Posts Tagged ‘Chinese government’

China’s Economy Is Not Normal. It Doesn’t Have to Be.

March 14, 2018
Credit: Matt Chase

WASHINGTON — China’s extraordinary growth over the past few decades has spawned two major lines of analysis. One school of thought holds that China is a rising economic power poised to conquer the world. The other argues that China’s economy has become so distorted that it is bound to collapse or, at least, as a former United States Treasury secretary suggested, “regress to the mean.”

Both views are mistaken.

For one thing, China has never been a normal economy. It experienced an average of nearly 10 percent growth rates for almost four decades, a record; it is the first developing nation to become a great power. So why couldn’t it keep defying expectations?

What some take to be the Chinese economy’s weaknesses have, in fact, been strengths. Unbalanced growth isn’t evidence of a looming risk so much as a sign of successful industrialization. Surging debt levels are a marker of financial deepening rather than profligate spending. Corruption has spurred, not stalled, growth.

At least so far. The central question isn’t whether China might continue to confound norms so much as what, precisely, is required for it to do so. And that, as ever, hinges on whether the Chinese government can strike the right balance between state intervention and market forces.

Centralized authoritarian power has its benefits, including the ability for those who have it, at least in theory, to correct course rapidly. This has allowed China’s leaders to put the economy on a more sustainable growth path in recent years. The gross domestic product growth rate rebounded last year. Foreign reserves are back up as well. Wages have increased. The recent abolition of term limits for the president and vice-president’s terms gives President Xi Jinping more time and leeway to promote his vision of a more prosperous, modern and powerful China, and with the help of trusted advisers: His former corruption czar, Wang Qishan, is expected to be named vice-president and Liu He vice-premier in charge of the economy.

Skeptics about China’s future usually point to the country’s swelling debt. China’s overall debt-to-G.D.P. ratio exceeds 250 percent — but that is a fairly average level: higher than that of most emerging-market economies; lower than that of most high-income countries. More worrisome, though, is the fact that it increased by more than 100 percentage points, or nearly doubled, over the past decade.

The International Monetary Fund has cautioned that other economies that experienced such rapidly rising debt ratios — Brazil and South Korea a few decades ago, and several European countries more recently — eventually succumbed to a financial crisis. Why would China be any different?

One reason is that not all debt is created equal.

As some of the optimists note, China’s debt is public, not private, which means that the risks are largely borne by the state, which has deeper pockets. The borrowing is largely domestic, rather than external. And despite a surge in mortgages, Chinese households have a low overall debt burden compared to their counterparts elsewhere. For all its heady growth, China’s financial system also remains relatively simple, without the exotic securitization that nearly brought down the American economy a decade ago.

China’s debt ratio also seems more worrisome than it really is because its nature is often misunderstood.

China’s banks are no longer just serving state actors; now they also serve the private sector, notably after the privatization of state-owned housing in the late 1990s and early 2000s created a broad-based commercial property market. As much as two-thirds of credit expansion between 2005 and 2013 — including via unofficial or so-called shadow banking — went into property-related assets, helping establish a market price for land. Thus, rapid credit growth largely reflects an increasing financial sophistication rather than a property bubble or wasteful investments.

Still, the official figures can appear to suggest otherwise. By my calculations, property prices in China have grown sixfold since 2004. But property transactions are not included in gross domestic product assessments — which helps explain why debt levels have surged while G.D.P. has not.

That said, high debt levels dorepresent some fundamental weaknesses. As I detail in my last book, the tax revenues of local governments have not kept pace with their social expenditures, prompting those authorities to borrow from banks to fund public services. China’s large debt isn’t a debt problem so much as a fiscal problem in disguise.

The growing commercial role of local governments has, in turn, multiplied opportunities for graft. But this problem, too, is often misunderstood.

Corruption is said to impede growth by inhibiting investment. Not so in China, where the state controls major resources, such as land and energy, yet generates lower returns on assets than the private sector does. Privatizing those resources was a nonstarter under communism, and so corruption has served as a makeshift alternative, by allowing more private actors to use state-owned resources after striking arrangements with officials. Because those actors’ practices are more profitable, the economy has benefited overall.

Some China observers also are concerned that China’s speedy growth cannot be sustained unless consumption replaces investment as the economy’s main driver. (The Chinese government appears to agree, or claims to at least.) They point out that while investment accounts for an unusually high share of gross domestic product, consumption accounts for an unusually low share.

But to say this is to misunderstand the nature of China’s unbalanced growth.

The main cause of that imbalance is urbanization. Over the past four decades China’s urbanization ratio has increased from less than 20 percent to nearly 60 percent. In the process, workers from labor-intensive rural activities have moved to more capital-intensive industrial jobs in cities. And so, yes, an ever-greater share of national income has gone into investment as a result. But corporate profits have also risen, leading to higher wages, which have spurred consumption. In fact, even as the consumption share of G.D.P. has fallen, personal consumption has grown multiples faster in China than in any other major economy.

Eventually, China’s economy will have to become more balanced, as the government well knows. But the Chinese Communist Party’s plan for that is to have the state play the “leading” role in the economy while the market plays the “decisive” role in allocating resources. Squaring that circle can be tricky.

How will China’s leaders reform state-owned enterprises, whose profitability keeps declining (especially relative to that of private firms), when they still see those companies as national champions?

Mass urbanization is expected to continue, still not out of people’s personal preferences but at the state’s behest, by way of residency restrictions, evictions and forced relocations. Yet China’s planners now seem intent on redirecting migrants from megacities to smaller cities, and this could curb economic growth: As the World Bank points out, labor productivity is much higher in larger cities than in smaller ones.

Then, there is the corruption issue, which will require another delicate balancing act. Corruption has benefited the Chinese economy by, in effect, allowing the transfer of state assets to more efficient private actors. But over time such gains are being outweighed by the social costs of bribes, wasteful expenditures and growing inequities. Allowing corruption to run rampant could undermine the legitimacy of the Chinese Communist Party. Yet combating it with draconian measures could hurt growth by discouraging both officials and entrepreneurs from taking economic risks.

Hence the importance, and sensitivity, of Mr. Xi’s signature anticorruption campaign. It has been cast as an effort to discipline errant officials, but some see it as a means for Mr. Xi to purge political opponents or exert more control over society. It seems to have been popular so far: The general public perceives local officials as taking advantage of the system, and here is the central government appearing to rectify the situation. But some warn that the National Supervision Commission, a new agency designed to institutionalize anti-graft efforts, could signal overreach.

