Huawei is the number two in the smartphone manufacturing industry. American companies accused the Chinese company of intellectual property theft, wire fraud, violating U.S. sanctions against Iran, and spying for the Chinese government. Now that the U.S. District Attorney formerly charged Huawei with 23 felonies, some people question Huawei ability to survive this all-out attack on their business model.
Obviously, Huawei denies the charges, but no one expected the company to admit to any wrongdoing. Huawei is not an ordinary Chinese company. The Chinese consider Huawei an international arm of the government. Even if the company did the things the U.S. attorney general said they did, the company won’t face bankruptcy. But they will face stiff fines and monumental loss in consumer trust, according to several news reports.
The Huawei story took an interesting twist when the Canadian government arrested Meng Wanzhou in Vancouver last December. Wanzhou is the daughter of Huawei’s founder, so she’s a prime negotiating tool for the U.S. government. Trump admitted he would use that leverage to get a better trade deal with China shortly after her arrest. Trump comments brought politics into the arrest, and the Chinese retaliated right away. Two Canadian businessmen found themselves in the middle of a Trump trade war and a possible prison sentence from the Chinese government.
Canada is also in this Huawei debacle. The Chinese blame Canada for Meng’s mistreatment. Canadian officials slapped a $5 million fine on Wanzhou, and she has to wear an ankle bracelet. The ankle bracelet keeps her from leaving Canada until the U.S. formerly extradites her. Canada’s ambassador to China said Meng’s arrest sounded political. Prime Minister Trudeau fired Ambassador John McCallum after he made that statement.
The United States hasn’t requested Meng’s extradition yet, but legal experts think Canada may not honor that request due to the tension between China and Canada. Canada needs China to maintain economic growth.
Even though Huawei has a plethora of international issues to address, the Chinese government will stand behind the giant tech company. China’s economy is not in great shape. The Huawei lawsuits could accelerate the decline in China’s gross domestic product growth.
Trump’s trade war and China’s slow manufacturing sector continue to hurt China’s economy. Plus, slower than expected consumer sales and growing debt forced the Chinese to inject billions of dollars into the economy recently. The New York Times thinks the Huawei debacle could exacerbate China’s economic pain.