business reading task 1.doc

Huaweis opacity a colourful issue for USBy Kevin Brown Published: April 19 2011 14:40Huawei, the worlds second-biggest maker of mobile telecommunications network equipment by market share, made a big concession to transparency this week, revealing for the first time the names of its board members.Unfortunately, the effect was somewhat undermined by the companys failure to address issues such as the suggestion, reported in the Chinese media, that Sun Yafang, the chairwoman, used to work for Chinas Ministry of State Security.For a company that complains about being unfairly demonised in the US for alleged, but unproven, links to the Chinese security apparatus, that is a significant omission. But is it enough to explain Huaweis failure to win a single network equipment contract from major US networks? Or is there, as the Chinese whispers have it, a plot in Washington to keep the company out of the US market?The case against Huawei is easily stated. The company is privately owned, and its shareholding structure is opaque. In addition to the security links attributed to the chairwoman, Ren Zhengfei, the founder and chief executive, is a former officer in China Peoples Liberation Army.Classified intelligence material in the US is said to link the company to the Peoples Liberation Army (PLA), prompting senior Republican lawmakers to warn that allowing it to become a major supplier would give the Chinese military a critical hold over US communications.As critics point out, China has form in this area already, having used, or connived at, cyber attacks against foreign companies operating in China, such as Google. Clearly, a regime that is prepared to use technology to defend itself against scrutiny might also be willing to use it to disrupt a rival countrys communications.As if this was not enough, Huawei has twice faced litigation from US groups for allegedly copying or stealing technology. The cases, brought by Cisco Systems and Motorola, were both dropped. But against a background of wider unease about Chinas failure to enforce intellectual property rights they have done much to encourage damaging speculation about the companys integrity. All this has had a serious impact on Huaweis ambitions in the US a market it must crack if it is to continue its long march towards overtaking Swedens Ericsson as the worlds number one equipment maker. Most seriously, it lost out last year to Samsung as a key supplier for a $5bn infrastructure project for a next generation mobile network being built by Sprint Nextel, the third-largest US telecoms operator. The contract went to South Korea after Gary Locke, the US commerce secretary, called Sprint chief executive Dan Hesse to express concerns.However, there are plenty of weaknesses in the prosecution case. For a start, not a shred of evidence has been produced to link Huawei to any attempts to interfere with the security of networks it has been involved in building. The classified intelligence referred to by US critics may be damning, or it may be a useful cover for bashing a successful Chinese company.Worst of all, it is clear from some of the rumblings on Capitol Hill that Huawei has been repeatedly confused with a different company called Hua Mei, which was linked to the PLA and was involved in controversial technology transfers under the Clinton Administration. The case for Huawei is that, Madam Suns security links notwithstanding, it appears to be serious about increasing transparency. As the recent identification of the board demonstrates, the bamboo curtain is slowly coming down. This is part of a deliberate strategy that began two years ago, when the company started to produce financial reports, even though as a private company it could have kept its numbers quiet. In addition, Huawei has split its operations into several units, accompanied by vague suggestions that one of them may eventually be listed.The company has also shown itself willing to find technological solutions to security worries, such as a “secure cell” structure in the UK under which software codes are compiled and input locally. Huawei is desperate to get into the top tier of the US market. Its chances of continuing to grow fast may depend on achieving that. In spite of all its efforts though, it is not much of a surprise that a private company run by a former military officer in a country with an unaccountable government and no rule of law has trouble selling sensitive products in the US.If Huawei really wants to allay fears in Washington, Mr Ren has the solution in his own hands: an initial public offering of the whole company, preferably outside mainland China, or at the very least including a listing in Hong Kong.That would dispose of ownership and management transparency worries at a stroke. But is Mr Ren willing to make such a dramatic move to make his point? Or, perhaps we should ask, will he be allowed to?Kevin Brown is the Financial Timess Asia Regional CorrespondentUS companies find China less welcoming By Jamil Anderlini in Beijing Government moves to exclude foreign businesses from parts of Chinas booming market have led to a jump in dissatisfaction among multinational companies and growing complaints of protectionism, according to a survey released on Monday.The proportion of US businesses that feels foreign companies are increasingly unwelcome to participate and compete in the Chinese market rose to 38 per cent in February, up from 26 per cent just two months earlier, according to the American Chamber of Commerce in China.That was the highest level of concern since Amcham began polling its members four years ago.The rising discontent among US businesses comes amid worsening bilateral relations and as Washington applies pressure on Beijing to allow its currency to appreciate.But the mood is not restricted to American companies, with businesses from all over the world and across a wide range of sectors increasingly disenchanted about operating in China, according to Joerg Wuttke, president of the European Chamber of Commerce in China.“The mood has obviously soured in several areas,” Mr Wuttke told the Financial Times on Monday. “Businesses feel the market is growing but the access is getting narrower.”He said this was even leading some multinational companies to consider diversifying some investment away from China to other parts of the Asia-Pacific region, a suggestion that was rarely heard just six months ago.The spike in discontent among foreign businesses is partly related to new Chinese “indigenous innovation” regulations proposed at the end of last year that will require government procurement to favour products that include Chinese intellectual property.Among US high-tech and information technology companies that responded to the Amcham survey, 57 per cent said they expected to lose business in China as a result of the new rules.Some Chinese regional governments have already compiled catalogues of products approved for government procurement, heavily favouring domestic companies based on the indigenous innovation