A question of passports

Canadian passport

Christopher Balding (“Not China Naive Balding”) explains why it matters, a lot, whether the arrested Huawei CFO Wanzhou Meng entered Canada on a Canadian passport, as has been rumored:

@BaldingsWorld

Here is what people don’t know about the dual passport situation with regards to Chinese citizens. You may ask, why would the CFO of Huawei enter Canada under a Canadian passport? There are very clear reasons and I absolute no doubt about it guarantee every Chinese 1/n

citizen with two passports knows what I am about to tell you. The simplest answer is that if you enter another country using a non-Chinese passport it is a lot easier, typically you don’t need a visa. That may be part of it but that isn’t the primary reason. 2/n

The primary reason, and let me reiterate, every Chinese I have ever met with two passports knows this, when you enter a country, which ever country passport you enter the country is what nationality the accepting country recognizes. In other words, when she entered Canada 3/n

with a Canadian passport, if that is in fact what she did, she is recognized as a Canadian citizen. If she enters France/Japan/China with a Canadian passport, she is recognized as a Canadian citizen by international law. Why does that matter you ask? If you ever get 4/n

into trouble, the only country the host country allows you to get consular or other access to is your country of citizenship. Most “Chinese” with second passports enter China using Canadian/US/Australian passports even if they have Chinese passports for this exact reason. 5/n

When Chinese with second passports travel abroad, they use the second passport not just because of the visa ease issue, but because they prefer being represented by actual humane governments. So when she entered Canada on a Canadian passport, if she did, 6/n

She was telling you, and I absolutely guarantee she knew what I’m telling you, she would rather be represented by Canada than by China. She could get a visa no problem and enter with her Chinese passport. Let me put it another way, Chinese with means are making clear 7/n

And conscious choice who they want representing them if they get jammed up, and it is rarely China. In her case, that may not be the best choice. However, I absolutely guarantee you every Chinese with two passports knows this and chooses this way. Done

1:32 AM – 7 Dec 2018

And a BBC reporter comments:

@StephenMcDonell

to @BaldingsWorld

We did ask the #China Foreign Ministry yesterday if Meng Wanzhou had entered #Canada on a Chinese or Canadian passport but no response.

1:30 AM – 7 Dec 2018

Balding again:

@BaldingsWorld

High probability: Huawei CFO not arrested directly for Huawei activities but for running transactions through closely held separate independent Cayman SPV which she runs that channeled FX transactions and profits through NYC. If that is the case, she is screwed

3:19 AM – 7 Dec 2018

This is also interesting:

China has said it will immediately implement measures agreed under a trade war “truce” with the US.

The commerce ministry’s remarks came days after Donald Trump and his Chinese counterpart, Xi Jinping, agreed to give negotiators 90 days to resolve their trade spat.

Few details have been made public about what the two sides will negotiate, a lack of clarity that has unsettled stock markets.

“China will immediately implement the consensus both sides already reached on agricultural products, energy, autos and other specific items,” a commerce ministry spokesman, Gao Feng, said at a regular press briefing. […]

Gao’s briefing came hours after the trade detente risked being rattled by the arrest in Canada of a top executive from the Chinese telecom giant Huawei at the request of the US.

Hmmm. Clearly, there is a *lot* more going on here than meets the eye. As usual, it’s stupid to rush to judgment before the facts are revealed (a thing I am definitely guilty of).

The plot thickens!

Huawei CEO Meng Wanzhou

The internet is abuzz with more news and speculation related to the stunning arrest of Huawei CFO Wanzhou Meng:

• I previously noted that “This is about as dumb as the US trying to arrest Julian Assange, but with far nastier geopolitical implications.” For what it’s worth, here’s Wikileaks weighing in:

@wikileaks

Editorial comment: The U.S. extradition of Huawei CFO Meng Wanzhou from Canada, for actions performed in China, is the same extra-territorial invasion through lawfare, that the U.S. government is applying to the UK, by extraditing Assange from the UK, for publishing in the UK.

