relationship with the company. Huawei employs 800 people in the U.K. and a recent $2 billion investment will create 700 more jobs in years to come. Europe will be even more difficult to convince — Huawei is already well-established there, with $3.75 billion in sales in 2011; the relationship is just too lucrative for recession-riddled countries to pass on.

This is part of a larger trend, as we’ve seen many American allies actively invite Chinese investment. British foreign policy has focused on getting commercial deals done. Angela Merkel’s dealings have led many to dub the Berlin-Beijing link as “the special relationship.”

The showdown with Huawei is yet more proof that U.S.-Chinese relations are complex and problematic. It’s also indicative of a larger truth in our globalized era: that free-market capitalism and state capitalism are increasingly at odds — and economic statecraft, exemplified in the move against Huawei, is the best line of defense for the former.

This economic statecraft is the second prong of the Obama administration’s pivot toward Asia. Washington has already begun to shift its military resources, but for the pivot to be sustainable, it will have to involve more soft-power efforts. America is all over the place in Asia when it comes to security — when you have a hammer, everything looks like a nail. But the nails are fewer when it comes to the economy. China’s economic influence only grows as the U.S. scrapes its way back out of the recession.

China is well aware that clashes between state capitalism and free market entities are a two-way street. While America is resistant to Huawei, China continues to stymie Facebook, Twitter and Google’s efforts to expand in the country. Twitter and Facebook are blocked by firewall in China, and Google has a long history of tension with the central government over its censoring of search results. In their place, Chinese competitors and copycats bloom. Even American companies largely turned a blind eye to Google’s exit: They saw it as a chance to get a leg up.

One potential U.S. coordinating partner is Japan. I recently spent a week there, where the dispute over the Senkaku Islands — known as the Diaoyu in China — has turned public opinion entirely against China, Japan’s largest trading partner. From my travels, no one in Japan thinks the relationship with China can be repaired any time soon. Japanese automakers are rethinking their growth plans after Chinese demand for Japanese goods fell once the dispute began.

The United States needs to hone its economic statecraft policies and incentivize allies and like-minded free market institutions to hold the line — regardless of the rewards the Chinese offer for breaking ranks.

Can the United States pull it off? We don’t know, but it’s becoming more and more critical that it does. What we do know is that, increasingly, it’s America’s way or Huawei.

PHOTO: A cleaner wipes the glass door of a Huawei office in Wuhan, Hubei province October 9, 2012. REUTERS/Stringer


We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see


Most people in Japan do not really care about the Diaoyu islands. It is a lie that public opinion is against China.

It is observed and well known that western media acts as propaganda arms of the America, curbing alternative views and curbing freedom of speech under thinly viewed disguises like editorial policy, etc.

Twitter and Facebook have been used to create social unrest and even manipulate elections. All states monitor and curb activities against the nation aka American monitoring centres of the global internet traffic.

America has used viruses to attack foreign nations and fears the other nations responds similarly. Indeed America is highly dependent on telecommunication and internet links and has stirred a hornet’s nest. The much vaunted and expensive military infrastructure is hapless and the domestic economy is vulnerable. The moral is that you do not lob stones if you live in a glass house.

China’s technology is more or less equal to the western nations now. As usage and knowledge spreads within China, it will grow despite all the propaganda and plots against China. You can choose to be friends and prosper together or be an increasingly weak adversary as you do not participate in the growth.

Posted by WJL | Report as abusive

Considering that America does have nearly enough good jobs for its citizens, why would we consider doing large-scale communication infrastructure business with a Chinese company?

Why not just do business with an American company that pays American taxes and hires American workers and has no issues with spying?

Remember the attacks from China against Google and other high companies in an effort to steal technology?

I can’t imagine how stupid someone would have to be to even consider allowing Huawei to gain a foothold in America!

Posted by breezinthru | Report as abusive

Sorry for the typo. I, of course, meant to say that America does NOT have nearly enough good jobs for its citizens.

Posted by breezinthru | Report as abusive

In my opinion, “state capitalism” is oxymoron.
There is free market capitalism, that also implies corresponding democratic and social institutions, and spurious capitalism, something that totalitarian countries like China and Russia are practicing. The difference for the world is about the same as between edible mushrooms and their deadly look-alikes.
To me, big question of the moment is whether it’s not too late, so that overall poisoning can still be avoided?..

