THE UNWRITTEN RULES IN CHINESE TECHNOLOGY
What do we mean when we say a Chinese company has “close ties to the government”? Or is “connected to the military”? And does this matter?
It is a problem that writers on China have encountered for years, and it can be difficult get firm evidence. But now Congress is getting interested in those questions, and the results (if they go public) could make for fascinating reading. Members of the House Intelligence Committee who are investigating spying threats from China have asked two big Chinese telecommunications firms active in the United States to explain their relationship with the Chinese government. In letters to Huawei and ZTE Corp., the lawmakers are asking, for instance, about the role of the “Party committee” and the “work the two companies have done in Iran and their funding arrangements with the Chinese government.”
Depending on what this probe turns up, this could help unravel one of the most perplexing questions about big Chinese firms. Take Huawei, for instance. On one level, it looks and acts more like a Western tech company than one of the big state-owned behemoths we hear so much about. It’s a closely held company, owned by its employees, and already the world’s second-largest telecom-equipment maker, working all over the world, with twenty-three R. & D. centers and a staff of a hundred and forty thousand people, including a lot of Chinese engineers from M.I.T. and Stanford. And it is innovating—it filed for more international patents than any other company in 2008. The founder spent ten years in what has been described as China’s equivalent of the Army Corps of Engineers, before founding the company, which is one reason why people have long wondered about its links. But in a valuable piece by Sheridan Prasso in Fortune last year, the company pushed back on this idea, saying much of the speculation stems from an instance of “mistaken identity,” repeated in a spin cycle from news accounts to think-tank reports, which confused it with “another Chinese company with a similar name which was in fact headed by a PLA officer and may have sold optical communications gear to Iraq under Saddam Hussein.” “There was some confusion there,” a company spokesman, Bill Plummer, told Fortune. “Huawei has never delivered any military technologies at any time.”
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