Even while much of Washington tries to practice social distancing, FBI director Christopher Wray made it a point to travel three blocks up Pennsylvania Avenue from the bureau’s headquarters last Tuesday for a speech to a small audience, most of them in masks. Wray has kept a low profile throughout his nearly three-year tenure as director, but the topic of his address at the conservative Hudson Institute was one he’s had no problem being vocal about, and on Tuesday he made his position clear by the third sentence of his remarks.
“The greatest long-term threat to our nation’s information and intellectual property, and to our economic vitality, is the counterintelligence and economic espionage threat from China,” he told the think tank crowd. “We need to be clear-eyed about the scope of the Chinese government’s ambition. China—the Chinese Communist Party—believes it’s in a generational fight to surpass our country in economic and technological leadership.”
For nearly an hour in his speech and a follow-on Q&A with the institute’s arch-China hawk Walter Russell Mead, Wray held forth in what bureau officials called the most detailed account of the Chinese threat ever given by the FBI. “We’ve now reached the point where the FBI is opening a new China-related counterintelligence case about every 10 hours. Of the nearly 5,000 active FBI counterintelligence cases currently underway across the country, almost half are related to China,” he said. “China is engaged in a whole-of-state effort to become the world’s only superpower by any means necessary.”
Wray’s remarks marked the second act in what will ultimately be four speeches by the Trump administration’s national security and legal leaders about the threat posed by China’s ambitions. White House national security advisor Robert O’Brien blasted China during an Arizona speech two weeks ago, Attorney General Bill Barr and Secretary of State Mike Pompeo are scheduled to speak this summer as well.
The push by the Trump administration to elevate the Chinese threat in America’s public consciousness is partly a presidential campaign tactic and partly an overdue acknowledgement by the foreign policy establishment that years of accommodating engagement with a rising China has done little to stem China's rambunctious and norm-shattering behavior across the globe even as it has given the country time and space to expand its economy, militarize the South China Sea, and consolidate power around the leader of the Chinese Communist Party, Xi Jinping.
After Washington and the West largely failed with carrots for two decades, the Trump administration has turned to geopolitical sticks—a strategy that was well underway before this spring’s novel coronavirus pandemic exacerbated Chinese-US tensions. Trump has been at pains to label the virus the “Kung flu—among other racist and xenophobic monikers—even as China moved aggressively in recent weeks to curtail the traditional freedoms of Hong Kong and silence dissent on the island.
For much of the last two years, the Trump administration’s fight against China has been embodied in its sustained economic and legal campaign against Huawei, China’s only truly global company, a $120 billion-a-year telecommunications manufacturer, headquartered in Shenzhen, just over the bridge from newly chilled Hong Kong.
Now the company, which just a few years ago had trouble getting its customers to pronounce its name correctly, has been transformed into a household name in the United States by virtue of a battering combination of US sanctions, criminal charges, trade restrictions, geopolitical threats, and special designations from the government aimed at ostracizing the company and its next generation 5G equipment from western telecom networks.
The company said this spring that the concerted US campaign wiped away an estimated $12 billion in revenue last year—an amount larger than the entire annual revenue of companies like eBay, Adobe, or Nvidia.
Wray’s remarks on China came just hours after what appeared to be a potential turning point in the US fight against Huawei: After months of controversy and study following the UK’s decision to allow Huawei to participate in building parts of its 5G network, UK Prime Minister Boris Johnson suggested last week that his government was reconsidering. (As this article was published the British government announced that it had indeed decided to ban purchase of new 5G equipment from Huawei.)
The British move marked a stunning reversal—one that simultaneously advances US goals while also underscoring the toll the US campaign is taking on the basic viability of the Chinese telecom giant. The UK move met with quick support on Capitol Hill, where Republican Senator Ben Sasse called Huawei “the Chinese Communist Party’s tech puppet” and independent Senator Angus King has said, “Huawei can either be a global telecommunications provider or an agent of the Chinese state—they can’t be both.”