Posted by UauS | Report as abusive

The threat of Chinese state control over Huawei and use of its products to provide a gateway for espionage is very real. Have any doubts? Look at the first response to this article (by “WJL”) which appears to have been written by a Chinese propagandist rather than an individual. As such the comment by “WJL” probably qualifies as “abusive”, but I hope that Reuters leaves it up as an example.

By the way, the threat is not only in the military/diplomatic/government regime, but also a severe threat in an industrial sense. Access to email and telephone via state sponsored channels for industrial espionage really happens. One author mentioned Google. I once worked for another company that was victimized by foreign intelligence agencies for industrial secrets.

Posted by QuietThinker | Report as abusive

Amazing indeed; Americans are the world’s most oppressed & and uninformed people, and they don’t even know it..
You want proof? Here are some…

Look and the infrastructure advances in the last ten years between the USA & China.
China has a very extensive high speed rail system;
We don’t have any !!!

Their subway system & subway stations are far superior to ours, and they only cost less than $1.00 USD.
Their also superior public city buses only costs .30 cents, regardless millage.

They have built & are still building affordable modern public housing to accommodate future generations.
Their economy is growing at a very healthy rate & they have bought trillions of our good old USA debt.

We spend most of our national budget on defense, they spend theirs on infrastructure.

Did you say public health & quality control issues ???
No meningitis epidemics in China…no Sir….

Posted by EthicsIntl | Report as abusive

To Ethicsintl,
I do not doubt that you can pick and chose to find some areas where China leads the US, but overall who wouldn’t pick America as their home? However, bus fares are not the issue here. The issue is the threat by Huawei to both national and industrial security, not only to the US but to the whole western world.

However, your comment would have been relevant to the discussion had you mentioned STEM education. In the name of budget balancing, the US is crippling our educational system. Only because of our failure to invest in education has Huawei been able to compete at all. With the current rounds of draconian cuts to our investments in education and science, we will be the underdogs in technology within a decade or two. This is far more threatening than government debt.

Posted by QuietThinker | Report as abusive

@EthicsIntl: that’s a LOT of information you post here coming from someone who belongs to “the world’s most oppressed & and uninformed people” :)
But here is some more: “The annual income of workers categorized as non-private sector, those in State-owned enterprises, collectively owned businesses and enterprises funded by foreign investment, stood at 42,500 yuan ($6,660) in 2011. Workers in the private sector… had an average annual income in 2011 of 24,500 yuan” Source: China Daily.
Wanna go?

Posted by UauS | Report as abusive

@UauS & @ QuietThinker;

Regardless of China’s many shortcomings they are progressing at an amazing pace, and they are still a developing economy. What the heck are we doing besides borrowing & buying from them ?

You and everyone else that is paying taxes here in the USA have been handing over our hard earned dollars to American multinational corporations that exploit the workers of China, and since we can no longer afford to buy US made goods we are forced to buy China made.
It is the perfect set-up of the world’s elite.

Posted by EthicsIntl | Report as abusive

@UauS & @ QuietThinker;

Furthermore, the average middle class Chinese are very savvy & economical consumers. They don’t spend their leisure time in shopping malls. They only buy compact cars without the thrills, and they save their money, no one there uses credit cards. The Chinese use 75% less resources than we do. We need to change our life style if we are to compete with them.

Who told you that most people want to live in the USA ?
That might have been true fifty years ago, but no longer.

I’ve been working in Beijing for four years and I’m thinking of retiring here. I have met many American, Canadian & Austrian families that have happily relocated to China.

Western media does not give you the truth & or the facts.
You have to go there and see for yourself.

Many westerners come here to obtain surgery, especially for cancer, that is not permitted by the big pharmaceutical monopolies in the West.

For income disparities here are some facts, as I have experienced them.

The average two bedroom apartment in a modern elevator building in the big cities rents for less than $500 USD per month, and it is furnished & with all the amenities.
Dinner for two in a nice restaurant is less $20 USD.
You can live in China very comfortably for under $1,500 a month.

I’ve been working in Beijing for four years and I’m thinking of retiring here. I have met many American, Canadian & Australian families that have happily relocated to China.

We all better wake up soon.

Posted by EthicsIntl | Report as abusive

Correction…Australia, not Austria,

Posted by EthicsIntl | Report as abusive

@EthicsIntl: after re-reading your posts and your repeating copy/paste i came to a conclusion that you are a fake… as most of the Made in China “advances”.

Posted by UauS | Report as abusive