Gu Suhua writes from Shenzhen: Ever heard of Huawei?
You should have because it’s a fair bet that some Huawei equipment is in your smartphone or other device. The name ‘Huawei’ does not appear because the final product is marketed as Samsung or some other well-known brand. The city of Shenzhen, just across the water from Hong Kong, is home to over 15 million inhabitants. Mind you, the haze is such that you are not sure where the city begins and where it ends. It was one of the first Special Economic Zones set up in China by Deng Xiaoping’s reforms. Foreign companies were invited in and labour was cheap. Only a dud would not have made money then. The US opened its markets and the rest is history.
Huawei’s equipment is now to be found in communications networks in over 130 countries. BT and Vodafone in Britain are big customers. Last year revenues exceeded 220 billion yuan ($35 billion). Profits were over $1.5 billion and much of this was distributed to staff. Huawei is the John Lewis Partnership of China. Within five years the company wants to increase sales to $70 billion.
So is this all about profit then? No, espionage is the word that surfaces and causes alarm in Washington, London and elsewhere. The House of Commons Intelligence and Security Committee wants to know about the cosy relationship between BT and Huawei. BT owns the landlines in Britain and this makes it possible for Huawei to gather intelligence and, in the event of military conflict, to cripple the war effort. So alarmed were the Americans that they prevented Huawei from buying 3Leaf, a server maker. The House Intelligence Committee stated that Huawei and ZTE, another Chinese telecoms giant, should be banned from involvement in mergers and acquisitions. Why? Huawei, for one, was set up by a former senior army officer. The assumption is that the company therefore has close links with Chinese military intelligence. The company denies this and points out that no court has ever produced proof of this link.
In the past, Chinese telecoms equipment was regarded as inferior to Western or Japanese products. This is no longer the case. Huawei and others are investing heavily in research and development and this is bearing fruit. Expect Huawei to begin marketing its own products soon.
Telecommunications is only one of the sectors in which the Chinese are suspected of industrial espionage. Take a recent case in Wisconsin. A Chinese scientist was accused of stealing a cancer-research compound and sending it to his home university in Zhejiang. When arrested he was found to have a ticket for a flight from Chicago to China. He had previously sold his car. Another case involved a Motorola software engineer who was sent to jail last year for stealing company secrets. And an agroscience researcher got seven years after pleading guilty to two counts of stealing trade secrets and passing them on to a Chinese university.
So we can take it for granted that a lot of espionage is going on. The above cases record only those who were caught. However, nowadays everyone spies on everyone else. On the face of it, stealing American secrets is more profitable than stealing Chinese secrets. As long as this is the case, the Chinese will try to outfox US companies.