4:26 PM – 6 Dec 2018

• Comrade Balding, an academic formerly based in Shenzhen, has some very interesting thoughts, among them:

@BaldingsWorld

There’s more coming on Huawei. I just don’t know when it’s going public

8:58 AM – 6 Dec 2018

===

Fact: timing of Huawei arrest is a great big political F+*#?!U

Fact: everyone in China knew she broke the US laws. Obama admin knew Huawei broke the law. Trump admin knew Huawei broke the law.

It’s only political if you think she should get away with it

8:48 AM – 6 Dec 2018

===

FWIW, I’ve know for a few months that there is more coming down the road with Huawei. Have confirmation from multiple unrelated people

2:08 AM – 6 Dec 2018

• The Alibaba-owned South China Morning Post ran this piece Thursday on how Meng told Huawei employees “in an internal talk on compliance that there are scenarios where the company can weigh the costs and accept the risks of not adhering to the rules.” Is China planning to throw Meng under the bus?

• Reuters correspondent “SJ” writes:

@SijiaJ

What happened on December 1? Xi & Trump met, Huawei founders’ daughter got arrested, Danhua Capital founder committed suicide

10:11 PM – 5 Dec 2018

• Wait, who committed suicide? From SCMP reporter Zheping Huang:

@pingroma

Prominent Stanford physics professor and blockchain venture capitalist Zhang Shoucheng died at age 55 on Dec 1 in the US after fighting depression, according to a family statement. Story TK

“Danhua lists 113 U.S. companies in its portfolio, and most of those companies fall within emerging sectors and technologies (such as biotechnology and AI) that the Chinese government has identified as strategic priorities,” the USTR name-checked Zhang’s VC in its Nov. 20 report

10:48 PM – 5 Dec 2018

Odd timing on that. “The family of Stanford professor Zhang Shoucheng, a world-renowned physicist and venture capitalist, denied speculation on Chinese social media that his death was connected to tensions in US-China relations or the arrest of Huawei’s CFO in Canada on Saturday.” (SCMP)

• An intriguing piece of gossip:

@maggiexiao

Replying to @BaldingsWorld

Rumor says Meng entered Canada with a Canadian passport. China recently strengthened its no-dual citizenships policy . So that means she voluntarily gave up her Chinese citizenship. If true, does China still have the rights to claim her back?

6:24 PM – 5 Dec 2018

• David Goldman comments:

First, never before has the United States attempted the extraterritorial rendition of a foreign citizen – Meng is a Chinese national – in connection with sanctions violations. It has imposed travel and banking restrictions, but seeking an arrest warrant for this is entirely without precedent. […]

The question is: Who ordered the arrest, and why?

It is possible that President Trump knew about it and sanctioned the arrest, to be sure. But it is unlikely that the president would escalate the conflict with China with the arrest of a senior executive of China’s flagship high-tech manufacturer on the same day that he sought to de-escalate the trade war.

If Trump did not initiate the arrest, who did? There are two alternative possibilities.

The first is that the order came from administration officials who believe that the United States must provoke a confrontation with Beijing now, before China becomes too powerful to intimidate. Some parts of the permanent bureaucracy and the intelligence community believe that China’s economy is fragile and that an economic war would produce an economic crisis and political instability, perhaps even toppling Xi Jinping.

That view may seem fanciful, but it is argued seriously, for example by some former senior officials of the Trump administration.

The second possibility is that Trump’s enemies in the permanent bureaucracy simply want to prevent the president from negotiating a deal with China that would enhance his image and remove risks to economic growth.

Goldman notes that the only American politician to comment publicly on the matter has been Senator Marco Rubio, who earlier this year tried to torpedo Trump’s agreement with Xi regarding ZTE. He “celebrated the arrest” in an email to Axios. Hmm.

• Huawei is in deep trouble and not only in the US. From Reuters: “Japan plans to ban government purchases of equipment from China’s Huawei Technologies Co Ltd and ZTE Corp to beef up its defenses against intelligence leaks and cyber attacks, sources told Reuters.”

• …And: “Australia and New Zealand have already blocked Huawei from building 5G networks.”