To discourage corruption effectively, the Chinese government will eventually have to leaven the rule of the party with more rule of law. In the meantime, some practical reforms would help, including creating a civil code to define acceptable commercial practices, basic property rights and the status of private companies. More sweeping — and more politically sensitive — reforms will also be needed to ensure that private actors have more access to major resources, like land and financing, without having to rely on personal connections to local officials.

The Chinese economy’s glory days may be over, but even a 6 percent growth rate over the next decade would be remarkable. At that pace, the economy would double by 2030 and likely become the world’s largest in nominal dollar terms. (It already is the world’s largest economy in terms of purchasing power parity.)

China’s remarkable success to date can be credited in part to its leaders’ willingness to set aside communism for pragmatism. Some observers worry that Mr. Xi is now reinjecting ideology into major policies, Mao-style. But he also is concentrating power and promoting action-oriented reformers like Mr. Wang and Mr. Liu — signaling his intention to address China’s social and economic needs even as he gathers the means to do so. China may not become a normal country for some time yet.


China Humiliates Another Western Company — Will Western companies ever stop Kowtowing toward Beijing?

February 21, 2018

Beijing increasingly demands corporate self-censorship.

 Image result for chinese dragon, new year, photos

Mercedes-Benz, the luxury unit of Daimler AG , recently learned the price of crossing Beijing. Earlier this month the German car maker was attacked by state media after posting an anodyne Dalai Lama quote on Instagram. The company quickly and abjectly apologized to the Chinese government. It then went further, promising “no support, assistance, aid or help to anyone who intentionally subverts or attempts to subvert China’s sovereignty and territorial integrity.”

This public humiliation has prompted many companies to ask: How much is it worth to stay in China’s markets?

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Gone are the days when China bided its time, as counseled by Deng Xiaoping. In exchange for continued access to Chinese markets, Beijing increasingly expects Western companies to engage in self-censorship, accept government control over information, and even punish their own workers for offending China.

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Few companies have been willing to stand up for themselves when singled out. In January the American hotel giant Marriott caved in to pressure and temporarily shut down its websites in China. Its offense? An online questionnaire listed Tibet, Taiwan, Macau and Hong Kong as independent countries. After changing the website, the company’s CEO publicly stated that Marriott “respects and supports Chinese sovereignty and its territorial integrity.” Delta Air Lines , Qantas, Zara and Audi are also fellow travelers in China’s geopolitical strategy.

The city skyline at sunset in Beijing, May 24, 2017.
The city skyline at sunset in Beijing, May 24, 2017.PHOTO: © GREGOR FISCHER/DPAZUMA PRESS

Perhaps most concerning, China has taken a particular interest in changing the fundamental way Western technology companies function.Facebook , banned in China since 2009, has worked on a “targeted censorship” tool during its bid to re-enter the country. Apple agreed to a partnership with a Chinese internet service company, effectively sharing user data with the government. There is no way either company would accept such demands from the U.S. government.

Some Western corporate leaders argue that running away from China makes no sense. “We believe in engaging with governments even when we disagree,” Apple CEO Tim Cook said last year. But engagement is a two-way street, and Beijing has shown no willingness to accommodate. Instead it has become more intrusive.

China’s behavior makes it necessary for Western companies to ask whether the cost of doing business can be too high. Does the profit motive override any responsibility to defend the values of the societies from which they emerged? If only to draw the line against further demands, companies should be reflexively opposed to Beijing’s overreach. Otherwise they should expect the cost of doing business in China to continue to rise.

Mr. Auslin is a fellow at the Hoover Institution, Stanford University, and author of “The End of the Asian Century” (Yale, 2017).

Appeared in the February 21, 2018, print edition.

Tesla’s China Dream Threatened by Standoff Over Shanghai Factory

February 14, 2018


Without a local partner, every Tesla sold in the world’s biggest EV market faces a steep import tax.
A Tesla Model S parked at one of the U.S. company’s electric charging stations in Beijing.

Photographer: Qilai Shen

Tesla Inc., the biggest-selling electric carmaker in the U.S., is in danger of being relegated to an expensive niche in China because Elon Musk can’t clinch a deal to open a factory there.

More than seven months after Tesla said it was working with Shanghai’s government to explore assembling cars, an agreement hasn’t been finalized because the two sides disagree on the ownership structure for a proposed factory, according to people with direct knowledge of the situation. China’s central government says the plant must be a joint venture with local partners, while Tesla wants to own the factory completely, the people said, asking not to be identified because the negotiations are confidential. Currently, all foreign automakers must partner with Chinese companies in order to manufacture locally.

Tesla’s sluggishness in starting local manufacturing means it’s fumbling a chance to capitalize on China’s hard sell for new-energy vehicles, including EVs, plug-in hybrids and fuel-cell vehicles. President Xi Jinping’s administration wants to scrub notorious air pollution and reduce dependence on imported oil, and it’s doling out billions of dollars in subsidies to entice consumers away from gas guzzlers.

“It’s a market they need to get a foothold in,” said Jeffrey Osborne, a New York-based analyst for Cowen & Co.  with an underperform recommendation on Tesla.

Tesla declined to comment on its negotiations with the Chinese government over local production. The Ministry of Commerce, National Development and Reform Commission, and the Shanghai Economy and Information Commission—which are all involved in the deliberations—didn’t reply to questions faxed at their requests.

The disagreement doesn’t mean a deal won’t be reached in the future. Tesla currently sells cars in China, but an import tax of 25 percent catapults the sticker price beyond the means of most consumers. A Tesla Model X made in the U.S. and shipped to China costs about 835,000 yuan ($132,000), providing openings for cheaper models from domestic rivals such as BAIC Motor Corp., Warren Buffett-backed BYD Co. and startups NIO and Byton.


A customer in Tesla’s Beijing showroom. The top-selling U.S. electric automaker risks being relegated to a luxury niche in China, the biggest market for electric vehicles.
Photographer: Tomohiro Ohsumi/Bloomberg

Tesla said in June it was working with the Shanghai government to explore local manufacturing, and it expected to more clearly define production plans by the end of 2017. The company said it needed to have local factories “to ensure affordability for the markets they serve.”

In November, Musk said during an earnings call the company was about three years away from starting production in China—meaning 2020 at the earliest. “Don’t set your watch by this,” he said.

Shares of local suppliers subsequently fell.