Put simply: The US government does not trust Huawei with Western internet, phone lines, and phones, not to mention the data that flows through them.
But those were not the issues the British reportedly cited for considering a pullback from its deal with Huawei. Instead, according to the Telegraph and Bloomberg, officials specifically said they fear that US pressure on Huawei would have “severe” consequences on the company, including blocking Huawei from using technology built using American IP. That, UK officials worry, would in turn force Huawei to use untrusted technology that could make security risks to Britain’s 5G network impossible to control.
The UK decision is all the more surprising because as the year began it indicated that Huawei would be allowed into parts of its 5G network, and globally the Trump administration’s steps against Huawei—moves that came after years of discomfort and growing agitation by US officials over the global spread of the Chinese telecommunications manufacturer—appeared to be losing steam, falling flat among even friendly allies in Europe, like the UK, and failing to convince them to eschew Huawei’s cheaper technologies for supposedly more trustworthy Western companies like Nokia and Ericsson.
The US argues that Huawei, as a Chinese-based company, does not deserve a position of trust in Western networks both because of general fears about the pressure the Chinese Communist Party can bring against its domestic companies and because Huawei over the last decade has acted as a company unworthy of trust.
“Huawei is a serial intellectual property thief, with a pattern and practice of disregarding both the rule of law and the rights of its victims,” Wray said in his remarks at the Hudson Institute. “In our modern world, there is perhaps no more ominous prospect than a hostile foreign government’s ability to compromise our country’s infrastructure and devices. If Chinese companies like Huawei are given unfettered access to our telecommunications infrastructure, they could collect any of your information that traverses their devices or networks. Worse still: They’d have no choice but to hand it over to the Chinese government if asked—the privacy and due process protections that are sacrosanct in the United States are simply nonexistent in China.”
The four-act administration speeches on China and the Chinese Communist Party—all of which seem like they will feature Huawei as a core part of the argument to curb China’s global ambition—cap off a remarkable six months of concerted effort against Huawei that has brought the Trump administration’s efforts back from what appeared to be an embarrassing defeat.
Huawei has become a microcosm of America’s alarm about China’s rise—the sum of all its fears about China’s geopolitical ambitions and technological capabilities. The US government sees Huawei as furthering three uniquely sensitive, destabilizing aspects of China’s growing role in the world: Unfair competition as China’s leap-frog economic growth is enabled by rampant economic espionage and intellectual property theft; China’s ambitions to focus advanced technologies on building an unprecedented surveillance network to crush internal dissent, as it is doing in Hong Kong and against minority groups like the Uighurs; and the aid and assistance China is providing to America’s other adversaries on the global stage, from Russia and Iran to North Korea.
Huawei has broadly, vigorously, and consistently denied US charges that it’s a law-breaking tool of the Chinese state, and its founder has said it will not spy on behalf of any country. Instead, in dozens of my conversations with Huawei executives in the US and China over the last year, they’ve stressed that they see themselves as a pawn caught between two superpowers. Dennis Amari, Huawei’s vice president of US government relations, told me this spring that he feels that the US actions are a “reaction and response to some broader issues around the activities of the Chinese government and military and some of the policies that have been enacted in China—in particular with respect to the Uighurs.”
“There’s clearly been a very strong anti-China philosophy within the administration and in particular in the White House,” Amari told me. “There have been members of President Trump’s team who have prevailed over the more moderate thinkers.”
US officials say that there’s good reason to worry about China’s surveillance ambitions; they point to what they see as a troubling and consistent pattern by China of new laws that could, regardless of Huawei’s philosophical beliefs, compel the company and any other Chinese domestic tech companies to cooperate with Chinese intelligence. The new 66-part national security law in Hong Kong is the third major expansion of legal structures—following a 2015 national security law and a 2017 intelligence law—that compel cooperation from tech companies like Huawei.
Indeed, perhaps as much as US efforts like Wray’s speech have advanced the Huawei fight, it has been China’s own troubling behavior—including fresh signs of the Chinese Communist Party’s aggressive support for Huawei, its recent crackdown on dissent, and violations of Hong Kong’s special status—that have strengthened the US case for wariness and breathed new life into the Western push against the company.
