Huawei and China: Not Just Business as Usual

Journal of Political Risk, Vol. 8, No. 1, January 2019 

By Douglas Black

A man looks at his phone near a giant image of the Chinese national flag on the side of a building in Beijing, during the 19th Communist Party Congress on October 23, 2017. GREG BAKER/AFP/Getty Images

To the average consumer around the world, Huawei is likely thought of as a Chinese company that makes nice phones — a “Chinese Apple” of sorts. The average American consumer might associate the firm as one that makes nice phones but, for some vague, political reasons, is not trustworthy. As of early December, the average Canadian consumer might recognize Huawei as the company at the focus of some political gamesmanship between the US, Canada, and China. All of these lay-interpretations are indeed valid, but there is a great deal more going on than revealed by a cursory glance. This article is intended as a brief explainer of Huawei’s history and current market position, the importance of the company to the ruling Communist Party and their strategic goals, and the far-reaching implications of the outcome of the arrest of Chief Financial Officer Meng Wanzhou.

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Incurring Strategic Risk in the East Asian Littoral: On What Basis?

Journal of Political Risk, Vol. 7, No. 12, December 2018 

By Captain Robert C. Rubel USN (Ret)

The South China Sea (C) is seen on a globe for sale at a bookstore in Beijing on June 15, 2016. China claims nearly all of the South China Sea — a vast tract of water through which a huge chunk of global shipping passes. The Philippines, Taiwan, Brunei, Malaysia and Vietnam have competing claims to parts of the sea, which is believed to harbour significant oil and gas deposits. (Photo credit: GREG BAKER/AFP/Getty Images)

Recently, two US Navy ships conducted a transit of the Taiwan Straits in an exercise of freedom of navigation.  Right now, US naval forces can conduct freedom of navigation exercises throughout most of the East Asian littoral, including the South China Sea (SCS) without serious fear that they will provoke open hostilities with the Peoples Republic of China (PRC), but as the PRC builds up its forces and gains more confidence, such an escalation may become a distinct possibility.  China started building up its “islands” in 2014, and at the time the US did nothing to stop it.  The Permanent Court of Arbitration ruled in the Philippines’ favor in 2015 over the status of Scarborough Shoal and other SCS features, but China ignored the ruling and the US did nothing to enforce the ruling.  Now Beijing has its “great wall of SAMs” there and it will likely take war to change things.  If China decides in the future to threaten or use force to enforce its claims to the entirety of the SCS as sovereign territory, there will be considerable finger-pointing in Washington concerning “who lost the South China Sea.” US inaction concerning the buildup could be attributed to misdiagnosis of Chinese intent or even a desire to accommodate what was seen as strategically harmless initiatives; however one potential explanation that has implications for future decision making is that the Obama Administration did not feel it had the backing of the international community and more specifically the support of regional countries to take action that would risk war.

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Wall Street Elites Against Democracy? A Case Study in Pro-China Media Bias

Press Reaction to the November 2018 speech by Dr. Peter Navarro, Director of the White House Office of Trade and Manufacturing Policy, was biased in a negative direction.

Journal of Political Risk, Vol. 7, No. 12, December 2018 

By Anders Corr, Ph.D.

U.S. President Donald Trump delivers remarks before signing ‘Section 232 Proclamations’ on steel and aluminum imports with (2nd L-R) Treasury Secretary Steven Mnuchin, Commerce Secretary Wilbur Ross, U.S. Trade Representative Robert Lighthizer and White House National Trade Council Director Peter Navarro in the Roosevelt Room of the White House on March 8, 2018 in Washington, DC. Trump signed proclamations that imposed a 25-percent tarriff on imported steel and a 10-percent tarriff on imported alumninum. (Photo by Chip Somodevilla/Getty Images)

Dr. Peter Navarro, Director of the White House Office of Trade and Manufacturing Policy, gave a speech on November 9 at the Center for Strategic and International Studies (CSIS) in Washington, D.C. The title of the speech was “Economic Security as National Security”, which Dr. Navarro, a Harvard-educated economist, argues is the maxim of the Trump Administration. After the speech, Dr. Navarro was attacked in the media, but not about his main points. The negative, and one might argue biased, coverage came from the Wall Street Journal, CNBC, the Atlantic, and Director of the National Economic Council, Larry Kudlow, among others. The negative response centered on Dr. Navarro’s controversial claim that Wall Street elites have undue influence on U.S. policy having to do with China.  Tempers were likely frayed at the time due to planning, negotiations and internal maneuvering in advance of a high stakes late November meeting then being planned between Presidents Trump and Xi Jinping at the G-20 meeting in Argentina. Worries were high that lack of progress on at least the outline of an agreement at the meeting could lead to deepening tariffs between the countries, and fears in the financial sector of falling stock markets or even a recession. But the bias and infighting of the attacks were unbecoming of these media outlets, and of Mr. Kudlow, the Director of the National Economic Council.