And the waiting game for Palo Alto, California-based Tesla may not end soon. Speaking with analysts after earnings were announced Feb. 7, Musk, the chief executive officer, didn’t talk about China, and the company didn’t mention its China plans in the update published with those results.

“Tesla has no strategic path,” said Yale Zhang, managing director of the Shanghai-based consulting company Automotive Foresight. “It has the halo of Elon Musk, and its products are slightly ahead of the competitors, but the others—especially the Chinese EV startups—are catching up rapidly.”

In the U.S., Tesla accounted for the majority of the 104,471 battery-powered cars, according to data compiled by Bloomberg.

In China, however, Tesla sold 14,883 vehicles, accounting for just 3 percent of the nation’s battery-powered EV sales of 449,431 units. Tesla ranked 10th behind leader BAIC’s affiliate, Beijing Electric Vehicle Co., which sold 102,341 cars, according to Bloomberg Intelligence. BYD sold 33,020 for third place.

Tesla said it currently has 31 retail stores across China and more than 1,000 Superchargers, which can recharge a model in 30 minutes.

Sales of new-energy vehicles—a category that includes battery-powered, plug-in hybrid and fuel-cell automobiles— reached 777,000 units last year and could surpass 1 million this year, the China Association of Automobile Manufacturers estimated. The government’s target is 7 million vehicles a year by 2025.

A Byton electric vehicle at the 2018 Consumer Electronics Show in Las Vegas.
Photographer: David Paul Morris/Bloomberg

Buyers say the generous handouts are working. Lily Li, a 36-year-old office worker from Shanghai, bought a BJEV car even though its driving range falls short of Tesla vehicles. Li paid less than 100,000 yuan for the EV160 model after incentives.

“I am very into Tesla for its battery technologies, but I can only afford a Tesla if its price falls below 300,000 yuan,” Li said. “It will take years before that happens, so I had to make do with a domestic EV.”

BYD’s top seller—the e5—costs 129,900 yuan after subsidies from the central government, according to its website. NIO and Byton also beat Tesla on price. NIO’s ES8, with a range of 355 kilometers (221 miles) on a single charge, sells for 448,000 yuan ($71,000).

Byton, a Nanjing-based company started by former BMW AG executives, unveiled a planned $45,000 SUV at last month’s CES in Las Vegas.

“It’s going to be a much narrower lane for Tesla,” said Bill Russo, CEO of Shanghai-based Automobility Ltd. “If you are double the price of the competition, then you are always going to be struggling.”

— With assistance by Craig Trudell


Intel Warned Chinese Companies of Chip Flaws Before U.S. Government

January 28, 2018

Decision to disclose issue to select few customers, including Lenovo and Alibaba, has ripple effects through security and tech industries

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In initial disclosures about critical security flaws discovered in its processors, Intel Corp. notified a small group of customers, including Chinese technology companies, but left out the U.S. government, according to people familiar with the matter and some of the companies involved.

The decision raises concerns, security researchers said, as it potentially could have allowed information about the chip flaws, dubbed Spectre and Meltdown, to fall into the hands of the Chinese government before being publicly divulged. There is no evidence any information was misused, the researchers said.

Weeks after word of the flaws first surfaced, Intel’s choices about whom would receive advance warning continue to ripple through the security and tech industries.

The flaws were first identified in June by a member of Google’s Project Zero security team. Intel had planned to make the discovery public on Jan. 9—people working to protect systems from hacks often hold off on announcements while fixes are devised—but sped up its timetable when the news became widely known on Jan. 3, a day after U.K. website the Register wrote about the flaws.

Because the flaws can be leveraged to sneak sensitive data out of the cloud, information about them would be of great interest to any intelligence-gathering agency, said Jake Williams, president of the security company Rendition Infosec LLC and a former National Security Agency employee. In the past, Chinese state-linked hackers have exploited software vulnerabilities to get leverage on their targets or expand surveillance.

It is a “near certainty” Beijing was aware of the conversations between Intel and its Chinese tech partners, because authorities there routinely monitor all such communications, Mr. Williams said.

Representatives from China’s ministry in charge of information technology didn’t respond to requests for comment. The country’s foreign ministry has in the past said it is “resolutely opposed” to cyberhacking in any form.

An Intel spokesman declined to identify the companies it briefed before the scheduled Jan. 9 announcement. The company wasn’t able to tell everyone it had planned to, including the U.S. government, because the news was made public earlier than expected, he said.


  • Intel Fumbles Its Patch for Chip Flaw (Jan. 11, 2018)
  • Businesses Rush to Contain Fallout From Major Chip Flaws (Jan. 5, 2018)
  • Intel Wrestled With Chip Flaws for Months (Jan. 5, 2018)
  • What You Can Do Now to Protect Against the Chip Flaws (Jan. 4, 2018)

Intel’s tricky path—inform enough big customers to head off significant damage while keeping the information as contained as possible to limit potential leaks—continues to weigh on smaller companies that weren’t given an early nod.

Joyent Inc., a U.S.-based cloud-services provider owned by Samsung Electronics Co. , is still playing catch-up, said Bryan Cantrill, the company’s chief technology officer.

“Other folks had a six-month head start,” he said. “We’re scrambling.”

In the months before the flaws were publicly disclosed, Intel worked on fixes with Alphabet Inc.’s Google unit as well as “key” computer makers and cloud-computing companies, Intel said in an emailed statement to The Wall Street Journal.

An official at the Department of Homeland Security said staffers learned of the chip flaws from the Jan. 3 news reports. The department is often informed of bug discoveries in advance of the public, and it acts as an authoritative source for information on how to address them.

“We certainly would have liked to have been notified of this,” the official said.

The NSA was similarly in the dark, according to Rob Joyce, the White House’s top cybersecurity official. In a message posted Jan. 13 to Twitter, he said the NSA “did not know about these flaws.” A White House spokesman declined to comment further, referring instead to the tweet.

Chinese computer maker Lenovo Group Ltd. was among the large tech companies, including Microsoft Corp. , Inc. and ARM Holdings in the U.K., that were notified of the flaws beforehand.

Lenovo was able to issue a statement Jan. 3 advising customers on the flaws because of “the work we’d done ahead of that date with industry processor and operating system partners,” a spokeswoman said in an email.

Alibaba Group Holding Ltd. , China’s top seller of cloud-computing services, also was notified ahead of time, according to a person familiar with the company.

