How China Views the Arrest of Huawei’s Meng Wanzhou

Few people around the world today are likely to recognize the name of Lin Weixi, a Chinese villager whose death helped launch the First Opium War, the conflict that came to define China’s relationship with the West in the modern era. In early July of 1839, as tensions between Britain and China were heightening over a trade imbalance, a couple of British merchant sailors in Kowloon got drunk on rice liqueur and beat Lin, who subsequently died. The British superintendent of trade, Charles Elliot, arrested the sailors, but refused to turn them over to the Chinese authorities, an act that China regarded as a violation of its sovereignty and an offense to justice.

.. Huawei is the largest telecom-equipment manufacturer in the world, and it recently overtook Apple as the second largest manufacturer of smartphones, after Samsung. Huawei has also emerged an increasingly powerful player in the tech industry. This year, it announced that it would increase its annual expenditure on research and development to as much as twenty billion dollars, which would place it among the world’s top R. & D. spenders, with Amazon and Alphabet.

.. Huawei’s investment in innovation has been persistent and purposeful. According to the head of geotechnology at Eurasia Group, Huawei is the only company that can currently produce “at scale and cost” all the elements of a 5G network, heralded as the next frontier of wireless communications. As such, it is positioned to take the lead in what’s been called the fourth industrial revolution.

.. Washington has long been worried that Chinese telecommunications equipment can be used for intelligence purposes. Huawei was founded, in 1987, by Ren, who was formerly an engineer in the People’s Liberation Army. Last week, the Times reportedthat “Counterintelligence agents and federal prosecutors began exploring possible cases against Huawei’s leadership in 2010” and that “as they investigated Huawei, F.B.I. agents grew concerned that company officers were working on behalf of the Chinese government.” In 2012, a U.S. House Intelligence Committee report concluded that Huawei “was unwilling to explain its relationship with the Chinese government or Chinese Communist Party,” and that the United States “should view with suspicion the continued penetration of the U.S. telecommunications market by Chinese telecommunications companies.” The Times also reported that “the top United States intelligence agencies told senators this year that Americans should not buy Huawei products.”

.. All this is viewed very differently in China, partly for reasons that date back to the nation’s devastating defeat in the First Opium War. In the eighteenth century, the British wanted tea much more than the Chinese wanted anything from the West, resulting in a chronic trade imbalance and a huge outflow of silver and gold from West to East. To staunch that flow, British traders decided to flood the Chinese market with opium from India, violating Chinese laws that forbade trafficking of the narcotic. As efforts to enforce the ban broke down, the British handily captured the city of Canton, before marching up the Chinese coastline. Within two years, Great Britain had made significant headway into the Chinese market, pried open a series of ports, and extracted concessions that the Qing dynasty was helpless to deny.

.. The war taught China two lessons it has never forgot.

  1. The first was that it had failed to recognize the threat of Western technological prowess. While Britain was energetically cultivating the use of steam in the first industrial revolution—and the steam-powered ships that propelled its victory in the war—China had sequestered itself, falling behind in mastering the technology that became the modern world’s instrument of power. President Xi Jinping’s push for technological supremacy in the twenty-first century can be seen as a continued revision of Chinese tactics.
  2. The second was that principle matters little in an international war of wills. In 1840, a Chinese official named Lin Zexu was tasked with stamping out the opium trade. He sent a letter to Queen Victoria, signed by the Emperor, in which he made an appeal to her conscience. “The purpose of your ships in coming to China is to realize a large profit,” Lin wrote. “You do not wish opium to harm your own country, but you choose to bring that harm to other countries such as China. Why?

Lin’s letter, however, reportedly never reached the Queen, and, in Parliament, the political and economic justification given for war elided ethical concerns. Aggression against the Chinese, it was argued, was entirely about defending Britain’s honor. Many agreed with the sentiments of Samuel Warren, a novelist and later a Member of Parliament who, in a widely distributed pamphlet titled “The Opium Question,” wrote, “In the name of the dear glory and honour of old England, where are the councils which will hesitate for a moment in cleansing them, even if it be in blood, from the stains which barbarian insolence has so deeply tarnished them? . . . Why are not there seen and heard there, by those incredulous and vaunting barbarians, the glare and thunder of our artillery?”

.. Even if people in the West have heard of Lin Weixi, it’s doubtful that they would see any connection between the case of a villager killed by a couple of drunken British sailors and that of Meng Wanzhou, a top executive accused of fraud who is able to post a multimillion-dollar bail and live under a sort of house arrest in one of two opulent homes that she and her husband own in Canada. They would certainly see a sharp distinction between China’s Party-managed judiciary and Canada’s independent courts. But a Western court’s attitude toward a Chinese citizen will be understood in China as an echo of a time when Western politicians exploited an asymmetric international order. How the nations involved choose to proceed at this juncture, two hundred years later, may come to define the terms of Sino-American engagement for many years to come.

 

 

The Next Great (Digital) Extinction

SOMEWHERE BETWEEN 2 and 3 billion years ago, what scientists call the Great Oxidation Event, or GOE, took place, causing the mass extinction of anaerobic bacteria, the dominant life form at the time. A new type of bacteria, cyanobacteria, had emerged, and it had the photosynthetic ability to produce glucose and oxygen out of carbon dioxide and water using the power of the sun. Oxygen was toxic to many anaerobic cousins, and most of them died off. In addition to being a massive extinction event, the oxygenation of the planet kicked off the evolution of multicellular organisms (620 to 550 million years ago), the Cambrian explosion of new species (540 million years ago), and an ice age that triggered the end of the dinosaurs and many cold-blooded species, leading to the emergence of the mammals as the apex group (66 million years ago) and eventually resulting in the appearance of Homo sapiens, with all of their social sophistication and complexity (315,000 years ago).