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How China Interferes in U.S. Elections

Journal of Political Risk, Vol. 7, No. 10, October 2018 

By Anders Corr, Ph.D.

US President Donald Trump flanked by Secretary of Transportation Elaine Chao and Stephen A. Schwarzman, Chairman, CEO and Co-Founder of Blackstone. Mr. Trump speaks during a strategic and policy discussion with CEOs in the State Department Library in the Eisenhower Executive Office Building (EEOB) on April 11, 2017 in Washington, DC. Mr. Schwarzman and the Chao family are influential with Mr. Trump, and have extensive business interests in China. Credit: Olivier Douliery-Pool/Getty Images.

China is powerfully influencing U.S. elections, as President Donald Trump alleged, but one will not necessarily find a Chinese intelligence agent stuffing ballot boxes in the local City Hall, or tampering with a voting booth. Facebook and Twitter claim they found no coordinated messages from the Chinese government. Bloomberg news and three digital security firms all claimed they found no evidence of digital or web-based misinformation campaigns. They apparently don’t count China’s ongoing anti-Trump propaganda, available through state-run media like China Daily and radio stations in the U.S. Nor do they count a new China-linked propaganda film advertised on Facebook, called “Better Angels“.

Plus, China’s immense wealth gives it more sophisticated and effective means to influence the general public, districts that voted for Republicans, the candidates themselves, the businesses that fund candidate elections, the universities and think tanks that hire politicians after they leave office, and the news media that voters will rely upon to choose their representatives on November 6, 2018. That is a far more powerful set of tools than anything the Russians used in 2016.

Vice President Mike Pence had it right when he said, “There can be no doubt: China is meddling in America’s democracy.” He said that Beijing was involved in “an unprecedented effort to influence American public opinion, the 2018 elections, and the environment leading into the 2020 presidential elections.”

Perhaps the most powerful influence that China wields over the U.S. public is the leverage that its $8.59 billion in box office sales provides to its “Propaganda Department” in Hollywood. American movie producers and directors actively self-censor in order not to alienate Chinese censors who could cut millions of dollars of ticket sales by denying access to the Chinese market. This leads Russians or terrorists to be the main villains in most Hollywood films, rather than China. Perhaps in part for this reason, 53% of Americans view China favorably according to a February 2018 poll, despite China’s human rights abuse at home, and ongoing economic and military transgression against the U.S. and our allies. That latent pro-China sentiment will make elections more difficult for Mr. Trump and the Republicans on November 6. This is China’s growing soft power, and is only infrequently commented upon in the media.

China’s sharper power to interfere with elections was demonstrated by the country’s recent attempt to use targeted tariffs to cause economic pain in districts that voted for Trump in 2016. In two rounds of tariffs, including over the summer, China hurt states and congressional districts that voted for Trump and other influential Republicans with $110 billion of targeted tariffs, focusing on commodities like soybeans, sorghum and pork that are overwhelmingly produced in rural pro-Trump districts. China also hit whisky, produced in Kentucky, and cranberries, produced in Wisconsin. Senate Majority leader Mitch McConnell represents Kentucky, and House Speaker Paul Ryan represents Wisconsin. “Mapping the counties that voted for Mr. Trump in 2016 and those affected by China’s tariffs shows the extent to which Trump voters’ jobs rely on the products being targeted,” according to the New York Times. “Beijing hopes it can convince those voters — and their elected representatives — that the president’s trade war could hurt them.” China’s counter-tariffs threaten more than double the jobs in districts Trump won in 2016, compared with those that Clinton won.