A spokeswoman for Alibaba’s cloud unit declined to comment on when the company was informed. She said any idea that the company might have shared information with Chinese authorities was “speculative and baseless.”

A Lenovo spokeswoman said Intel’s information was protected by a nondisclosure agreement.

Despite the security concerns, an early heads up to a select number of large global companies made sense, said Dave Aitel, chief executive of Immunity Inc., a company that sells security services. “They’re going to tell as few people as possible” to contain possible leaks, he said.

Because they had early warning, Microsoft, Google and Amazon were able to release statements soon after news of the flaws leaked out saying their cloud-computing customers were largely protected.

Smaller competitors, though, continue to struggle. DigitalOcean Inc., a cloud-services seller, said Jan. 19 it was still testing a fix for its customers. Rackspace Inc. said last Wednesday it has several teams working on a fix. The cloud company earlier in January told customers it understood the situation “can be frustrating.”

The DHS also stumbled with its initial guidance. The agency’s Computer Emergency Response Team first linked to an advisory stating the only way to “fully remove” the flaws was by replacing the chip. CERT now advises users instead to patch their systems.

The DHS should have been looped in early on to help coordinate the flaws’ disclosure, Joyent’s Mr. Cantrill said. “I don’t understand why CERT would not be your first stop,” he said.

Write to Robert McMillan at and Liza Lin at


U.S. Officials Worried Jered Kushner Under Influence of Chinese Campaign

January 25, 2018
 JANUARY 25, 2018 16:59


The crux of the concerns center on Kushner’s numerous encounters with Chinese Ambassador to the US, Cui Tiankai.

Jared Kushner

Jared Kushner . (photo credit: REUTERS)

NEW YORK – The US security establishment is reportedly concerned that senior White House adviser and son-in-law to the president of the United States, Jared Kushner, may be the subject of a Chinese influence campaign due to his personal business interests.

Those worries were revealed this week after The New Yorker reported that the 37-year-old has repeatedly held private meetings with Chinese government officials since the outset of the Trump administration.

The crux of the concerns center on Kushner’s numerous encounters with Chinese Ambassador to the US, Cui Tiankai, with some meetings being accompanied by disgraced former national security adviser Michael Flynn.

Cui and Kushner have also met alone on at least one occasion, according to The New Yorker, which intelligence officers say is a flagrant breach of security protocols.

The US usually conducts high-level talks with foreign governments in large groups, with experts on the American side present to ensure its interests are not manipulated or undermined.

But Kushner’s alleged eschewing of the diplomatic procedures have “made some people in the US government uncomfortable,” leading experts to believe that Beijing could be using the political neophyte to influence American policy.

“He went in utterly unflanked by anyone who could find Beijing on a map,” one security official told the Manhattan-based magazine. “It was a dream come true. They couldn’t believe he was so compliant.”

Those concerns were first raised following a private meetings Kushner held with Cui last year at Donald Trump’s sprawling Florida estate Mar-a-Lago, where he reportedly discussed his own business interests along with policy.

That’s when intelligence officials “became concerned that the Chinese government was seeking to use business inducements to influence Kushner’s views.” It’s unclear what was said between Kushner and the Chinese envoy, with one former official briefed on the matter describing the talks as “inconclusive.”

In response, a Kushner spokesperson told The New Yorker that there “was never a time — never — that Mr. Kushner spoke to any foreign officials, in the campaign, transition, and in the administration, about any personal or family business. He was scrupulous in this regard.”

Security officials note, however, that the president’s son-in-law owes hundreds of millions of dollars on a 41-story Manhattan office building his company purchased in 2007.

Over the past two years, Kushner has sought financial backing overseas – courting firms in South Korea, Israel and France – all to no avail as a substantial mortgage payment looms just months away.

Earlier this month, The Wall Street Journal reported that Kushner was also warned by security officials to be careful when speaking to family friend Wendi Deng Murdoch, who they suspect has ties to the communist government in Beijing.

Murdoch, the former wife of media mogul Rupert Murdoch, is a powerful Chinese-American business woman who has been close friends with Kushner’s wife, Ivanka Trump, for years.

Security officials were reportedly concerned that Deng would use her contacts in the administration to further a construction project in Washington funded by the Chinese government, an anonymous source told the Journal.

The high-profile project is a proposed plan to build a Chinese garden less than 5 kilometers (3.1 miles) from both the Capitol and the White House.

The garden, estimated to cost $100 million, was reportedly designated a national security risk because the design included plans for a tall tower that could be used for surveillance.

A spokesman for Deng told The Guardian that Deng “has no knowledge of any FBI concerns or other intelligence agency concerns relating to her or her associations.”

He added: “[Deng] has absolutely no knowledge of any garden projects funded by the Chinese government.”


How China forces American companies to do its political bidding

January 22, 2018
 Global Opinions January 21 at 7:27 PM
The Washington Post
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Chinese and American flags fly outside of a JW Marriott hotel in Beijing, Thursday, Jan. 11, 2018. The Marriot hotel chain apologized Thursday to China’s government for referring to Tibet and self-ruled Taiwan as countries in a customer survey that news reports said Chinese police investigated as a possible crime. (AP Photo/Mark Schiefelbein)

As China’s economic might grows, Beijing is leveraging that power to coerce foreign companies to advance its political narrative and punish them when they step out of line. The Chinese Communist Party’s treatment this month of hotel giant Marriott after a minor website error takes the effort to a new and dangerous level.

In Washington, the Chinese government’s overreaction to Marriott listing Taiwan, Tibet, Hong Kong and Macau as “countries” on an emailed questionnaire has sparked alarm. Trump administration officials, lawmakers and experts said the Communist Party is escalating how far it is willing to go in enforcing strict adherence to its political positions among foreign actors.

After a Marriott Rewards employee “liked” a Jan. 9 tweet by the “Friends of Tibet” group praising the questionnaire, Chinese authorities called in Marriott officials for questioning, shut down their Chinese website and mobile apps, and demanded an apology. The Jan. 11 apology from Marriott CEO Arne Sorenson parroted the language the Communist Party uses to describe groups that stand opposed to Chinese repression or advocate for Tibetan autonomy.

“We don’t support anyone who subverts the sovereignty and territorial integrity of China and we do not intend in any way to encourage or incite any such people or groups,” Sorenson wrote.

Marriott has more than 300 hotels in China, its second-largest single market, after the United States. While it began disciplinary proceedings against the employee who “liked” the offending tweet, Chinese netizens scoured the Internet and found dozens more foreign corporations that had listed as countries territories that are claimed by China. Chinese Internet bots fueled the purportedly popular outrage.

