China debates pros and cons of retaliation after Huawei CFO arrest

Conversations with seven Chinese officials revealed a split between those focused on the economy and others who deal with national security

The arrest of Meng Wanzhou, Huawei Technologies’ chief financial officer, has triggered a debate in China over whether to carry on with trade talks or link the two issues and retaliate.

Conversations with seven Chinese officials across five government agencies, all of whom asked not to be identified, revealed a split between those focused on the economy and others who deal with national security. The first group saw a need to keep the two issues separate, while the second wanted to push back more forcefully against the US.

Officials concerned about the economy warned a collapse in trade talks would hurt China more than the Huawei arrest. Trump has threatened to raise tariffs to 25 per cent on $200 billion worth of Chinese goods if a deal isn’t reached in 90 days. In the worst case of a 25 per cent duty on all Chinese goods, 2019 economic growth could slump about 1.5 percentage points to 5 per cent, down from 6.6 forecast for this year, according to Bloomberg Economics. 

“The detention of Huawei’s CFO is not an accidental incident and will cast a shadow over the trade talks, but both sides will work hard to avert that bad influence,” said Wei Jianguo, former vice minister of commerce and now a vice chairman of the China Center for International Economic Exchanges. “The negotiation between Chinese and US working groups is going smoothly, and actually much better than people outside expected.”

‘Century of humiliation’

On the other hand, bureaucrats who were more involved with national security view things differently. In their eyes, Xi caved too much and ended up looking weak to the public. The Huawei arrest was just another tactic by the US to gain even more leverage, they say, and China should fight back with measures that hurt American companies.

One official mentioned being personally angry because Huawei is a point of national pride for the Chinese people, and keeping the issue separate from trade talks would be difficult even if top leaders wanted to.