But China has many other ways to influence voter opinions in the U.S., and thereby interfere with how voters vote. China also does an end-run around voters by influencing the political choices provided at the voting booth, in that most politicians of both parties are influenced to be soft on China by an environment conditioned by Chinese money and giveaways, including to U.S. students, the media, professors, congressmen, businessmen, and even U.S. military officers.

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Japan Forgetting: A Syndrome Afflicting U.S. Foreign Policy

Journal of Political Risk, Vol. 7, No. 10, October 2018 

By Arthur Waldron, Ph.D.

JAKARTA, INDONESIA SEPTEMBER 18: The silhouette of two Indonesian Navy personnel guards the JS Suzutsuki 117 docked at Tanjung Priok port, Jakarta, Indonesia on September 18 2018. The arrival of three Japanese Navy warships, including JS Jaga 184, JS Suzutsuki 117 and JS Inazuma 105 along with 800 soldiers, aims to strengthen diplomatic ties on the 60 years anniversary of the two countries relations. (Photo by Eko Siswono Toyudho/Anadolu Agency/Getty Images)

Hearing an analyst say recently that we must come to terms with China, led me to spit out my coffee and ask myself, more importantly, “What about Japan?”

Forgetting about Japan, or what might be called “Japan forgetting”, is a besetting failure of American foreign policy. It has been since the early years of the last century, most notably after 1922 when the Anglo-Japanese alliance, a source of stability comparable to the 1887 Reinsurance Treaty of Bismarck and Wilhelm I. In 1890 when Wilhelm II refused to renew the treaty, leading in part to World War I.

The end of the Anglo-Japanese alliance came with the Washington Conference of 1921-22. If you are serious about understanding China, read the “Conference on the Limitation of Armaments”, which was published by the U.S. Government, half in English and half in schoolboy French, so it is not as formidable as it appears. It is the indispensable starting point.

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Sanction Hong Kong, For Its Own Sake

Journal of Political Risk, Vol. 7, No. 10, October 2018 

Silhouette of man standing on top of mountain with reflection of urban cityscape. Source: Getty Images.

By Ho-fung Hung, Ph.D.

The decision of the Hong Kong government to expel Financial Times Asia editor Victor Mallet from Hong Kong has already provoked widespread concern about freedom of speech and autonomy of Hong Kong in the international community. Mr. Mallet broke no law, and the Hong Kong government’s decision is obviously based on his role as moderator of an August 14 talk by pro-independence activist Andy Chan at the Foreign Correspondents Club. This unprecedented expulsion of a foreign journalist takes Hong Kong a big step closer to the status quo in mainland China.

The UK Foreign Office, US Consulate in Hong Kong, European Union, and American Chamber of Commerce in Hong Kong, all issued statements criticizing the decision of the Hong Kong government. In particular, AmCham president Tara Joseph pertinently links the case to the concern about Hong Kong’s continuous viability as a financial center, saying that, “The rejection of a renewal of work visa for FT correspondent Victor Mallet sends a worrying signal. Without a free press, capital markets cannot properly function, and business and trade cannot be reliably conducted.”

Beijing has long said that Hong Kong is no longer important to China economically, because China’s GDP has been roaring ahead over the last two decades since Hong Kong’s sovereignty handover. But in fact, Hong Kong’s special status as an autonomous economy separate from mainland China is still serving China very well.

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How to Block China at the WTO: Use GATT Articles XX-XXI

Journal of Political Risk, Vol. 7, No. 9, September 2018 

By William R. Hawkins

The People’s Liberation Army (PLA) Liaoning aircraft carrier, bottom, sails past a container ship in Hong Kong, China, on Friday, July 7, 2017. Photographer: Justin Chin/Bloomberg via Getty Images.

The Ministry of Commerce of the People’s Republic of China (PRC) has announced it will file a complaint with the World Trade Organization (WTO) against the U.S. imposition of 25% tariffs on $16 billion worth of Chinese goods in August. This was the second tranche of tariffs imposed by President Donald Trump as the result of the U.S. Trade Representative’s (USTR) “findings of its exhaustive Section 301 investigation that found China’s acts, policies and practices related to technology transfer, intellectual property and innovation are unreasonable and discriminatory and burden U.S. commerce.” This second tranche brought the total of Chinese imports subject to higher duties to $50 billion, as announced in June. Beijing’s response was given by the state-owned People’s Daily: “By launching the complaint under the WTO dispute settlement mechanism, China is to safeguard free trade and multilateral mechanisms as well as its legitimate rights and interests.”