The first sign this winter that the US would not be cowed despite a disappointing initial string of setbacks overseas came as a new, superseding indictment raised the stakes in the case against Huawei chief financial officer Meng Wanzhou, who was arrested in late 2018 while traveling in Canada at the request of the US and charged with deceiving banks into continuing to do business with Huawei even as the company circumvented US sanctions on Iran. Those charges were updated on February 13, when the US charged Huawei and two subsidiaries with racketeering—the same so-called RICO statutes used to tackle Mafia families, drug cartels, and street gangs. The law allows prosecutors to pull together disparate incidents into an overarching pattern of a criminal enterprise.
The court papers laid out years of allegations dating back to 2000 relating to trade-secret theft, from source code to instruction manuals, where Huawei or its employees had targeted at least five western companies. Though the companies weren’t named, they’re believed to be Cisco Systems, CNEX Labs, Motorola Solutions, Quintel Technology, and T-Mobile, whose case against Huawei for the attempted theft of the tech underlying its phone-testing robot, nicknamed Tappy, had served as the foundation for earlier charges against Huawei. (The company has pleaded not guilty in this case and the racketeering case.)
In many ways, the individual cases were part of Justice Department efforts since 2014 to publicize and shame China’s rampant intellectual property theft—from military systems to paint color technology—but rarely have US officials offered such specificity and singled out a whole company for such aggressive charges.
The next day, at the Munich Security Conference, Huawei’s global chief cybersecurity leader, John Suffolk, brushed away the charges as old hat. “They are hoping that if they throw enough mud, some of the mud will stick,” he said.
At the same conference, though, US official Robert Blair—who was serving as the White House’s special representative on telecommunications policy—told reporters that given the company’s track record and the Chinese government’s history of using private sector companies to advance its interests, the burden should be on Huawei to demonstrate its freedom from the Chinese government. “Over the last couple of years there’s been more than enough evidence of the way the Chinese government has been using its national champions," Blair said. "So really the onus is on Huawei now: They have to show they are a trustworthy partner, they have to separate themselves from the Chinese government.”
In a recent statement to WIRED, Huawei said that the new charges were without merit and that the lawsuit was filed for reasons related to economic competition rather than law enforcement.
Yet from that blockbuster February indictment, month by month—and at times, week by week—the US campaign continued against the backdrop of the administration’s rising rhetoric and tensions with China as the Covid-19 pandemic spread from Asia to the United States. As Wray outlined, the FBI has moved aggressively against Chinese espionage at the same time; just days before the Huawei RICO indictment, the Justice Department also charged four Chinese military hackers with perpetrating the massive data breach of Equifax.
In May, the Trump administration again targeted the company’s access to Western technology, announcing new export controls that would force potential suppliers to ask for government permission before providing Huawei with critical computer chips made using US technology. (While in the short-term the export controls are likely to stymie Huawei, it’s also certain to accelerate Chinese domestic production and investment in computer chips, one area where the Asian nation has traditionally relied on US suppliers, and thus could have a serious ripple effect on the US technology sector.)
Then, on June 30, the FCC formally designated both Huawei and the other leading Chinese telecom, ZTE, as national security threats. The FCC order explained that “Huawei is highly susceptible to influence and coercion by the Chinese government, military, and intelligence community” and that such influence “presents profound risks to the security of our nation’s communications networks.” (Huawei has called the FCC’s designation arbitrary and capricious, maintaining that the Chinese government has no ownership or control over the company—though having traveled to Huawei’s headquarters in Shenzhen last year, where I sat through an hour-long presentation about the company’s unique ownership structure, the validity of that statement is at best a matter of debate.)