• …And: “Britain’s BT Group said on Wednesday it was removing Huawei’s equipment from the core of its existing 3G and 4G mobile operations and would not use the company in central parts of the next network.”

• I’ll close with Professor Balding again – somewhat off-topic, but it caught my eye:

I think what most people who haven’t spent a lot of time in China don’t get is how abnormal the business, economic, financial, and negotiation climate is. People see the shiny tall glass office buildings and the Ritz and they make the assumption they get it. That’s wrong 1/n

The stories that get out in public are wild. The stories that never make it into the public are at least 10x crazier. The IP theft and theft stories you hear about in public are low hanging fruit where someone falls out of favor in Beijing. I know first hand accounts of 2/n

Flat out 10 ten digit USD thefts. Companies who have valid contracts telling a foreign partner they’re ignoring a contract and they will have them abducted or jailed if they even think about trying to enforce a contract with again 10 digit USD values. You DC/NYC debutantes 3/n

simply do not understand what you are dealing with.The rules are different. You think fentanyl doesn’t get various levels of state protection? Get real. You think this IP theft and gangsterism isn’t quasi official policy? Get real. You need to be realistic about your counterparty

6:14 AM – 6 Dec 2018

China Telecom diverting internet traffic to and through North America

It may seem that I am beating up on a certain country all the time, for unknown reasons of my own, but in fact I am just relaying the accelerating flurry of reports of official misbehavior by that country’s government and state-owned corporations. Now we learn that, allegedly, China Telecom – one of the big three state-owned telecom providers – has hacked North America’s internet infrastructure (PDF link):

China Telecom has ten strategically placed, Chinese controlled internet ‘points of presence’ (PoPs) across the internet backbone of North America. Vast rewards can be reaped from the hijacking, diverting, and then copying of information-rich traffic going into or crossing the United States and Canada – often unnoticed and then delivered with only small delays. […]

Over the past few years, researchers at BGProtect LTD based on the DIMES project [DIMES] at the Tel Aviv University built a route tracing system monitoring the BGP announcements and distinguishing patterns suggesting accidental or deliberate hijacking across many routes simultaneously and with a granularity down to the individual city. Using this technique, the two authors of this paper noticed unusual and systematic hijacking patterns associated with China Telecom. […]

Using these numerous PoPs, CT has already relatively seamlessly hijacked the domestic US and cross-US traffic and redirected it to China over days, weeks, and months as demonstrated in the examples below. The patterns of traffic revealed in traceroute research suggest repetitive IP hijack attacks committed by China Telecom. While one may argue such attacks can always be explained by ‘normal’ BGP behavior, these, in particular, suggest malicious intent, precisely because of their unusual transit characteristics – namely the lengthened routes and the abnormal durations. The following are a set of such unusual cases.

An article summarizes:

In 2016, China Telecom diverted traffic between Canada and Korean government networks to its PoP in Toronto. From there, traffic was forwarded to the China Telecom PoP on the US West Coast and sent to China, and finally delivered to Korea.

Normally, the traffic would take a shorter route, going between Canada, the US and directly to Korea. The traffic hijack lasted for six months, suggesting it was a deliberate attack, Demchak and Shavitt said.

Demchak and Shavitt detailed other traffic hijacks, including one that saw traffic from US locations to a large Anglo-American bank’s Milan headquarters being terminated in China, and never delivered to Italy, in 2016.

During 2017, traffic between Scandinavia and Japan, transiting the United States, was also captured by China Telecom, ditto data headed to a mail server operated by a large Thai financial company.

Interestingly, a 2015 Obama-Xi agreement aimed at stopping cyber IP theft by military forces appears to have been somewhat successful. But the agreement did not cover activities by Chinese corporations, and apparently nobody considered the security risks of allowing China Telecom to operate major internet nodes throughout North America. China does not allow US-based ISPs to control pieces of its internet infrastructure in China. Perhaps it’s time for the US and Canada to learn from China’s example.

