China Strikes Back: Defending Huawei and ZTE From Its Congressional Critics

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American companies operating in the People's Republic have Communist Party committees, too.

RTR38XRP-615a.jpgDarley Shen/Reuters

After two of China's telecom behemoths endured a very public smack down at the hands of the U.S. House Permanent Select Committee on Intelligence, Chinese web users are standing up -- or at least tweeting -- in defense.

An October 8 House report held that Huawei and ZTE "failed to provide evidence that would satisfy any fair and full investigation" into their ties to Chinese intelligence-gathering operations, and recommended that both U.S. government entities and private enterprises avoid doing business with the two given "long-term security risks."

On Sina Weibo, China's Twitter, Internet users appeared to reach rapid consensus that the setback for Huawei and ZTE manifested a "double standard" that demanded a proportional response. Commenters argued that the House report was nothing more than an exercise in realpolitik, what @ DominateL called "trade protectionism in disguise." @友为99 sighed, "The U.S. is just being the U.S.; they only think of protectionism. Everything is a threat to their national security." @ 隆中赋 complained, "For a country that opposes the United States, every business from that country has the possibility of being a spy."

Indeed, the House report found that the "Communist Party committees" within Huawei and ZTE cast " a shadow source of power and influence" over both. In fact, such committees are present in most large foreign companies' China branches. As @leo_力 tweeted, "IBM has Communist Party committees in China too." A photo dated June 2011, courtesy of FESCO ( Foreign Enterprise Human Resources Service Co.), the state-mandated labor management agency for foreign enterprises in China, appears to bolster this assertion.

Chinese media have named other companies, including brands as diverse as Carrefour, Standard Chartered Bank, Nokia Siemens, Hyundai, and Canon among those that have formed Communist Party committees in their China operations, some dating back to the 1990′s. In theory, every company with more than three Communist Party members is required to have a Party committee. This article from Southern Weekly, a Chinese newspaper, quotes an American executive who wondered, "We have three Republicans. Can we apply to form a 'Republican Party Committee'?" And this fascinating article from Global Times points out that as of August 2012, 486 Party branches have been set up in foreign enterprises based in Shanghai alone, consisting of about 10,000 Party members.

Foreign corporations seem to have come around to the notion that having a "party committee" is necessary to navigate China's highly political business environment. According to the same report in Southern Weekly, Nokia Siemens' Shanghai branch secured a government subsidy of more than RMB10 million (approximately US$1.7 million) through the efforts of its executive vice president and Communist Party secretary, Huang Junjian.

If foreign companies in China are increasingly hip to the need to cozy with Communists, Chinese citizens are increasingly aware of their power as consumers. With few near-term policy options available to China's government to respond to Huawei and ZTE's setback, Web users quickly circulated calls for Chinese consumers to "boycott Apple," and even American-made goods in general. Many others exhorted the Chinese government to investigate whether Apple, Microsoft, Cisco, IBM, and other American corporations with footprints in China posed risks to Chinese national security. Editor Hu Xijin (@ 胡锡进) of the hard-line Global Times published an editorial reflecting online opinion, one that "calls for China to take protection of its corporations seriously and not be afraid to take revenge against such actions. China has to make America and Europe understand that if Chinese companies encounter injustice on their turf, some of their companies will become scapegoats in China."

Web users seemed aware of the difficulty of putting such rhetoric into practice. @痒痒挠73 observed, "Many of the key systems and servers in Chinese banks are from IBM. Without IBM, domestic banks won't have a way to open accounts." Consumers may not have a choice, either. As @艾泽拉斯的银叶草 wrote, "Right now the only [mobile] operating systems are Apple and Android, and they're both American."

In addition to lamenting the practical difficulty of extricating American products from Chinese daily life, Internet users questioned their government's resolve. In response to the Global Times' strident editorial, @河南凯锋 wrote, "The question is: Does China dare? When the U.S. demanded we cease inspections of genetically modified foods, the relevant organs didn't inspect; [when] others in the U.S. admitted that they were conducting experiments with genetically-modified golden rice on Chinese children , the relevant organs over here didn't say a thing about it." @至紧要静心 complained, "The government's attitude is soft as always; why can't [they] announce in a loud voice that they're investigating whether Microsoft, IBM, Apple, [and] Cisco are threats to Chinese national security? Why can't they announce in a loud voice that China is going to bring up enterprises to replace [them]?"

In reality, American products forged in the crucible of a market economy may simply be harder to replace than Chinese products, many of them generated by businesses married in some way to the state. As @奔忙的达尔达尼昂 wrote, "All Chinese-made goods can be replaced, they don't have an essential competitiveness, how can they compare to the American imperialists?" Others blamed the U.S., and not China, for this schism. @ 不沉默的大多数 asked rhetorically, "Is America secure only when Chinese companies make hats and socks and not high-tech products?" Some argued that China would have to change first. @龙行天天下 wrote, "The U.S. will stop being this way only when the Communist Party gets out of private enterprise."

The Chinese can wish all they like, but deep reforms to the "special characteristics" of China's socialist economy remain a long way off. Meanwhile, the hoped-for boycott of American made goods is unlikely to gather steam. In addition to loving -- or needing -- American products and services, many Chinese are likely weary of blanket boycotts after recent anti-Japanese protests engulfed the country. @Joneking seemed incredulous: "We were just boycotting Japanese goods, now we're boycotting American goods?"

Perhaps it's time for China to consider more creative solutions. @勤奋蝶恋花_2008 suggested that "China should let Google, Facebook, and Twitter enter the Chinese market," hopefully inviting American reciprocity. @BrokenWindows 's suggestion was less ambitious, but more characteristic of the cynicism that pervades China's blogosphere: "It's time to bribe some U.S. senators."

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Rachel Lu & David Wertime

David Wertime, editor and co-founder of Tea Leaf Nation, has lived and worked in Beijing, Chongqing, and Hong Kong. He is currently based in Washington, D.C. Rachel Lu, editor and co-founder of Tea Leaf Nation, spent her childhood in southern China. She is currently based in Hong Kong.  

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