Corporations including Delta Air Lines and Zara rushed out apologies of their own. But the Chinese government didn’t stop there. Dozens of companies were told to scrub their websites for any related content or face severe consequences. The state-run media organ China Daily piled on with an op-ed headlined “No flouting of China’s core interests will be tolerated.” Chinese government officials even threatened the family of a Chinese student in Canada who responded favorably to the Friends of Tibet tweet.

By combining government power, manufactured public outrage and negative state-sponsored media coverage, the Chinese government can place massive pressure on American companies to tow the party’s political line. That aggressiveness is now becoming an issue in the U.S.-China relationship.

“Everyone should be deeply concerned by the PRC’s growing comprehensive campaign to exploit trade and commerce to advance its global Communist agenda,” Sen. Ted Cruz (R-Tex.) told me. “For decades the Communist Party has limited speech within China on topics and opinions that threaten their one-party rule, and we are now seeing this form of information warfare influence the way American companies conduct business.”

For example, by parroting the Communist Party line on Tibet, Marriott helps the Chinese government whitewash its systematic and brutal repression of Tibetans. As the International Campaign for Tibet wrote in a letter to Sorenson, Marriott could have changed the emailed questionnaire without endorsing China’s political position on Tibet.

“China has been continually attempting to silence international public debates on the issue of Tibet, and your statement unfortunately furthers their efforts,” the group wrote, pointing out that the Chinese propaganda machine can use Marriott’s statement to further undermine Tibetan human rights.

The question for Washington policymakers is: Where does this end? What if a Tibetan group wanted to hold a conference at a Marriott hotel in Washington? Would Marriott be within its rights to prevent that? Does official Washington have a role to play?

Rep. Mike Gallagher (R-Wis.) told me that as China becomes more brazen in its efforts to coerce or control American businesses, the United States must devise a comprehensive public-private effort to push back.

“This is only the latest in a long pattern of the Chinese government leveraging access to its marketplace to extract painful concessions from foreign businesses,” he said. “Our actions, or lack thereof, can influence their behavior. To this end, we need to stand firm in defense of American interests, both security and economic.”

For now, Marriott seems more concerned with how it is viewed in Beijing than in Washington. A Marriott spokeswoman said the company had no response to the concerns of lawmakers or human rights groups about its behavior.

Marriott International Asia Pacific President Craig Smith turned down an interview request from me but gave an interview to China Daily, in which he called the incident probably one of the biggest mistakes of his career. In fact, the biggest mistake that American corporations can make is allowing themselves to be used as tools by the Chinese Communist Party to advance illiberal norms.

Washington is awake to the threat of Chinese economic coercion of American companies for political objectives. Now policymakers must persuade corporations to ask themselves if there is a larger interest at stake than their bottom line.

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Why U.S. Companies May Lose the AI Race

January 19, 2018

Chinese rivals are gaining fast because of rising investment, as well as freer access to enormous amounts of data about people

A facial-recognition system on display at a recent conference in Washington. The U.S. is a powerhouse in AI research, but China’s government is pushing to lead the AI field by 2030.
A facial-recognition system on display at a recent conference in Washington. The U.S. is a powerhouse in AI research, but China’s government is pushing to lead the AI field by 2030. PHOTO: SAUL LOEB/AGENCE FRANCE PRESSE/GETTY IMAGES

Last fall, a U.S. intelligence-community contest sought algorithms that could identify surveillance images of people out of a database of millions of photos. The dark-horse victor was Shanghai-based artificial-intelligence startup Yitu Tech.

The five-year-old company beat out 15 rivals for a $25,000 prize. But Yitu had an advantage: access to Chinese security databases comprising millions of people that it could use to train and refine its algorithms.

Competitors, who worked from smaller databases, had “one hand tied behind our back,” says Paul Nicholas, chief executive of Inc., a Newark, N.J., startup that entered the contest.

The contest represents a growing concern about the global race to develop and profit from artificial intelligence, which frequently uses large data sets to learn skills like facial recognition and cancer diagnosis. Big U.S. technology companies are leading the race. But their Chinese rivals are catching up quickly because of growing investments, as well as freer access to enormous amounts of data about people, often compiled with the help of government agencies.

The AI FrontierValue of artificial-intelligence financing dealsby quarter. China passed the U.S. in fundinglast year.Source: CB InsightsNote: Data for 4th quarter 2017 is as of Dec. 20
.billionU.S.China2014’15’16’17’$3.0U.S.xDec. 31, 2014x$0.83 billion

In the West, access to such information is at times limited by growing concerns over privacy and the ethics of letting machines make important decisions—fears that are leading to new policies and stricter proposals around collecting personal data and deploying AI.

“Ultimately, AI advances are inextricably founded on the broad use of data to train machines as they go about learning,” says Brad Smith, president and chief legal officer for Microsoft, which has invested heavily in AI and also is a vocal supporter of strong privacy protections. “The question is whether privacy laws will constrict AI development or use in some parts of the world.”

An accelerating effort

At stake is whether U.S. giants—including Apple Inc., Google parent Alphabet Inc., Inc., Facebook Inc. and Microsoft Corp. —can retain their lead in the global tech race or whether they will be overtaken by Chinese behemoths Tencent Holdings Ltd.and Alibaba Group Holding Ltd. Also in the hunt is Chinese search engine Baidu, which is smaller but has invested heavily in AI.

When it comes to academic and corporate AI research, the U.S.—particularly in the San Francisco Bay Area—is a powerhouse. The U.S. dominates the number of international patents filed for AI topics like neural networks and unsupervised learning, according to filings from the World Intellectual Property Organization. The country also has more than 1,000 AI companies, almost double the number in China, according to a December report from Tencent’s in-house research institute.

In addition, spending by U.S. companies dwarfs that of China’s tech titans. Alphabet spent $13.9 billion on R&D in 2016, and Microsoft spent $13.0 billion for the year ended June 30. By contrast, Alibaba pledged in October to nearly triple its R&D spending—to about $5 billion annually over the next three years.

WEF’s Klaus Schwab: What to Expect in 2018
Prof. Klaus Schwab, founder of The World Economic Forum in Davos, Switzerland, talks with WSJ’s Editor in Chief Gerard Baker about his views on President Trump, international trade and globalization.

