US economy

Trump’s Trade War Is Breeding Patriots in China

Huawei was never a darling of the Chinese government’s industrial policy, and plenty of state-owned companies that were, like Great Dragon and Shenzhen Electronic Group, haven’t made it onto Mr. Trump’s blacklist. It is Huawei, not those other companies, that pioneered 5-G technology, the next generation of wireless networks that the United States sees as a national security risk.

Huawei succeeded despite, not because of, the Chinese government’s industrial policies. It is a genuinely private company, owned by its employees. In the 1990s, when the authorities strictly regulated and restricted population mobility, Huawei had trouble obtaining residency permits for staff members in Shenzhen.

Huawei went to Europe to get away from China’s skewed business environment, and it has become China’s top technology firm because it learned to thrive in brutally competitive international markets. No Chinese company can operate without government support, of course, and in 2004 Huawei received credit from the China Development Bank to expand into developing countries. But it earned recognition from the Chinese government only after passing the market test.

Going hard on Huawei was the wrong way for the United States to confront China over its grievances — even if many of them are entirely valid.

Huawei did commit intellectual property theft, but it is also investing heavily in research and development. According to the European Union’s Industrial R&D Investment Scoreboard, in 2019 Huawei ranks fifth in the world in R&D spending, ahead of Apple (which is seventh). Some 45 percent of its employees are working on R&D. By Chinese standards, the company is collaborative: While it has developed its own operating system, it has also kept using Google’s, Android. Its supply contracts with American companies amount to some $11 billion a year. It counts many foreign citizens on its staff, including at senior levels. And so — supreme irony — the Chinese who celebrate Huawei seem to do so precisely because it stands for values that should resonate with Americans, too: a can-do attitude, independent outlook and openness to the world.

One early misstep of the Trump administration concerns ZTE, another Chinese telecom company. In the spring of 2018, the United States Commerce Department prohibited American companies from selling critical chips to ZTE. But the Trump administration later reversed that decision — bringing ZTE back from the brink of bankruptcy.

Unlike Huawei, ZTE is a state-owned company subsidized by the Chinese government and, apparently, garners little love from the Chinese public. It also is a weaker company than Huawei and, therefore, more vulnerable to being derailed. Targeting ZTE first would have also allowed the United States to keep bolder measures in reserve and escalate matters by confronting Huawei later if that proved necessary.


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