Defence & Foreign Policy Opinion Politics & Protest

Caught in the crossfire: will Hong Kong be a victim of the trade war between the US and China?

Highly educated, well connected and very, very rich, Huawei Technologies CFO Sabrina Meng Wanzhou is a living, breathing symbol of China’s remarkable rise from the poverty and chaos of the Cultural Revolution to the global powerhouse it has become today.

But now, having been recently released from a Vancouver prison on C$10 million (HK$58.4 million) bail, the highflying executive is wearing a GPS ankle bracelet and under 24-hour guard in the Canadian city well known for its attraction to wealthy Chinese migrants. Moreover, if things don’t go her way in her upcoming extradition fight with a United States prosecutor, she may find herself sitting in an American jail for the next 30 years or so.

Meng Wanzhou

Meng Wanzhou. Photo: Huawei.

Humbling, to say the least—even if her current detention is being enforced in one of two million-dollar homes she owns in Vancouver.

Since Meng is a permanent resident of Hong Kong and was carrying no fewer than three Hong Kong passports at the time of her arrest while in transit at Vancouver International Airport, her story is also our story and—so far anyway—both captivating and unnerving in equal measure.

Since Hongkongers are allowed to carry only one valid passport at a time, Meng’s multiple passports initially raised eyebrows among those worried Hong Kong laws may no longer apply to Huawei princesses. As it turns out, however, Meng’s triple identity appears to be the result of her legally changing her name to include the surname of her second husband, Liu Xiaozong, after their marriage in 2007. Only her most recently issued passport is valid.

Meng’s shock arrest has not sparked the same sort of outrage here that has been vented on the mainland and among the Chinese diaspora in Vancouver, which includes Liu, a permanent resident of Canada, and wealthy friends and acquaintances of the couple who have offered to pay a good portion of her hefty bail.

That’s probably because most Hongkongers suspect the charges that the Americans have levelled against her—that she directed a Hong Kong shell company to sell telecoms equipment to Iran in violation of US sanctions (and possibly, if that equipment had military and/or nuclear applications, of United Nations sanctions as well)—are probably true.

After all, western intelligence services have long believed that Shenzhen-based Huawei, in addition to being a multinational telecoms giant that has surpassed Apple as the second-largest seller of smart phones in the world, also serves the military intelligence arm of the People’s Liberation Army, where its founder, Ren Zhengfei, once worked as a senior engineer.

Ren Zhengfei

Oh, by the way, Ren happens to be Meng’s father, and the family is nothing short of corporate royalty in China. Thus, Canada’s arrest of Meng at the request of the US was an exceptionally provocative act—all the more so because it occurred on December 1, the same day that US President Donald Trump and Chinese counterpart Xi Jinping announced a 90-day halt to any new trade tariffs following their post-G20 dinner meeting in the Argentine capital of Buenos Aires.

It’s no surprise that China was quick to retaliate with the detention on Monday in Beijing of a former Canadian diplomat, Michael Kovrig, who is now working as a senior adviser for an NGO called the International Crisis Group, for allegedly taking part in “activities that harmed China’s national security.”

A second Canadian, businessman Michael Spavor, who organises trips to North Korea from his base in the northern Chinese city of Dandong, has also been detained by Chinese authorities on the same charge.

Meanwhile, American corporate elites who regularly travel to China are left wondering whether this new and dangerous brand of hostage diplomacy will continue at their expense … while Chinese executives are thinking twice about flying to the US.

And just in case—amid all the fear, bluster and supposed legal transgressions—you were wondering what this drama was really about, Trump has offered to intervene with the US Justice Department on behalf of Meng and Huawei if that would help to secure an acceptable trade deal with China.

Michael Kovrig Michael Spavor

Michael Kovrig and Michael Spavor. Photo: Twitter.

The stakes keep getting higher in the ongoing cold war between these two global Goliaths as little Hong Kong finds itself increasingly caught in the crossfire.

In a report issued just last month, the US-China Economic and Security Review Commission, citing the central government’s heightened interference in the city’s political affairs and a concurrent erosion of the rule of law, called for a possible rethink of Hong Kong’s special trade status with Washington in the export of technology with civilian and military applications.

Any threat to Hong Kong’s special trade status should be taken very seriously. After all, that status is what has spared Hong Kong from the slew of tariffs Trump has slapped on Chinese products ranging from solar panels to washing machines to batteries and aircraft parts. Losing any part of it would be a huge blow to Hong Kong’s international standing as a free and fair trading centre as well as a clear sign that it was being used as a pawn by Washington in the grand Sino-US chess game for profit, power and influence.

Trump may publicly embrace Xi as his BFF, but his administration’s policies amount to a naked threat to hamstring China’s economic growth with punishing tariffs and crippling sanctions on big companies such as Huawei and ZTE, which last year paid a US$1.19 billion fine to the US Department of Commerce for exporting US-made technology to Iran and North Korea in violation of the same trade sanctions Huawei is now accused of flouting.

Donald Trump and Xi Jinping

Donald Trump and Xi Jinping. File photo: White house.

Before Trump’s intervention in the ZTE case, Commerce officials had issued a seven-year ban on US companies exporting essential components for ZTE’s smart phones, a sanction that could have put the conglomerate out of business. So ZTE execs were happy to pay the fine, and Trump was positively elated to appear to have spared the telecoms behemoth a sudden death.

No doubt the US president would now like to exploit Meng’s case to wring further trade concessions out of the Chinese. Based on the outrage and tit-for-tat hostage diplomacy generated by Meng’s arrest, however, that’s not going to happen.

Rather, the rough winds of the trade war between the US and China are likely to continue unabated, with Hong Kong, despite its special status, feeling their force.

Caught in the crossfire: will Hong Kong be a victim of the trade war between the US and China?