Arrest of Huawei CFO sends shockwaves through China

Changing political environment may not be entirely to Huawei’s advantage

Arrested Huawei executive board member Meng Wanzhou is the daughter of the company’s founder. Photograph: Reuters

Arrested Huawei executive board member Meng Wanzhou is the daughter of the company’s founder. Photograph: Reuters

 

The arrest of Meng Wangzhou, chief financial officer of the electronics giant Huawei and daughter of the firm’s founder Ren Zhengfei, has sent shockwaves through China. Huawei is a domestic titan, a flagship firm pushing innovation as part of the country’s efforts to rise out of low-level manufacturing. The success of Huawei’s smartphones have made it a real name in the consumer arena, while it has successfully penetrated markets all over the world with its telecoms equipment.

With over two thirds of its revenues coming from outside the country, Huawei is an exemplary firm at a time when president Xi Jinping is trying to boost China’s efforts to innovate and compete with foreign rivals. It is a significant player in the strategy to beat the US in the ongoing trade war.

Despite this success, Huawei occupies a complex role in domestic corporate society. Changing Chinese policies mean a switch away from private-sector companies towards state-owned enterprises under president Xi Jinping. The days when China’s vast private-sector giants could do what they want may be coming to an end, and Huawei may be feeling the initial pain from this transition.

Meng’s father Ren Zhengfei didn’t make the list of top 100 entrepreneurs for the forthcoming celebrations to mark the 40th anniversary of opening up and reform. Although he was in the People’s Liberation Army, Ren wasn’t allowed join the Communist Party because his family had links to the Nationalist KMT before the Revolution in 1949.

While it is a champion of domestic innovation, Huawei’s relationship with the Communist Party is complicated, reflecting changing attitudes to private companies in China.

Members of the media stand outside the Supreme Court In Vancouver ahead of Meng Wanzhou’s bail hearing. Photograph: Bloomberg
Members of the media stand outside the Supreme Court In Vancouver ahead of Meng Wanzhou’s bail hearing. Photograph: Bloomberg

Alibaba chairman Jack Ma (recently outed as a long-term Communist Party member), Tencent chairman and chief executive Pony Ma and chairman of Evergrande Group Xu Jiayin were all in there, but another major entrepreneur not to make the list was China’s richest man, Wang Jianlin, head of the property conglomerate Wanda. He is also a People’s Liberation Army veteran.

Meng is the child of Ren’s first marriage to Meng Jun, daughter of a former senior official in Sichuan province, by whom Ren also has a son, Meng Ping. The son has occasionally used his surname while working at Huawei to be known as Ren Ping, but he has distanced himself from seeing his children as potential heirs to Huawei, mindful of investor scorn.

Despite occasional efforts to paint a transparent picture of Huawei’s operations, the structure of the company remains a little murky. Meng Wangzhou’s own marital status is ambiguous. She has denied being married to Huawei board member and marketing strategist Xu Wenwei, even though she has previously been reported as having two children with him.

It is notable that neither of Ren’s daughters have taken their father’s surname, Ren. This is possibly due to their father’s multiple marriages, which is not something the Communist Party likes to encourage.

Ren’s youngest daughter is Annabel Yao by his second wife, Yao Ling. She is straight out of central casting from the recent film smash Crazy Rich Asians, making her debut at the shamelessly elite Crillon Ball in Paris, alongside such luminaries as Julia McCaw, daughter of AT&T founder Craig McCaw.

Ren’s third wife is Su Wei. According to Chinese media reports, she is a millennial who was formerly his secretary.

Despite these complications, for the time being the official message is to shore up support for domestic companies. The strident nationalist title Global Times, although not a direct publication from the Communist Party, can always be relied upon for insights into official thinking.

“We call on the Chinese government and society to offer moral support to Huawei and Chinese diplomats to offer timely assistance to Meng,” it said in an editorial.

“Obviously Washington is resorting to a despicable rogue’s approach as it cannot stop Huawei’s 5G advance in the market,” it said.

“We also support Huawei in its legal battle with the US to prove its innocence and thwart some Americans’ plot to throw the company off track,” it said.

Huawei is at the forefront of China’s efforts to move from low-level manufacturing towards sophisticated technology-led business. Photograph: Reuters
Huawei is at the forefront of China’s efforts to move from low-level manufacturing towards sophisticated technology-led business. Photograph: Reuters

“China has been exercising restraint, but the US cannot act recklessly. US president Donald Trump should rein in the hostile activities of some Americans who may imperil Sino-US relations,” it said.

Among ordinary Chinese the reaction to Meng’s arrest has been generally negative.

On the Weibo social network someone called Xiang wrote: “I have decided to change my phone to Huawei now, in order to support them.”

Another commentator called Live, 35, was clearly sceptical: “I would like to know why she was arrested before I got angry.”

Meanwhile, Ben Liu wrote: “This is no longer a question of malicious terrorism. This is purely terrorist behaviour to intervene with trading. This is completely behaviour by triad organisations.”

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