US, Canadian Businessmen: Careful in China for Now

A Hong Kong-based risk assessment firm is warning Canadian and American businessmen to avoid travel to China and to do any necessary business in Hong Kong rather than the mainland –especially executives holding Chinese and multinational passports -- in the wake of the Dec. 1 arrest of Meng Wanzhou, the chief financial officer and deputy chairperson of Chinese telecom equipment giant Huawei.

Meng, the daughter of Huawei founder and chief executive Ren Zhengfei, was arrested in Vancouver, Canada and faces extradition to the US over allegations that Huawei was helping Iran in evading US sanctions after the Trump administration declared the nuclear nonproliferation treaty between western nations and Tehran invalid.

Read: Why Did Huawei Exec Meng Have 3 HK Passports?

“There is an immediate risk to in-country-executives due to the likelihood that the Chinese government will exploit the situation by using Meng’s arrest as a political tool,” said the report by A2Global Risk, a security management consultancy that provides services to individuals, businesses, government agencies and NGOs operating in volatile environments. “Those most at risk are US or Canadian-Chinese dual nationals who are based in China. China does not recognize dual nationality.”

Beijing, according to the report, “could signal its displeasure with Ottawa and Washington through the arrest of a high-level executive of U.S./Canadian-Chinese nationality, working for a high-profile Western company in China, or visiting China for business.”

The firm went on to predict a possible exodus of U.S.-based high-profile Chinese executives with Chinese state-owned enterprises and private businesses in the wake of Meng’s arrest. Offspring of Chinese government officials studying or working in the U.S., Canada and Europe may choose to return to China due to the worsening state of Sino-U.S. relations., the report said.

The gravity of the situation was indicated by a threat of “grave consequences” for Canada and an escalation of the case into one of the most serious diplomatic confrontations between the two nation. Canadian Ambassador John McCallum was summoned to the Foreign Ministry to receive a “strong protest” against the arrest and a demand that Meng be released immediately.

“Senior level U.S/Canadian-Chinese dual nationals should not travel to China until the latest escalation in the U.S-China confrontation has subsided,” A2Global Risk said “If travel is essential, we recommend they travel on their foreign passport and be wary of carrying Chinese identification. It is more likely that high-level foreign managers will be targeted, rather than junior foreign executives.”

It is advisable, the report said, “that high-level personnel from any Western company with ongoing regulatory disputes, such as non-compliance with China’s cyber law, or even minor issues, do not travel to China at this time.”

Even before this incident, two US citizens, Victor and Cynthia Liu, were prevented by authorities from leaving China in an attempt to pressure their father, a high-profile Chinese fugitive named Liu Changming, to return to China to face criminal charges. Chinese authorities claim that the Liu children were in possession of Chinese nationality documents, thought to be Chinese identification cards.

The threat of doing business in China is not limited to Canadians and Americans. High-level Japanese executives, the report said, should also reassess their need to travel to China for business at the moment, as there is potential that they may also be a target of the Chinese authorities, due to long-standing Sino-Japanese tensions and Japan’s closeness with the West.

Japanese caution is certainly warranted. Japanese companies were forced to close factories and offices in China after series of government backed violent protests over competing claims to the Daioyu/Senkaku islands in 2012 as people took to the streets in more than 70 Chinese cities to protest the Japanese government's purchase of the islands from their private Japanese owners.

Independent commentators have suggested that the arrest is not directly related to Huawei but instead to investigations into financial transactions, A2Global Risk said.

“Meng’s arrest comes at a politically sensitive time in US-Chinese relations and jeopardizes a truce in the ongoing trade war agreed by Trump and Xi in Argentina,” according to the report. “It is possible that the Chinese side did not know about Meng’s arrest during the talks. China’s Ministry of Commerce said it would immediately start implementing the agreements brokered by the two sides on agricultural products, energy and cars.

Huawei, as the report says, has been at the center of a national security debate between the ‘Five Eyes’ intelligence community (Australia, Canada, New Zealand, the U.K. and the US) with Australia, New Zealand and the US banning the company from supplying their 5G mobile communications networks.

BT, a leading UK multinational telecommunications company, said on 5 December that it was stripping Huawei equip from its 4G network, and would not use the Chinese company for its 5G network. Two days late, Japan said it would ban government purchases of telecommunications equipment from Huawei and China’s other telecoms giant, ZTE.

“The Chinese authorities may see the arrest of Meng as part of a greater US-led conspiracy against China’s technological prowess, and part of a perceived effort by the U.S. to ‘contain’ China,” the report said. But “the longer China is thwarted, the greater the potential for pushback from the Chinese authorities.