The USTR report on China’s use of government regulations to force joint ventures (which give majority control to Chinese “partners” of American firms); mandate technology transfers, facilitate “the systematic investment in, and acquisition of, U.S. companies and assets to generate large-scale technology transfer…[and] support cyber intrusions into U.S. commercial computer networks” is not a description of free trade.

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Reason, Imagination and Invention in the South Pacific: The Laser Beam Kiwi

Journal of Political Risk, Vol. 7, No. 6, June 2018 

By Bernard Cadogan, Ph.D.

Troops pose with the “Laser Kiwi” flag, submitted to the New Zealand Flag Consideration panel in 2015 by James Gray. Source: Reddit.

Address to the U.K. Defence Academy, Shrivenham, 7th February 2018

New Zealand is proof that nature does not always abhor, a vacuum. The country is truly, “the last, the loneliest and the loveliest” as Rudyard Kipling declared Auckland to be in his “Song of the Cities”. Strategic systems never tolerate vacuums. They punish confusion and ambivalence. New Zealand is no redoubt, nor is it overlooked.

The intention of this address is to consider New Zealand’s sense of geopolitical reality. Are we proof that the Versailles Conference unassociated Organisation for Economic Co-operation and Development (OECD) nation state has been outclassed in the 21st century Pacific? Are we a living fossil ?

Woodrow Wilson envisaged a world in which there would be no assemblages such as empires, nor alliance systems even. Sovereignty-pooling exercises such as the European Union and Mercosur or Caricom would have been anathema to Wilson. They are not an option for us.

When asked at the Versailles Conference, why we had made the effort we did in the Great War, our Prime Minister Bill Massey replied, “we did it for Civilisation”.

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Trade Strategy is a Proper Part of National Security

Journal of Political Risk, Vol. 7, No. 6, June 2018 

By William R. Hawkins

Chinese-chartered merchant ship Cosco Shipping Panama crosses the new Cocoli Locks during the inauguration of the Panama Canal expansion in Panama City on June 26, 2016. A giant Chinese-chartered freighter nudged its way into the expanded Panama Canal on Sunday to mark the completion of nearly a decade of work forecast to boost global trade. Photo: JOHAN ORDONEZ/AFP/Getty Images.

On June 4, the Koch brothers (Charles and David) announced the launch of a “multi-year, multimillion-dollar” campaign against the tariffs and trade restrictions imposed by the Trump administration; especially those levied on China. The billionaire brothers are regularly called “conservatives” because they make large campaign donations to Republican candidates. But they are not conservatives; they are libertarians, a very different breed of cat. And their donations to the GOP are meant to sway the party in their ideological direction, not merely support it. The liberal media tries to tarnish conservatism by placing libertarians on “the Right” even though this is not their intellectual origin. This is done to further the left-wing narrative that “conservatives” are self-interested, greedy individuals who are enemies of organized society and the common good. This is true for libertarians, who doubt the very legitimacy of the nation-state or the “higher” norms of society. Too often they define right and wrong on the basis of whether it turns a profit.

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A Peculiar Chess Game in North Korea《奇怪的棋局》

Journal of Political Risk, Vol. 6, No. 5, May 2018

By Wei Jingsheng (魏京生)

Wei Jingsheng (魏京生) was the most famous Chinese dissident in 1979, when Deng Xiaoping put him on a nationally televised trial for writing the essay, “The Fifth Modernization: Democracy.” He received 15 years in prison. After meeting with President Clinton’s Assistant Secretary for Human Rights in 1993, he was put back in jail for another 14 years. He served 4 years of his second jail term before being exiled to the United States in 1997. A number of points are new in his latest article, published in English for the first time here. In particular, the discussion of China’s President Xi obstructing the Trump/Kim summit has very serious implications for the future of U.S.-China relations, and the credibility of President Xi as an interlocutor in Korean peace negotiations. Wei Jingsheng’s piece was originally published on Radio Free Asia’s blog and dated May 17, 2018. The article, including its Beijing slang, has been translated into English below.

Chinese human rights activist Wei Jingsheng (left) and American politician US President Bill Clinton talk together in the White House, Washington DC, December 8, 1997. (Photo by Robert McNeely/White House/Consolidated News Pictures/Getty Images)

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