US-China Relations Updates

Recently, Huawei’s technological breakthroughs have sparked significant discussions in the American public opinion sphere. The American magazine “The National Interest” published an interesting article titled “The Huawei We Don’t Know.” It attempts to explain to Huawei’s detractors why Huawei has achieved its current height and reminds them not to fall into ideological fanaticism but to focus on respecting objective reality.

The author of the article, Chandran Nair, is a Malaysian-Indian businessman and scholar who frequently contributes to major media outlets worldwide. Regarding Huawei, he begins the article by stating that China has rapidly risen to become the world’s second-largest economy and a global power in just thirty years. Western powers, filled with fear, have expressed significant concerns and have joined mainstream media in demonizing China’s remarkable development. In this process, Huawei has found itself at the center of attention.

There are primarily two factors that have tarnished Huawei’s reputation in the West. Firstly, Huawei has excelled in its actual operations and demonstrated a strong spirit of innovation. Westerners believe that their technological advantages and innovation are inseparable from specific political systems and cultural values. Huawei’s success, achieved by taking a different path, unsettles the West. Secondly, since Huawei is a Chinese company and its founder has a military and party background, the West perceives it as being controlled by the Chinese government. However, this perception does not align with reality and highlights the lack of understanding among most people regarding China’s business ecosystem.

Chandran Nair believes that Ren Zhengfei’s experiences of poverty and entrepreneurial setbacks in his youth set him apart from most tech giant founders. The resilience and positive will shaped by these life experiences are reflected to some extent in the company’s corporate culture and evident in its ability to overcome US sanctions and pursue independent innovation. Additionally, while the focus has been on Huawei’s highly anticipated new smartphone models, there is another development worth noting that may not have made headlines. Huawei recently launched its own Enterprise Resource Planning (ERP) software, ending its reliance on Oracle software.

Westerners often mistakenly believe that Huawei’s business model is a centrally controlled, old-style Chinese state-owned enterprise centered around a single founder. However, in reality, Huawei is a fully private company with employee ownership, and Ren Zhengfei holds only 0.7% of the company’s shares. The company’s governance structure is unique, operating under a collective leadership model with multiple checks and balances, where shareholder representatives and decision-making members are elected through democratic processes. Employee shareholders also have voting rights, and democratic procedures are transparent to all employees, sometimes even livestreamed.

As the founder of Huawei, Ren Zhengfei’s influence stems from his personal reputation and the Chinese culture of respecting elders. He is described within the company as someone who willingly shares his visions and ideas. While Ren Zhengfei has veto power over board decisions, records indicate that he has exercised it only a few times, primarily on technical and operational matters, which is a common practice in private enterprises.

Huawei has indeed been significantly impacted by recent sanctions, with a 69% decrease in net profit in 2022 compared to previous years. However, Huawei has maintained a high proportion of research and development (R&D) funding, allocating 25% of its revenue, equivalent to 161.5 billion Chinese yuan, to R&D. This figure exceeds that of any non-U.S. tech company and even surpasses the R&D-to-revenue ratio of many U.S. tech giants such as Amazon and Alphabet (Google’s parent company).

Despite being unable to launch high-end 5G smartphones due to the sanctions in recent years, Huawei has not downsized its smartphone business division. This is attributed to a cultural difference that is often misunderstood and undervalued. In this environment, employees have a strong sense of belonging to the company, motivating them to focus on research and development until they achieve phased results. The recent launches of the Mate60 series and X5 products demonstrate Huawei’s strategic wisdom in sustaining its operations and reinvesting, even in challenging times.

Chandran Nair believes that Huawei’s success also comes from its openness and learning from global cultures. Huawei’s corporate culture itself embodies the resilient tradition of Confucian culture, while its leadership has studied successful and enduring corporate governance models worldwide, including family businesses in Japan and companies in France, Germany, and the United States. After learning from others’ strengths, Huawei has tailored its own operating system. For example, the design of its supervisory board partially draws from Germany’s corporate governance structure and the business management principles formulated by Austrian economist Fredmund Malik.

Lastly, Chandran Nair mentions that Huawei places great emphasis on social responsibility and sustainable development. Unlike many Western approaches that focus on establishing charitable foundations under the ESG (Environmental, Social, and Governance) framework, Huawei prioritizes investment in technological development and provides sustainable solutions based on cost-effectiveness. Many countries in Central and South America, as well as Europe, have adopted Huawei’s technology in animal protection and environmental conservation efforts.

Another example is Huawei’s solutions for rural communications. Typically, providing communication services in rural areas yields a 30% lower profit margin compared to densely populated urban areas. However, Huawei’s technology reduces costs by 70% compared to traditional communication solutions. Since 2017, Huawei has provided communication services to rural areas in more than 60 countries, benefiting over 50 million people. Therefore, when the United States excludes Huawei’s technology from the market, rural populations indeed face more inconvenience, as American communication companies lack the willingness and capability to fill the gap.

In conclusion, Chandran Nair describes Huawei as a company that will not fail. He also states that Huawei’s critics are busy reacting to recent developments, but they should take note of how Huawei has achieved success through various strategies.

It is worth mentioning that The National Interest magazine is an American publication focusing on international relations. In its early years, Francis Fukuyama even promoted his “end of history” thesis praising the American system through this magazine. However, he later found the magazine too realist and decided to discontinue his affiliation. Realism emphasizes objective interests rather than ideology, which diverges significantly from the mainstream political correctness in the United States over the past two decades.

From this perspective, publishing an article that provides a positive analysis of Huawei may not necessarily be an endorsement of the company. Instead, it is more likely that the magazine’s editorial team aims to help American readers understand the nature of the opponent they are facing.