Trump

Huawei, Geopolitics, Trade War and Hostage Crisis

At the very moment Trump was having dinner with Xi Jinping in Argentina, an international bombshell event occurred — the CFO of Huawei got arrested in Canada at the request of US officials.

Meng Wanzhou, the CFO, is no ordinary person; known as the “Princess of China,” she’s also the daughter of Huawei’s founder, who is a billionaire and a legend who spent 15 years in China’s army (PLA) as a technology specialist. Think of him as Chinese Steve Jobs with an extra dose of patriotism.

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Father-Daughter: Ren Zhengfei (with Xi Jinping) and Meng Wanzhou

Huawei itself is a global company with a revenue of $100 billion and is a leader in many areas of technology (more on that later).

Let’s take a look at the charges against Meng:

**1. Huawei sold or tried to sell HP computers to Iran through a company called SkyCom. This was against the US sanctions
(It’s a crazy concept that everyone in the world is expected to follow US laws. Flip the scenario and ask US corporations to follow Chinese sanctions … and the responses will be very different! Fact is that only the UN can impose sanctions).

**2. The CFO made a PowerPoint presentation to HSBC bank in Hong Kong in 2013 and claimed that SkyCom was an independent company (but the prosecutors allege that SkyCom was really more like a subsidiary of Huawei)

Do all these charges make sense? Not really. Here is why:

**1. US sanctions against Iran have been varying over the years. For example, before 2010, the sanctions were very permissible. Then Obama and the Congress made the sanctions very stringent through multiple legislation from 2010-2013, which were removed in 2015 and reinstated by Trump in 2018. Moreover, Obama’s sanctions — which Huawei is supposed to have violated — said that it was okay to sell computers to Iran for certain purposes:

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**2. When European banks and corporations violated the same US sanctions on Iran, nobody got arrested — the entities were simply fined.

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**3. And don’t forget that Ronald Reagan sold weapons to Iran in the 1980’s. And Halliburton did a lot of business with Iran in the 1990’s and the 2000’s in spite of all the sanctions

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So, what’s the real deal with the arrest and the flimsy charges? There are three real factors behind it.

**1. Huawei has become a veritable leader and has been beating many western technology giants like Apple, Ericsson, Nokia, Cisco etc. So bringing Huawei a few notches down will help many bankers, oligarchs and shareholders.

* In 2018, Huawei stole the #2 spot from Apple in smartphone market share.

* In 2018, Huawei also beat Ericsson in telecom infrastructure and became #1.

* In Feb 2018, Huawei was the first in the world to come up with a 5G chipset.

* Huawei has been #1 in global patents approved.

* Huawei is also competing in designs of semiconductor chips specifically for AI (Artificial Intelligence)

* Finally, Huawei has a very secure encryption that the NSA can’t break into. That’s why the countries of “Five Eyes” — USA, Canada, New Zealand, Australia and UK — have already banned or are in the process of banning Huawei from building 5G networks.

(See Slide show for headlines)

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**2. Kidnapping Meng Wanzhou and keeping her as a hostage may help in the US-China trade negotiations. At least, that’s what John Bolton and the CIA may be thinking.

But two can play this Mafia tactic. CEOs of major US corporations often visit China. Here are some pictures of Mark Zuckerberg (Facebook), Tim Cook (Apple), Elon Musk (Tesla), Bill Gates and Warren Buffet (one of the richest men in the US) visiting China:

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**3. It’s about geopolitics. USA is #1 and it’s going to fight off the challenger. It’s the Thucydides Trap that Harvard professor Graham Allison warned about. Keep in mind that China is now forecast to overtake the US in nominal GDP by 2025. GDP Forecast

Many people don’t know the following: in terms of purchasing power, China’s economy has been larger than that of the US since 2014.  This is called “PPP GDP,” which is a metric used by the IMF, the CIA, the Federal Reserve Bank etc. to compare economies:

#1 PPP GDP

As I wrote before, the next decade is the most dangerous decade in many centuries. And the Huawei drama is just a symptom of the geopolitical turmoil.