China’s Vice Premier landed for crucial trade talks in Washington Monday to be informed that tech giant Huawei had just been indicted by the Justice Department on charges of sanctions violations, theft of trade secrets and fraud.
Though the timing of the announcement was unlikely deliberate, it was immediately denounced by Beijing as “political manipulation” — and will prove a massive obstacle when Liu He sits down with U.S. Trade Representative Robert Lighthizer for two days of negotiations this week to end the trade war.
Though the indictments go into excruciating detail about how Huawei attempted to steal trade secrets — and established a bonus scheme to encourage employees to do it more often — the company and the Chinese government insist it is innocent.
“The company denies that it or its subsidiary or affiliate have committed any of the asserted violations of U.S. law set forth in each of the indictments,” a Huawei statement said.
Beijing is standing behind one of its most prestigious companies and urged Washington to “stop the unreasonable crackdown.”
A statement from China’s foreign ministry, read Tuesday on state TV, said U.S. authorities had “mobilized state power to blacken” some Chinese companies “in an attempt to strangle fair and just operations,” adding that there was a “strong political motivation and political manipulation.”
The two-day talks in Washington this week are designed to find a temporary truce to avoid the imposition of a new 25 percent levy on $200 billion worth of Chinese goods that Donald Trump has ordered to begin March 2 if no deal is agreed.
Both sides maintain the Huawei indictments are a separate issue that will not impact the trade talks, but the timing and their severity mean they will be hard to ignore.
“The timing of the announcements is remarkable,” Bernt Berger, a senior fellow on Asia at the German Council on Foreign Relations in Berlin, told VICE News. “The question is how goal-oriented such moves might be. targeting Chinese companies as a pawn in US-China strategic competition will push them into greater dependency with the Chinese state. This greater influence is a becoming a self-fulfilling prophecy.”
What is Huawei accused of?
Acting Attorney General Matt Whittaker announced a total of 23 charges against Huawei.
The first indictment, consisting of 13 charges, alleges that Huawei’s chief financial officer, Meng Wanzhou, who was arrested in Canada last month, committed fraud by misleading banks about Huawei’s business dealings in Iran.
The U.S. is seeking her extradition and she will appear in court in Vancouver on Tuesday.
Huawei said it is “not aware of any wrongdoing by Ms. Meng and believes the U.S. courts will ultimately reach the same conclusion.
The second indictment relates to the sustained theft of intellectual property from T-Mobile, specifically the technical details of “Tappy”, a smartphone testing robot developed by the carrier.
The DoJ claims Huawei employees secretly took photos of the robot, measured it and tried to steal a piece of it from T-Mobile’s lab in Washington state. T-Mobile has not commented on the allegations.
What’s been the reaction in Beijing?
China claims the indictments — and their timing — are being used by Washington as leverage ahead of the trade talks, and the language used suggests the attacks on Huawei are being taken personally by Chinese officials.
"You can see from the reaction from China, that this is felt to be a very personal attack and that there have been what look like reprisal, tit-for-tat arrests,” Emily Taylor, an associate fellow at U.K.-based think tank Chatham House, told VICE News.
Speaking about the arrest of Meng, the daughter of Huawei founder Ren Zhengfei, a spokesperson for China’s foreign ministry, complained Tuesday that Washington “has shown disregard for the stern representations” from Beijing over her case.
”We urge the U.S. to immediately withdraw the arrest warrant against Miss Meng Wanzhou and stop making such kinds of extradition requests,” Geng Shuang added.
Hun Xijin, the editor-in-chief of the state-owned Global Times newspaper, strongly criticized the U.S. action:
Were the indictments designed to disrupt the trade talks?
That remains unclear but the Department of Justice sought to distance themselves from the trade talks, saying that the case against Huawei is entirely separate.
And while Beijing may complain about “political manipulation” the news would not have come as a major surprise to officials in China.
“The timing of the indictment was a legal process, the Americans didn't actually choose yesterday to provide the information, the deadline to submit it was today, so they were one day ahead of the deadline,” Steve Tsang, Director of the SOAS China Institute at the University of London, told VICE News.
Tsang also noted that it is not unusual for indictments to be announced this close to the deadline, as it allows investigators to build as strong a case as possible.
Additionally, this week’s trade talks were set up "at a time when the Chinese would have known this would be roughly the timing of the indictment of Huawei being released,” Tsang says.
What about hacking?
Huawei has long been a boogeyman for American lawmakers, ever since a congressional report in 2012 concluded that Huawei — and ZTE — could become a tool for state-sponsored spying or sabotage.
Since then, the U.S. government has worked to limit its exposure to Huawei equipment and in recent months has expanded that program to corral allies such as Australia and New Zealand to ban Huawei from next-generation 5G networks — with some success.
But there was no indication in Monday’s charges that the U.S. is ready to reveal evidence that backs up its claims that Huawei is a threat to national security.
"The indictment is against specific criminal offenses that Huawei is alleged to have committed, and that is not a matter of national security, that is a matter of law,” Tsang said. “So it would have been completely inappropriate and wrong for the indictments to have talked about a national security issue — because that makes it political.”
However, the New York Times reported that Gina Haspell, the CIA director, and Christopher Wray, the FBI director, will detail to a Senate Intelligence Committee hearing Tuesday the threat posed by Chinese state-sponsored cyber espionage.
Cover image: Acting U.S. Attorney General Matthew Whitaker announces new criminal charges against Chinese telecommunications giant Huawei with Federal Bureau of Investigation Director Christopher Wray and Commerce Secretary Wilbur Ross at the Department of Justice January 28, 2019 in Washington, DC. (Chip Somodevilla/Getty Images)