China is squealing like a stuck pig at the arrest of Huawei executive Meng Wanzhou, but the dangers of escalation are high both for Huawei and – seldom noticed – Hong Kong. Meng was arrested in Canada on Dec. 1 and ordered held at the request of the United States, which has accused Huawei of helping the Iranian government evade sanctions put in place when the Trump administration unilaterally voided the Obama-era nuclear disarmament treaty with Tehran.
To take the issue of the danger to Hong Kong, which has so far been given scant attention in the west, first: Canadian authorities have found Meng has been in possession of three Hong Kong passports in addition to mainland ones.
The first question is whether she was entitled to any Hong Kong passport, let alone three. She is not thought to have lived in Hong Kong long enough – seven years -- to have acquired the permanent residence which would entitle her to a Hong Kong Chinese passport.
Two other routes to Hong Kong residence do exist: investment of a sufficiently large sum in a high-skill employment generating enterprise, and being viewed as an especially distinguished person, such as a sporting star. It is not known as yet whether Meng qualified under either category. Nor is it clear why she had three such passports. Conceivably they could be old ones containing still valid visas, but the situation demands clarification from Hong Kong’s Immigration Department.
Although Meng also held mainland passports, the Hong Kong ones would have given her visa-free access to many countries that demand visas from other holders of Chinese passports. So whatever the actual circumstances of her passports, the United States (and others) are likely to see it as a further blurring of the lines between the mainland and the SAR at a time when Hong Kong’s government is pushing for closer integration with the mainland and the so-called Greater Bay Area, an adjoining zone of cities and municipalities of some 60 million people.
At risk is Hong Kong’s separate treatment not only for trade purposes but also for access to high technology and other economic benefits of the One Country-Two Systems principle which is supposed to govern the territory. Well before Huawei incident there have been voices in the US calling for re-examination of its relationship with Hong Kong as provided in the 1992 US-Hong Kong Policy Act. To US unhappiness with suppression of democracy and dissent in Hong Kong is now being added concern that its separate status is being cynically used by Beijing for mainland purposes, Although Huawei claims to be a private company, its links to the highest levels in Beijing, and the military in particular, are clear enough.
The US move against Meng must be seen as a part of a broader strategy of clipping the wings of what is probably China’s most important high-tech, global-reach company. Australia and New Zealand have recently both banned Huawei from participation in 5G systems and the UK is imposing tight restraints on the company’s operations there. Others may well follow. – though developing countries less worried about espionage may prefer Huawei’s lower cost products.
The US most likely has a strong technical case against Meng. But in most cases involving breach of US sanctions on Iran, the Justice Department has targeted companies rather than their executives. Hence huge fines have been imposed on some foreign banks without individuals being charged with fraud, as in the Meng case.
China’s noisy reaction attests not just to the importance of Huawei but of Meng who is not only its finance director but daughter of its founder and chairman. It contrasts with silence over the arrest and recent conviction of former Hong Kong Home Affairs minister Patrick Ho for bribing officials in Africa on behalf of a major mainland state owned enterprise. Ho, who had been an eager Belt and Road advocate faces a significant jail term.
The Meng arrest will undoubtedly add to the difficulty of sustaining a truce in the US trade war with China. But it also highlights the anger which many US trade partners, from Germany to India, regard the US attempt to make others kowtow to its Iran embargo, a product of four decades of failure of US policies in the Middle East and of benefit only to Israel, Saudi Arabia and Russia.