The effect of the FCC’s order is narrow, but potentially profound: By blocking companies that receive federal subsidies to expand broadband access from using those funds to purchase Huawei and ZTE products, the FCC hit rural internet service providers, the one area where Huawei had painstakingly built a corporate foothold in the US. Despite being the globe’s second-largest manufacturer of smartphones, which elsewhere in the world compete well against the iPhone, sales of its handsets have been more or less blocked in the US.
Now with the politically charged FCC ruling, Huawei might find itself for all intents and purposes boxed out of the US market. Although US companies could use nonfederal money and apply for waivers to install Huawei products, it’s hard to imagine many US internet service providers being eager to install equipment that’s been officially labeled a security threat.
Beyond the new penalties and charges from the government, Huawei has also been on the losing end of several legal fights through the spring—in one case, a federal judge ruled that Congress was within its rights to restrict government agencies and contractors from doing business with the Chinese company and, in Canada, a judge in May upheld the 2018 arrest of Huawei CFO Meng Wanzhou, who is also the daughter of Huawei’s founder, ruling that her extradition proceedings should move forward.
Canadian leaders say they have faced serious pressure from China to release Meng. Two Canadians, Michael Kovrig and Michael Spavor, have been held by China on suspicious charges since Meng’s arrest, and a third Canadian who had already been in Chinese custody had his sentence upgraded to the death penalty. Those suspiciously timed detentions seem to have been taken from the same playbook that China previously deployed against Canada the last time it arrested a Chinese national on the US’s behalf in a 2014 espionage case; after the arrest of the spy in Vancouver, China promptly arrested two Canadian missionaries and held them on what their home country said were specious charges.
Canada didn’t back down in 2014, and despite immense domestic political pressure, Prime Minister Justin Trudeau has similarly refused to order the release of Meng and rejected any deal now: “Randomly arresting Canadians doesn’t give you leverage over the government of Canada.” (China has denied that its detentions of Canadian citizens, either in 2018 or 2014, were retaliatory.)
The ongoing detention of the two Canadians—which Trudeau has said China has explicitly linked to Meng’s arrest—is part of a series of actions by China amid the US anti-Huawei campaign that seem to underscore that the Shenzhen manufacturer isn’t necessarily totally divorced from Beijing’s circle of influence.
In April, The New York Times broke news that five disaffected former Huawei employees had been arrested by Chinese authorities after discussing in a private WeChat conversation that they could prove Huawei conducted business with Iran—the core of the case against Meng and Huawei, which alleges fraud and violations of US sanctions against doing business with the Iranian regime. One of the men was even arrested while on vacation in Thailand and returned to China for questioning. That same former employee was released from custody only after signing a statement that he wouldn’t publicly deviate from Huawei's company line about its work with Iran, according to the Times report.
That Chinese police would coerce and pressure corporate employees to stay silent about Huawei’s business practices appeared to be among the most damning evidence yet that the Chinese Communist Party has a less-than-arms-length relationship with the company, although the timing of the December incident in the midst of the US-China trade war and the US moves against Huawei make it difficult to determine the chicken-or-egg causation of China’s aggressive defense of its domestic giant.
Huawei—which ranks as the world’s largest telecommunications manufacturer with operations in 170 countries around the world and annual revenues roughly equivalent to Microsoft—has hardly taken the US assault lying down.
Its founder, Ren Zhengfei, built a famously scrappy and fierce corporate culture, and while its executives were carefully curbing their international travel even before the Coronavirus—the US indictment of Meng features several still-sealed defendants, leaving senior company officials to wonder if they’re next on the US target list—the company has been marshaling an extensive counterattack from its multiple campuses in and around Shenzhen. In one speech soon after his daughter’s arrest reported by The Wall Street Journal, Ren reportedly told a company R&D center, “Surge forward, killing as you go, to blaze us a trail of blood.” And more recently he told a corporate audience in Wuhan, “the company has entered a state of war.” (Huawei has since said that some of Ren's meaning was lost in translation, and The Wall Street Journal’s reporters have posted the original Chinese characterization for discussion.)
