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Which Chinese National could be the bargaining chip to resolve the US-China trade war?

Updated: Feb 26, 2019


In the months following President Trump’s 2018 import tax on Chinese goods, there is a rising sense of turmoil in the global economy looming around the possibility of an increased trade war between the United States and Chinese government.


 Amid this economic crisis, an unexpected chance for resolve has come in the form of judicial action. In December 2018, Chinese national and Huawei CFO, Meng Wanzhou was arrested in Canada, largely under pressure from the United States government. The Justice Department and New York State government have continuously pursued Wanzhou’s extradition to the United States. 


Ms. Meng, 46, is the eldest daughter of Ren Zhengfei, the leader of the telecom equipment maker Huawei. She received her Masters in accounting from China’s Huazong University, and after graduating in 1993 joined Huawei as an assistant. Since then she has worked her way through the ranks, and as of 2018 holds the title as the Chief Financial Officer and Deputy Chairwoman. According to Michael Balsamo (2019), an editor for TIME Magazine, the Justice Department currently has over 10 federal charges against Ms. Wanzhou and Huawei; these charges include forging fraudulent bank transactions, avoiding U.S. sanctions, and stealing trade secrets from U.S. companies. 


The charges against Ms. Wanzhhou are both detailed and retaliatory in nature, but her extradition will not ease any tensions between the U.S., Canada, and China. A 2018 Justice Department ruling against the Chinese company Sinovel (2018) resulted in multi-million dollarfines, Huawei and it’s executives could face a similar fate. 


Why fines? Fines place economic pressure on corporations who have been accused of ill-intentioned international business practices. Fines allow the U.S. to avoid further tension with China by incarcerating a non-U.S. citizen. In Meng Wanzhou and Huawei’s case, a fine is a much better scenario then any further trade blockade between China and the United States government.


 In the release of Ms. Wanzhou, the U.S. is likely to pursue the maximum statutory fine requested by the U.S. government and a block on all Huawei business transactions with U.S. citizens and companies. The block on trade with U.S. entities would allow Huawei to revamp their operations and decrease possible ties to the Chinese government. 

If the blockade against Huawei is taken seriously by the Chinese government and Chinese corporations it will highlight the need for better international standards and individual rights for companies and nations who partake in business with China. 

If the case is surmounted by facts from The Justice Department then legal action is inevitable, but not all scenarios end negatively for the U.S. and China. President Donald Trump has spoken on the idea of releasing Meng Wanzhou if it helps resolve any future trade war with China.


 In an interview with Reuters (2018) when asked about the Huawei case, the President stated: “If I think it's good for what will be certainly the largest trade deal ever made -- which is a very important thing -- what's good for national security -- I would certainly intervene if I thought it was necessary.”


Although fines are something that no company wants to pay, in Huawei’s case if the U.S. Justice Department charges are proven true, a maximum statutory fine and the release of MengWanzhou to her family would be the best scenario for future business between the American, Chinese, and Canadian governments.


 If the fines and blockade are pursued, rather than any stricter legal action by the U.S. government, this resolve creates further opportunity for conversation, which allows the U.S. to avoid the looming idea of a technological cold-war between the world’s two largest economies.


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References

US Justice Department. (2018, July 6). Court Imposes Maximum Fine on Sinovel Wind Group for Theft of Trade Secrets. Retrieved at https://www.justice.gov/opa/pr/court-imposes-maximum-fine-sinovel-wind-group-theft-trade-secrets

Balsamo, Michael (TIME). (2019, January 28). Justice Department Details Charges Against Chinese Tech Giant Huawei and Its CFO. Retrieved athttp://time.com/5514960/charges-against-meng-wanzhou-huawei/

Klein, Betsy and Westcott, Ben (CNN). “Trump expresses openness to using Huawei CFO as bargaining chip in China trade talks”. Retrieved athttps://www.cnn.com/2018/12/11/politics/trump-china-huawei-cfo/index.html

Leskin, Paige (Business Insider). (2018, December 15). What you need to know about Meng Wanzhou, a Chinese tech founder's daughter whose arrest could set fire to US-China relations”. Retrieved at https://www.businessinsider.com/huawei-cfo-arrest-who-is-meng-wanzhou-2018-12

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