I’ve been thinking about the GOE, the Cambrian Explosion, and the emergence of the mammals a lot lately, because I’m pretty sure we’re in the midst of a similarly disruptive and pivotal moment in history that I’m calling the Great Digitization Event, or GDE. And right now we’re in that period where the oxygen, or in this case the internet as used today, is rapidly and indifferently killing off many systems while allowing new types of organizations to emerge.

.. Just as in the Great Oxidation Event, in which early organisms that created the conditions for the explosion of diversity had to die out or find a new home in the mud on the ocean floor, the early cohort that set off the digital explosion is giving way to a new, more robust form of life.

.. FROM THE OUTSET, members of that movement embraced nascent technological change. Stewart Brand, one of the Merry Pranksters, began publishing the Whole Earth Catalog in 1968, which spawned a collection of other publications that promoted a vision of society that was ecologically sound and socially just. The Whole Earth Catalog gave birth to one of the first online communities, the Whole Earth ‘Lectronic Link, or WELL, in 1985.

From Economic Crisis to World War III

The response to the 2008 economic crisis has relied far too much on monetary stimulus, in the form of quantitative easing and near-zero (or even negative) interest rates, and included far too little structural reform. This means that the next crisis could come soon – and pave the way for a large-scale military conflict.

BEIJING – The next economic crisis is closer than you think. But what you should really worry about is what comes after: in the current social, political, and technological landscape, a prolonged economic crisis, combined with rising income inequality, could well escalate into a major global military conflict.

The 2008-09 global financial crisis almost bankrupted governments and caused systemic collapse. Policymakers managed to pull the global economy back from the brink, using massive monetary stimulus, including quantitative easing and near-zero (or even negative) interest rates.

But monetary stimulus is like an adrenaline shot to jump-start an arrested heart; it can revive the patient, but it does nothing to cure the disease. Treating a sick economy requires structural reforms, which can cover everything from financial and labor markets to tax systems, fertility patterns, and education policies.

Policymakers have utterly failed to pursue such reforms, despite promising to do so. Instead, they have remained preoccupied with politics. From Italy to Germany, forming and sustaining governments now seems to take more time than actual governing. And Greece, for example, has relied on money from international creditors to keep its head (barely) above water, rather than genuinely reforming its pension system or improving its business environment.

The lack of structural reform has meant that the unprecedented excess liquidity that central banks injected into their economies was not allocated to its most efficient uses. Instead, it raised global asset prices to levels even higher than those prevailing before 2008.

In the United States, housing prices are now 8% higher than they were at the peak of the property bubble in 2006, according to the property website Zillow. The price-to-earnings (CAPE) ratio, which measures whether stock-market prices are within a reasonable range, is now higher than it was both in 2008 and at the start of the Great Depression in 1929.

As monetary tightening reveals the vulnerabilities in the real economy, the collapse of asset-price bubbles will trigger another economic crisis – one that could be even more severe than the last, because we have built up a tolerance to our strongest macroeconomic medications. A decade of regular adrenaline shots, in the form of ultra-low interest rates and unconventional monetary policies, has severely depleted their power to stabilize and stimulate the economy.

If history is any guide, the consequences of this mistake could extend far beyond the economy. According to Harvard’s Benjamin Friedman, prolonged periods of economic distress have been characterized also by public antipathy toward minority groups or foreign countries – attitudes that can help to fuel unrest, terrorism, or even war.

For example, during the Great Depression, US President Herbert Hoover signed the 1930 Smoot-Hawley Tariff Act, intended to protect American workers and farmers from foreign competition. In the subsequent five years, global trade shrank by two-thirds. Within a decade, World War II had begun.

To be sure, WWII, like World War I, was caused by a multitude of factors; there is no standard path to war. But there is reason to believe that high levels of inequality can play a significant role in stoking conflict.

According to research by the economist Thomas Piketty, a spike in income inequality is often followed by a great crisis. Income inequality then declines for a while, before rising again, until a new peak – and a new disaster.

This is all the more worrying in view of the numerous other factors stoking social unrest and diplomatic tension, including

  • technological disruption, a
  • record-breaking migration crisis,
  • anxiety over globalization,
  • political polarization, and
  • rising nationalism.

All are symptoms of failed policies that could turn out to be trigger points for a future crisis.

.. Voters have good reason to be frustrated, but the emotionally appealing populists to whom they are increasingly giving their support are offering ill-advised solutions that will only make matters worse. For example, despite the world’s unprecedented interconnectedness, multilateralism is increasingly being eschewed, as countries – most notably, Donald Trump’s US – pursue unilateral, isolationist policies. Meanwhile, proxy wars are raging in Syria and Yemen.

Against this background, we must take seriously the possibility that the next economic crisis could lead to a large-scale military confrontation. By the logicof the political scientist Samuel Huntington , considering such a scenario could help us avoid it, because it would force us to take action. In this case, the key will be for policymakers to pursue the structural reforms that they have long promised, while replacing finger-pointing and antagonism with a sensible and respectful global dialogue. The alternative may well be global conflagration.