“The fact is, we were forced to speak up and stand up and defend our position,” Ren told the Journal in a recent interview. “The US is waving a stick at us, and after taking a blow from the left, we can’t just wait for the next one to come at us from the right.”
Part of what has complicated the US bargaining position, particularly in Europe, is that at its most basic level, the US versus Huawei fight is also a raw geopolitical competition between two superpowers with advanced signals intelligence capabilities and extremely pervasive global surveillance networks.
Huawei has pointed to the Edward Snowden leaks to say that US criticism of China is the pot calling the kettle black when it comes to hacking foreign networks and spying on internet traffic. For example, one Snowden document leaked in 2013 outlined a years-long NSA effort, codenamed BULLRUN and known as the “SIGINT Enabling Project,” that focused on cracking encryption standards the world over. “The SIGINT Enabling Project actively engages the US and foreign IT industries to covertly influence and/or overtly leverage their commercial products’ designs,” the leaked briefing document read. “These design changes make the systems in question exploitable through SIGINT collection (e.g., Endpoint, Midpoint, etc.) with foreknowledge of the modification.”
The US doesn’t necessarily deny its own surveillance ambitions, and while the US is careful to never be this blunt diplomatically, its argument around 5G security effectively boils down to this: Someone is going to be lurking inside the next generation of the globe’s wireless networks, wouldn’t you rather it be western intelligence agencies, which are beholden to democratic legal systems and respect human rights and political speech, than Chinese security forces, which carry out ethnic cleansing, crush political speech, and crisscross the globe to disappear troubling dissidents?
This is not a conflict that will be over anytime soon, nor is Huawei likely to be the only Chinese company in US sights. The Huawei struggle is itself a sequel to a 2018 fight by the Trump administration against ZTE, which was similarly confusing and which President Trump’s own actions complicated and confused. The first year of the Huawei battle in 2019 also saw chaotic and sometimes ill-conceived steps, as the Trump administration’s targeting of Huawei often seemed to take a shoot-from-the-hip, “ready, fire, aim,” approach. For example, its revelation a year ago that Huawei would be added to the “entity list” came with little detail or nuance and left US companies like Google, whose Android operating system has historically powered Huawei’s smartphones, reeling from conflicting messages.
By contrast, this year, the US steps have seemed more refined and precise; the Commerce Department, for instance, issued rules clarifying that US companies could participate in international technical rules- and standard-setting bodies, alongside Huawei, without violating the restriction on business.
Some of the renewed strength of the campaign comes as the Trump administration has also made clear just how deeply it is willing to commit to reinvigorating Western innovation; both the Huawei fight and the Covid-19 pandemic have cast a harsh light on US industrial supply chains and encouraged the administration to invest in critical technologies and manufacturing at home. In a major victory for the Trump administration, one of Taiwan’s leading semiconductor manufacturers announced this spring that it would open a new factory in Arizona.
Such moves are part of the Trump administration’s strong signaling that it is willing to fight fire with fire—intervening in an almost Chinese-style economic approach on both the supply side and the demand side to wean the West from Chinese tech like Huawei.
Therein lies a certain irony to this latest chapter and proposed moves: One of the major failed assumptions of the last two decades of Western engagement with China was that as China grew, it would become more like the West—strengthening the rule of law, ensuring protections for intellectual property, and engaging productively in multilateral international organizations. Instead, China simply has grown more geopolitically rambunctious and more authoritarian. Now, to combat this China, the Trump administration seems open to making the west more like China.
Indeed, after years of complaining that Huawei’s growth from a small rural telecom company to a global powerhouse has been fueled by unfair government subsidies, the US is starting to offer similar aid. Keith Krach, a US undersecretary of state for economic growth, energy, and the environment, told reporters on a June 25 conference call that the US was willing to help fund the purchase of non-Huawei components for the networks of other countries. “There’s lots of financing tools and those kinds of things that I think many countries like us are willing to help provide, because we recognize this danger,” he said. “If countries are choosing their 5G systems, this is definitely the time to do a rip-and-replace transition.”
