Donald Trump has seized a Chinese princess

When Donald Trump emerged from his dinner with Xi Jinping last Saturday − announcing a 90 day pause in their tit-for-tat tariff war, some fence-mending Chinese imports of American soybeans, cars and petroleum and that their "very strong and personal relationship" remained intact − world leaders and financial markets were greatly relieved.

It quickly proved a very short Munich moment. On Tuesday, Trump tweeted he remained a “tariff man”. On Thursday came an even bigger shock. As Trump had sat down with Xi, Canada was arresting Chinese telecom executive, Meng Wanzhou, on an extradition request by the US for allegedly violating its sanctions against Iran.

Meng Wanzhou, Huawei’s chief financial officer, has been detained in Canada and may be extradited to the US to face charges.

It has refocused attention on the main game behind the tariff exchanges: the US battle to retain supremacy in the highest realms of technology, against Chinese technology theft, forced transfers of trade secrets by foreign investors in China, and concerted cyber espionage.

The arrest goes right to the centre of this struggle, directly challenging Xi Jinping’s orchestration of the Chinese knowledge offensive – and implicitly his centralisation of power in his own leadership. His chairmanship-for-life may eventually be at risk.

It could come from the Chinese classics. Trump has seized a Chinese princess as hostage in his negotiations. The risk is Beijing will grab some US executives in return, perhaps from companies "breaking Chinese law" by selling arms to Taiwan.

Meng, also known as Sabrina Meng, is no ordinary executive. At 47, chic and worldly, she is the daughter of founder and chairman of Huawei, Ren Zhengfei, 74. Now the company’s chief financial officer and deputy-chair, she is widely regarded as her father’s heir apparent.

Huawei is no ordinary company either. For one thing, it says it is not a company but a “collective”. Ren claims to own only 1.42 per cent equity, with about 64 per cent owned by its 61,000 Chinese employees – though they have no say in running Huawei, get little information about financial performance, can’t trade their shares, and have to sell them back when they leave.

Ren, son of a small farmer, was an engineer in the People’s Liberation Army for 20 years, rising to high rank, before he quit in 1987 to found Huawei, now the world’s largest supplier of telecom network gear and third biggest supplier of mobile handsets, reporting revenue of Rmb 604 billion (A$121 billion) in 2017.

While Ren remains reclusive, his family is enjoying its wealth. Last month another daughter, Annabel Yao, 21, a computer science student at Harvard, did the opening waltz with dashing young Count Gaspard de Limburg-Stirum at Le Bal des Debutantes in Paris, an event for celebrity offspring.

Huawei founder’s daughter Annabel Yao at Le Bal des Débutantes in Paris.Credit:Instagram

The murky governance and Ren’s strong PLA connection have long made Huawei suspect abroad, from fears of secret “backdoors” being inserted in the networks it builds. In the “Five Eyes” intelligence-sharing group, only Britain and Canada have so far felt able to counter this risk, while the US, Australia and New Zealand have restricted use of Huawei equipment.

Xi has not lessened such fears by requiring all Chinese companies, not just state-owned enterprises, to have a Communist Party committee sitting at the elbows of their boards, and enlisting them in his Made in China 2025 plan to seize leadership in Artificial Intelligence and other key technologies. Huawei is at the forefront of this drive.

Trump apparently did not know of Meng’s arrest at the dinner. But his National Security Advisor, John Bolton, who was at the table, knew it was impending. What’s in Trump’s head, beyond a simplistic focus on bilateral trade balances, is hard to know. But Bolton’s later remarks suggest his propensity for bombshells is being used to unbalance Xi, without making that the ostensible aim.

China’s technocrats are already uneasy with Xi’s disregard of the mostly conventional economic nostrums pursued, within the limits of a Leninist political system, since Deng Xiaoping’s opening in 1978. Debt is piling towards 300 per cent of gross domestic product; Xi’s response to any risk of growth falling below a perceived political stability level of 6.5 per cent is to stoke things with more debt.

At the Communist P

Ren Zhengfei, Huawei founder.

arty congress last year, Xi declared China had a distinctive model for economic success that other countries could emulate. His strategic assertiveness, through a military build-up and the promised splashing of US$1 trillion on his Belt and Road Initiative connecting China to Europe, signal Deng’s adage about keeping a “low profile” while building strength is now abandoned.

Subtle pushback has started this year. Tsinghua University law professor Xu Zhangrun attacked Xi’s tightening ideological grip. Deng Pufang, son of the late supreme leader, declared China should “keep a sober mind and know our own place. We should neither be overbearing nor belittle ourselves.” Peking University economist Zhang Weiying said it was a “wrong interpretation” to say a China model of a one-party state, huge state sector and top-down industrial direction was behind China’s growth of the last 40 years.

As China looms like a giant, internal critics are pointing out its feet of clay. Intentionally or not, Trump is stomping on them, with possible shattering results for Xi Jinping’s ambitions.

Hamish McDonald is a former China correspondent and foreign editor of the Herald.

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