But China hopes to close the gap with the U.S. in funding and tech development, driven by a new government effort to lead the AI field by 2030. The strategy focuses on boosting areas including medicine and agriculture, as well as government and military applications.

The drive is showing up already in the funding for AI startups. Among these Chinese firms, disclosed funding rose 10-fold in 2017 over the prior year to $7.06 billion, surpassing comparable U.S. firms, where disclosed financing rose 24% to $5.62 billion, according to CB Insights.

PricewaterhouseCoopers predicts that the U.S. will profit most from AI initially, but that China will catch up, reaping about 46% of the $15.7 trillion it expects AI to contribute to global economic output by 2030, followed by North America with 24%.

“The Chinese government’s thoughtful investment in AI is a huge accelerator,” says Andrew Ng, a former executive at Google and Baidu, who recently founded AI startup

Different values

Another issue that looms large in the rivalry between China and the U.S. is privacy. Chinese consumers have fewer concerns about data privacy compared with those in the West—and that gives Chinese companies greater leeway to mine their personal information and use it to develop smarter and more effective AI systems, for jobs such as medical care and surveillance.

For instance, Yitu, the AI contest winner, works on behalf of multiple security agencies in China and has access to a database of 1.8 billion photos of faces. Using that trove of information, it has learned to scan photos and find matches in seconds, to do jobs like authenticating the identity of ATM users.

Western policy makers are more reluctant to give companies wide latitude to use consumers’ personal information, which some experts think could end up hampering the development of AI and let Chinese companies pull ahead in the tech-development race.


And privacy restrictions will get a lot tougher in May, as a new European Union law that covers tech titans like Google takes effect. The law limits the use of identifiable information about people, such as name, address and ethnicity, and allows individuals to demand explanations for automated decisions on important topics, such as why a computer denied someone’s loan application—answers that are difficult for some types of AI to provide.

More than 120 countries have so far adopted privacy laws, the large majority with European-style elements, according to Graham Greenleaf, a professor of law and information systems at Australia’s University of New South Wales. Tech executives say Europe’s size could force U.S. tech companies that wish to do business in Europe to follow its lead in other areas, too.

Regulation could be “a big help or a big detriment” to U.S. AI efforts, depending on how it’s implemented, says Mr. Ng. “Despite the U.S.’s current lead in basic AI research, it can be easily squandered in just a few years if the U.S. makes poor decisions.”

Mr. Schechner, Mr. MacMillan and Ms. Lin are reporters in The Wall Street Journal’s Paris, San Francisco and Shanghai bureaus. Email and


U.S. Warned Jared Kushner About Wendi Deng Murdoch

January 16, 2018

Officials said the businesswoman could be trying to further Beijing’s interests, people familiar with the matter say

Image may contain: 2 people, people standing and suit

WASHINGTON—U.S. counterintelligence officials in early 2017 warned Jared Kushner, President Donald Trump’s son-in-law and senior adviser, that Wendi Deng Murdoch, a prominent Chinese-American businesswoman, could be using her close friendship with Mr. Kushner and his wife, Ivanka Trump, to further the interests of the Chinese government, according to people familiar with the matter.

U.S. officials have also had concerns about a counterintelligence assessment that Ms. Murdoch was lobbying for a high-profile construction project  in Washington, D.C., one of these people said.

The project, a planned $100 million Chinese garden at the National Arboretum, was deemed a national-security risk because it included a 70-foot-tall white tower that could potentially be used for surveillance, according to people familiar with the intelligence community’s deliberations over the garden. The garden was planned on one of the higher patches of land near downtown Washington, less than 5 miles from both the Capitol and the White House.

Ms. Murdoch in 1999 married Rupert Murdoch, who is the executive chairman of News Corp, which publishes The Wall Street Journal. Mr. Murdoch filed for divorce in 2013. Ms. Murdoch still uses her married name.

The counterintelligence officials didn’t provide Mr. Kushner with details about their assessment of Ms. Murdoch, the people familiar with the interaction said. The warning was part of an effort by national-security officials to highlight to Mr. Kushner, who was new to government, the need to be careful in his dealings with people whose interests may not align with those of the U.S., the people added. Ms. Trump, who in late March announced she would take a formal White House role, wasn’t present for the counterintelligence warning. Neither Ms. Murdoch, Mr. Kushner nor Ms. Trump has been accused of any wrongdoing.

It is common for counterintelligence officials to warn senior members of a new administration about interactions with people with foreign connections, and such briefings sometimes refer to specific people, according to people familiar with the protocols.

A spokesman for Ms. Murdoch said she “has no knowledge of any FBI concerns or other intelligence agency concerns relating to her or her associations.” He added that she “has absolutely no knowledge of any garden projects funded by the Chinese government.”

A representative for Mr. Kushner and Ms. Trump described Mr. Kushner’s interaction with officials warning him about Ms. Murdoch as a “routine senior staff security briefing.” He added that Mr. Kushner “has complied with all ethics and disclosure recommendations and has played a helpful role in strengthening the U.S.-China relationship so as to help bring about a better resolution to the many issues the countries have.”

In response to questions from the Journal about Ms. Murdoch and the garden, a representative from China’s Embassy in Washington called the Journal’s information “full of groundless speculations.”

U.S. officials have been concerned about Chinese government efforts to use people with close ties to the administration and with interests or family in China to try to influence policy. For example, Las Vegas casino magnate and Republican National Committee finance chairman Steve Wynn, whose Macau casinos can’t operate without a license from the Chinese territory, last year delivered a letter to Mr. Trump from the Chinese government about an alleged fugitive Beijing wants the U.S. to return, the Journal has reported, citing people familiar with the matter. A representative for Mr. Wynn has denied the episode

Ms. Murdoch, who is a U.S. citizen, has been friends with Ms. Trump and Mr. Kushner for years.

Ms. Trump posted a photo on Instagram of her travels in Croatia with Ms. Murdoch in 2016. Ms. Murdoch posted a photo of Ms. Trump and Mr. Kushner at Mr. Kushner’s birthday party in 2016, and one of her with Ms. Trump at an inauguration event last year with the caption “Congratulations @ivankatrump” followed by two hearts. Ms. Murdoch was photographed arriving at the couple’s Washington home in February 2017.

Ms. Trump also previously served as a trustee for funds set aside for the children of Mr. Murdoch and Ms. Murdoch, according to people familiar with the matter. Ms. Trump stepped down from that role in December 2016, the people said.

