WCA March 2008

Statue of Liberty Image from BigStockPhoto.com Photographer: Marty

However the action plays out, Huawei seems unlikely to be driven from the field of battle as readily as, say, CNOOC. The Washington Post points out that, according to a 2002 article in CEOCIO , a trade magazine run by China’s Ministry of Information Industry, as a competitor Huawei is a ‘violent attacker.’ Its sales force was known for blowing into a town dominated by a competitor and winning over contracts ‘by any means necessary.’ One wonders if Rep McCotter oughtn’t to ponder that last phrase. ❖ Questions are raised about the easing of export controls on ‘sensitive’ technology slated for China In marked contrast to the Huawei unpleasantness (see above), in mid-2007 a conspicuously more trusting attitude toward China was demonstrated by, of all people, President George W Bush. Despite tight curbs on sharing telecommunications and other technology that might lend itself to military applications, his administration quietly eased some restrictions on the export of politically delicate technologies to China. The new approach was intended to help US companies increase sales of high-tech equipment to the Chinese. Now, however, the administration is facing questions about whether some equipment – newly authorised for export to Chinese companies deemed trustworthy by Washington – could aid China in modernising its military. As reported by Steven R Weisman in the International Herald Tribune , American weapons experts have also suggested that China might share the expertise with Iran or Syria, with both of whom the US has vexed relations. (‘Doubts raised on sales of US high-tech equipment to China,’ 2 nd January) The technologies in question include telecommunications equipment, sophisticated composite materials, advanced aircraft engine parts, and navigation systems. The questions were to be aired in a report set for mid-January release by the Wisconsin Project on Nuclear Arms Control, an independent research foundation that opposes the spread of arms technologies. Mr Weisman said that the US government’s new approach is part of a drive to require licences for an expanded list of export technologies in fields of interest to China’s military. But, even as it imposes new requirements for these transfers, the administration is also validating certain Chinese companies to import the technologies without licences. Five such companies were designated in October. As many as a dozen others are up for possible designation. Mario Mancuso, Under Secretary of Commerce for Industry and Security, defended the new system of licensing-cum- exemptions. “We believe that the system we have set up ensures that we are protecting our national security consistent with our goal of promoting legitimate exports for civilian use,” he told the Herald Tribune . “We have adopted a consistent, broad-based approach to hedging against helping China’s military modernisation.”

Telecommunications

Even with American partners, Chinese telecom Huawei arouses security concerns in Congress

Already huge, Huawei Technologies has an ambition: to dominate telecom equipment markets all over the world, starting with the United States. From its headquarters in the southern city of Shenzhen, Huawei has made a strong start. Late last year, it joined Bain Capital Partners (Boston) in a $2.2 billion takeover bid for another Massachusetts company, the networking pioneer 3Com Corp (Marlborough), which makes systems to protect against computer hackers. In Bain Capital, Huawei has a partner with an impeccable American pedigree. Bain, a private-equity firm, was founded in 1984 by Mitt Romney, a former governor of Massachusetts and now a leading contender for the Republican presidential nomination. Bain said in a statement that Huawei – with an initial stake of 16.5% and an option to go as high as 21.5% – would not have any operational control over 3Com, which ‘will be firmly controlled by an American company’. But even with the right connections giving the right assurances, Huawei may not find it that easy to find a berth in the US. Foreign access to American infrastructure has a tendency to set off alarms in Congress. It will be recalled that lawmakers raised fierce objections to China’s biggest offshore oil producer CNOOC, which in 2005 was thwarted in its attempt to purchase the California gas company Unocal for $18.5 billion. Worries about foreign ownership have derailed other Chinese attempts to buy into high-value American companies. With its 70,000 employees and strong backing from the Chinese government, Huawei makes an unlikely phantom. But, as noted by Ariana Eunjung Cha, of the Washington Post Foreign Service, the fact that no one knows exactly who owns the company contributes to congressional unease about the Huawei deal. “Technically,” she wrote, “Huawei is a private venture, not state-owned. But the company won’t reveal information about its shareholders except to say it’s ‘100% employee-owned’, with its chief executive owning one per cent.” (‘Telecom Firm in China Sets Sights on US Market,’ 6 th January) Predictably, a congressman – Rep Thaddeus McCotter, of Michigan, chairman of the House Republican Policy Committee – has called on the Bush administration to block the deal. The research organisation Rand Corp provided the rationale, declaring that Huawei has ‘deep ties’ with the People’s Liberation Army. Not only is the Chinese military a customer of Huawei’s, Rand said in an analysis prepared for the US government, but also was a ‘political patron and research and development partner.’ Huawei officials, in a written response to questions, dispute those assertions. Moreover, Ms Cha reported, “Xing Houyuan, dean of the Beijing-based Overseas Investment Research Center, which is under China’s Ministry of Commerce, said efforts to block the deal amount to discrimination — an attempt by the United States to protect key industries like telecommunications.”

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Wire & Cable ASIA – March/April 2008