On the other side of the equation, the Trump administration seems potentially interested in the Chinese model of government funding to empower innovation and effectively create state-owned enterprises in critical technology fields. Leaders like Bill Barr have suggested publicly that the US and Western countries should make direct investments and even take potential ownership stakes in critical “trusted” companies like Nokia and Ericsson that provide alternatives to Huawei’s 5G technologies.
“Some propose that these concerns could be met by the United States aligning itself with Nokia and/or Ericsson through American ownership of a controlling stake, either directly or through a consortium of private American and allied companies,” Barr told a Washington audience earlier this year, as part of a Justice Department conference highlighting its anti-China initiative. “Putting our large market and financial muscle behind one or both of these firms would make it a more formidable competitor and eliminate concerns over its staying power.”
Larry Kudlow, the White House’s top economic adviser, endorsed similar moves, saying he felt it was important for the 5G architecture and infrastructure to be built by US firms.
On Capitol Hill, a bipartisan group of lawmakers in both houses have co-sponsored legislation known as the “Utilizing Strategic Allied (USA) Telecommunications Act” that would make significant investments in 5G innovation. As the members of the House Energy and Commerce committee said in endorsing the legislation, “By promoting a more competitive market of trusted alternatives to suspect 5G equipment, we can more easily secure our critical networks and bring like-minded countries with us.” On the Senate side, Angus King signed on as a co-sponsor too in June.
Senator Mark Warner, a telecom pioneer himself and vice chair of the Senate intelligence committee, says he believes the USA Telecom Act would help boost a Huawei-free 5G alternative known as OpenRAN, for open radio access network, that has shown promise in tests in Idaho and is set to be rolled out in the UK and elsewhere later this year. OpenRAN allows a variety of different components from different manufacturers to be knitted together in a 5G network and would let telecom and internet service providers go beyond the proprietary soup-to-nuts solutions of Huawei or Ericsson. “Every month that the US does nothing, Huawei stands poised to become the cheapest, fastest, most ubiquitous global provider of 5G,” Warner said. “We need to move beyond observing the problem to providing alternatives for US and foreign network operators.”
The idea of government investment in a Huawei alternative has continued to kick around in the months since and was the subject of a large Wall Street Journal article at the end of June. “Some see this as an opportunity to facilitate the creation of an industrial base inside the United States,” Brian Hendricks, who heads policy in the Americas for Nokia, told the Journal. “The US has been out of the game for a while.”
Any such move, if or when it comes, would be a dramatic departure from recent years and the dogmas of the Republican Party, which prizes the free market, but even simply continuing the pressure on Huawei appears to be having an effect and allowed Ericsson breathing room to advance its own 5G technologies. (Nokia, due to a bad bet on a core computer chip, has continued to stumble.)
The willingness, though, to even consider such philosophical departures makes clear how the Trump administration—and even many Democrats—view the rise of China as the defining geopolitical challenge of the next generation. Although as John Bolton’s recent book outlined, Trump’s China policy has had certain unique and troubling Trumpian elements to it, it’s not clear that in January 2021 a Joe Biden administration would do much differently on the Huawei front.
And, as much as Huawei is in the US sights right now, the Trump administration is making clear that it won’t be alone—its real targets are any domestic Chinese companies that might give the rising superpower an unfair advantage or compromise users’ security or privacy.
Notably, where Huawei has been drawn politically over the last two years ever deeper into China’s embrace, TikTok seems to be taking rapid action to distance itself from its Chinese owners and attempt to avoid the all-out war Huawei is fighting. Even as US officials criticized it, the app company announced last week that it was pulling out of Hong Kong after the new Chinese crackdown there, and it’s considering changes to its ownership structure that, according to The Wall Street Journal, would further distance the company from its Chinese origins. (TikTok did not confirm the purpose of its restructuring to WIRED, but the company said that it already operates independently from the Chinese government.)
One thing, though, may ultimately save TikTok: Unlike Huawei, which has virtually no domestic US consumers using its devices, TikTok has a fierce and vocal US fan base.