The representative for Mr. Kushner and Ms. Trump said the two “have been friends with Rupert and Wendi Murdoch for a decade before coming to Washington and their relationship is neither political nor about China.”

The Chinese garden project at the arboretum in Northeast Washington had been planned for more than a decade as a symbol of goodwill between the two countries, akin to Beijing’s gift of pandas to the National Zoo in 1972.

The 12-acre project was to feature a lake and multiple gardens and structures that could be used to host cultural programs. In 2003, Jiang Zehui, a cousin of former Chinese President Jiang Zemin, signed a letter of intent with a U.S. Agriculture Department official to build the garden. In January 2011, then-President Hu Jintao traveled to the U.S. and was presented with a model of the project by Joe Biden and Hillary Clinton, then the vice president and secretary of state, respectively. In October 2016, following an agreement by then-President Barack Obama and Chinese President Xi Jinping, there was a groundbreaking ceremony.

The project has since been shelved because of the counterintelligence concerns, according to people familiar with the national-security issues.

Representatives for the USDA and the Chinese Embassy both said they continued to work on the project but declined to provide details of any developments since the groundbreaking. “The two sides are working closely preparing for the actual construction work,” said the Chinese Embassy representative, without elaborating. Journal reporters who recently visited the arboretum couldn’t locate any evidence of construction. An empty meadow sat at the planned site.

Mr. Kushner and Ms. Trump emerged in early 2017 as important points of contact for Beijing in the new White House after early tensions between the two countries, the Journal has reported. Ms. Trump attended a Lunar New Year party at Beijing’s embassy in Washington last February and later posted a video of her daughter singing a New Year’s song in Mandarin, which went viral in China. Mr. Kushner was instrumental in setting up the meeting last spring between Messrs. Trump and Xi at the president’s Mar-a-Lago resort in Florida and accompanied him to Beijing in the fall.

The Kushner family real-estate company, Kushner Cos., also has pursued business in China, holding advanced talks with Anbang Insurance Group Co. for an investment of as much as $1.25 billion in a New York real-estate project. The talks broke off in March 2017. Mr. Kushner had earlier sold his stake in the project and other properties to family members.

Ms. Murdoch has previously surfaced on the radar of counterintelligence professionals, according to a person familiar with the issue.

After reports that she was romantically involved with former British Prime Minister Tony Blair while still married to Mr. Murdoch, British security officials discussed with U.S. counterparts whether the alleged relationship could be cause for concern, according to a person familiar with the matter. At the time, the Federal Bureau of Investigation said there was reason to be watchful about Ms. Murdoch, but that they hadn’t looked into her in detail, the person said. Mr. Blair and Ms. Murdoch have denied any impropriety in their relationship. Representatives for Mr. Murdoch, Mr. Blair, Ms. Murdoch, the FBI and the U.K. Embassy in Washington declined to comment on the matter.

Generally, U.S. counterintelligence officials have been warning of potential attempts by the Chinese government to exploit ethnic Chinese living in the U.S. who have both access to power and family back in China, giving Beijing leverage.

Ms. Murdoch, the daughter of a factory director, came to the U.S. in 1988, studied at Yale University’s business school and later landed a job at News Corp.’s Star TV in Hong Kong, where she met Mr. Murdoch. After marrying the media magnate, Ms. Murdoch helped arrange business deals for News Corp in China and met with top politicians including Jiang Zemin, the Journal previously reported.

Ms. Murdoch’s spokesman said she occasionally traveled to China with Mr. Murdoch but played down her role in business dealings there.

Write to Kate O’Keeffe at and Aruna Viswanatha at

China Quietly Orders Closing of Bitcoin Mining Operations — “Some people have already moved their hardware out of China.”

January 10, 2018

Move tightens a clampdown that already has shut exchanges for trading of cryptocurrencies in China

BEIJING—Bitcoin can’t catch a break in China.

Chinese authorities ordered the closing of operations that create a large share of the world’s supply of bitcoin, tightening a clampdown that has already shuttered exchanges for the trading of cryptocurrencies in China.

A multiagency government task force overseeing risks in Internet finance issued a notice last week ordering local authorities to “guide” the shutdown of operations that produce, or “mine,” cryptocurrencies, according to the notice and people familiar with the information.

While the notice called for an “orderly exit” without setting a deadline, far-flung areas of China where cryptocurrency mining operations have flourished are complying. A local regulatory official in the far western region Xinjiang said Wednesday that his agency received the notice and is doing “what the country wants.”

The central bank, the lead agency in the task force on Internet financial risk that issued the notice, didn’t respond to a request for comment.

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Miners use powerful computer systems to solve complex math problems to generate and verify units of cryptocurrencies. The miners have thrived in sparsely populated areas of China where electricity is plentiful and inexpensive and temperatures are cooler.

Their winding down is the latest blow for bitcoin and other cryptocurrencies in what was a promising market but where the government is concerned about money laundering and risks in the financial system. China accounted for nearly 80% of computer power devoted to global bitcoin mining over the past 30 days, a rough approximation of its share of new units created in the same period, according to calculations based on data from ChainalysisInc., a New York-based research firm.

A loss of a large-scale mining operation would disrupt the creation and verification of cryptocurrency units, according to Philip Gradwell, chief economist at Chainalysis. He said it usually takes about 14 days for the bitcoin system to adjust so the rate of creating new coins stabilizes. If China were to wipe out 80% of global mining power in one go, recovery could take weeks, possibly months, he said.

“If China really does switch off all the minters suddenly, there could be a very high level of disruption,” Mr. Gradwell said. “It’s very hard to estimate back-of-the-envelope how big an impact would be.”

Such an across-the-board shutdown is unlikely, Mr. Gradwell and other analysts say, given that the Chinese government has been tightening the regulatory noose for months, prompting many operators to move their equipment elsewhere.

“I don’t think miners have been sitting on their hands,” said Arthur Hayes, who runs a peer-to-peer cryptocurrencies exchange called BitMEX. “Some people have already moved their hardware out of China.”

The founder of Chinese mining pool F2Pool, which accounts for 9% of the bitcoin mined over the past month, said his operations in Inner Mongolia and Xinjiang received “directives” from local authorities, though he declined to provide details.

“We are already very small,” said the founder, who is known in the Chinese bitcoin community by the nickname “Shen Yu,” or “mythical fish.”

After the government banned offerings of new cryptocurrencies and commercial exchanges in September, official scrutiny fell on the miners.