China Telecom PoP North America

China Telecom’s presence in North America (Source)

Talk about burning your bridges

Actually, “nuking your bridges from orbit” might be a better characterization of this hectoring statement by the Chinese ambassador to Canada, Lu Shaye, after the Canadian government blocked the acquisition of Canada’s third-largest construction firm by a Chinese state-owned enterprise (emphasis mine):

I regret that the Canadian government rejected the acquisition of the Canadian construction company, Aecon, by China Communications Construction Company (CCCC) on national-security grounds. China does not agree with politicizing and wantonly using the concept of national security and opposes adopting discriminatory policies against Chinese enterprises. Canada’s rejection of Aecon shows that Chinese enterprises are suffering from unfair treatment – and it’s not the first time.

The rejection will result in much greater loss for Canada than China. The acquisition offered by CCCC at a premium of $1.5-billion was definitely good news for Aecon. It would not only greatly improve Aecon’s international competitiveness and tap into its development potential, but also help increase employment opportunities and employee welfare, from which its shareholders would also benefit. Yet, the Canadian government made this impossible, leaving the employees and shareholders of Aecon disappointed. But for CCCC, a world construction giant, the Canadian construction market is insignificant and being rejected for acquiring Aecon may only mean that it has saved $1.5-billion.

We have noticed that since CCCC reached an acquisition agreement with Aecon in October last year, the Canadian media have repeatedly hyped CCCC as one of the state-owned enterprises of China, which they described as monsters. These reports are neither objective nor fair. I have always stressed that China has no objection to Canada’s security review of acquisitions by foreign enterprises. But we oppose demonizing Chinese state-owned enterprises and abrasively smearing them. I have said that slandering Chinese state-owned enterprises in this way is immoral.

Still, some people are so full of imagination that they claim China’s development depends on stealing technologies from western countries. I’d like to advise them to keep calm and think: How could a country such as China – with a population of more than one billion – develop by solely stealing technologies from other countries? It would be too arrogant for someone to think that innovation capacity is exclusive to western countries.

In fact, China has long been a major powerhouse of independent innovation. According to data released by the World Intellectual Property Organization, China was the largest holder of newly registered patents in the world in 2016 and 2017. These people are advised not to believe that developing countries will always lag behind the West. At present, it is an inevitable trend for countries to carry out international technological co-operation in the era of globalization. Being complacent and conservative are not only against the international trend, but also bound to be left behind. To maintain the leading position in technology fields, western countries must run faster, instead of tripping other countries up and making dirty tricks. Some people also attack CCCC’s participation in construction on islands and reefs in the South China Sea. But this just proves that CCCC boasts advanced technology in the infrastructure field. Perhaps what they are really afraid of is the strong competitiveness of China’s state-owned enterprises.

And some people have said that western standards are global standards in terms of investment, trade and protection of intellectual-property rights. Such logic seems domineering and centres around the idea that westerners have the final say on international rules. On the contrary, I think that global standards are by no means western standards. Using standards defined by the West to ban or suppress the progress of developing countries is futile, and runs counter to international morality.

The world is colourful – and Canada has always boasted diversity and multiculturalism. I hope Canadians can embrace China as simply a different country and not regard China as a threat just because of our differences. Only by getting rid of such kinds of demons can Canada relieve the burden, co-operate with China and come aboard the express train of China’s development.

Pretty astonishing language from China’s top diplomat in Canada, even by the Chinese government’s usual swaggering, self-righteous standards. It’s amazing that Beijing would consider this an appropriate response to a rebuffed corporate takeover bid. This statement is more of an angry, narcissistic lashing-out than a considered diplomatic response by a great power. And could China do more to vindicate the critics of the Aecon deal than this blithe and insulting dismissal of their concerns?

We have heard a lot about China’s “soft power” offensive, but all the Confucius Institutes and newspaper advertorials in the world cannot undo the damage done by this sort of grandiose approach to foreign relations. From the standpoint of China’s national interest, it makes no sense to alienate a potential partner this way.

I assume this episode will be remembered the next time a Chinese company bids on a sensitive Canadian asset. The US is watching, too.