The government notice to shut down miners began circulating on social media last week and may have added to the factors that have seen prices of bitcoin drop to $14,200 from a high in December of $19,000 per unit after soaring for much of the year. Just before China’s clampdown in September, bitcoin traded for $4,600.

A potential shutting of China’s vast bitcoin mining network could also shake up the dynamics between global mining pools, or firms that share processing power, some analysts said. In recent years, a handful of these powerful Chinese pools resisted expanding the bitcoin network to process more transactions, according to cryptocurrency entrepreneurs.

If authorities in China have cooled to cryptocurrencies, demand has remained hot elsewhere, especially in South Korea, making that country the center of attention for the industry. South Korean regulators have announced tougher measures to crack down on cryptocurrency trading, following the collapse of one Seoul-based platform that investigators are looking into for possible involvement by North Korean hackers.

Write to Chao Deng at


AT&T pulls out of deal to sell Huawei phones in the US — Concerns about Chinese espionage

January 9, 2018

AT&T has backed out of a deal with Huawei to sell the company’s new flagship smartphone in the US, as reported by The Wall Street Journal and independently confirmed by The Verge. Huawei was set to announce the partnership this week at CES 2018 before AT&T canceled the arrangement at the last minute; the Chinese giant has already blanketed Las Vegas in advertising for its Mate 10 Pro phone.

It’s not clear why the deal is off, but Huawei is likely to announce US availability for the Mate 10 Pro anyway, since the company already sells unlocked devices online and through certain retail stores in the country. But making a flagship phone available on a major carrier would have represented a huge leap in profile for Huawei, which is the world’s third biggest smartphone vendor but has often been the subject of suspicion from American companies and politicians.

At CES 2012, Huawei’s consumer division CEO Richard Yu told The Verge that the company “needs some time for the US carriers to accept high end [products] from Huawei. We’re early in the US market, but maybe [there are] some other reasons like trust, for the carriers. The US government is also an influence — it gives some noise.” Five years on, it looks like Yu will have to wait a little longer.

Huawei’s CES press conference is happening tomorrow — we’ll be there to see what gets announced.


Richard Yu, chief executive of Huawei’s consumer business group, presenting the high-end Mate 10 smartphone in Munich in October. Credit Christof Stache/Agence France-Presse — Getty Images

SHANGHAI — With an advanced screen, a special artificial-intelligence microchip and an eye-popping price, the newest smartphone from Huawei Technologies was meant to show Americans what China can do with technology.

Instead, Huawei’s push to sell the phone in the United States has suddenly lost a powerful backer — and the push has attracted some unwanted scrutiny from Washington.

AT&T walked away from a deal to sell the Huawei smartphone, the Mate 10, to customers in the United States just before the partnership was set to be unveiled, said two people on Tuesday familiar with the plans, who spoke on the condition of anonymity because the discussions were not public. The Wall Street Journal reported earlier that AT&T had changed plans.

The reasons that led to AT&T’s shift were not entirely clear. But last month, a group of lawmakers wrote a letter to the Federal Communications Commission expressing misgivings about a potential deal between Huawei and an unnamed American telecommunications company to sell its consumer products in the United States. It cited longstanding concerns among some lawmakers about what they said are Huawei’s ties to the Chinese government.

The letter, which was reviewed by The New York Times, said Congress has “long been concerned about Chinese espionage in general, and Huawei’s role in that espionage in particular.”

While the letter did not mention AT&T, its pending deal to sell the Huawei smartphone in the United States had been widely reported.

Fletcher Cook, a spokesman for AT&T, declined to comment.

Huawei, a private company, has long denied that it presents security risks. In a statement, Huawei said that it had delivered “premium devices with integrity globally and in the U.S. market” over the past five years, adding that it would introduce new products for the American market on Tuesday.

The last-minute disruption is the latest in a long line of setbacks for Huawei, which has struggled for years with political opposition to its efforts to tap the hugely valuable United States market. More broadly, it underscores a deepening political rift over issues of technology, user privacy and security — a rift that adds to a brewing trade dispute between the world’s two largest economies.

Just a week ago, an affiliate of the Alibaba Group in China dropped a $1.2 billion proposal to acquire MoneyGram, after a United States panel that reviews foreign takeovers did not endorse it. The deal drew heavy criticism from lawmakers over the possibility of Chinese access to American user data, despite assurances from the Chinese company that it would take steps to make the data more secure.

AT&T, meanwhile, faces its own challenges in the United States. The Justice Department in November sued to block the company’s $85.4 billion bid for Time Warner, a merger that would create a media and telecommunications behemoth with the ability to reach consumers through a wide variety of means.

Huawei has been counting on the Mate 10 to compete with Apple’s high-end iPhones, in a test of the potential appeal of a Chinese brand in the American market. While Huawei has long sold budget phones, some Mate 10 versions cost $900 or more without subsidies from phone carriers.

Huawei sells smartphones in the United States, but it does not have smartphone deals with any of the major wireless carriers in the country. Those carriers — Verizon, AT&T, Sprint and T-Mobile — dominate the market, making it more difficult for Huawei to get a foothold in the country. The AT&T deal was supposed to cement the company’s status as a top maker of the devices, alongside Apple and Samsung Electronics of South Korea.

Congressional misgivings about the company’s close relationship with the Chinese government have long plagued Huawei. Already, other major telecommunications companies refuse to buy the equipment Huawei makes for telecommunications networks — its core business — because of worries in Washington over security.

In the letter, the lawmakers said that Huawei had ties to the Chinese Communist Party, as well as to the country’s intelligence and security services, and they accused Huawei of disregarding intellectual property. In particular, the letter implies that the deal with AT&T could more firmly establish Huawei phones in the United States, and ultimately open up the possibility of American government officials using them.

Analysts said the political opposition to Huawei was not surprising. Leaders in China and United States view technology made in the other country with suspicion. In policy guidance and speeches, Chinese officials have repeatedly called for technology made by American companies to be replaced by locally produced ones. Beijing has also widely blocked major American internet companies from offering products in the country.

American lawmakers have stated their suspicions before. In 2012, a House intelligence committee report said two Chinese companies, including Huawei, were a threat to United States national security.

For a Chinese company that has pushed hard to become a recognized multinational player, the setback is only one of many in the United States. Huawei is also under investigation by the Treasury and Commerce Departments over whether it broke American trade sanctions against countries including Iran and North Korea. Huawei says it is committed to complying with the law.