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Huawei's cryptic gift is more than a souvenir

Chinese group's choice of reading for visitors shows defiance toward US

Employees walk at Huawei headquarters in Shenzhen, China.   © Reuters

Visitors to Huawei's headquarters these days may receive a particular gift. But it is not a smartphone or any of the other products that have helped make the Chinese company the biggest telecommunications equipment manufacturer in the world. Instead, it is a book written by a Frenchman who spent time in a U.S. jail.

Visitors are given the book, "The American Trap" by Frederic Pierucci, because it is said to be favored by Ren Zhengfei, the founder of Huawei and father of Meng Wanzhou, the Huawei executive who is currently being held in Canada awaiting extradition to the U.S.

The book struck a chord with Mr. Ren, executives said, because Mr. Pierucci accuses the U.S. of using its judicial system to weaken companies that compete with big American firms. The Frenchman went to jail for authorizing bribes to win a contract in Indonesia against competition from U.S. companies.

The gift reveals Huawei's mood of defiance. But is goading Washington by suggesting that it lacks judicial independence a wise strategy? Make no mistake: the very survival of the Chinese champion is at stake.

The inclusion of Huawei and 68 affiliates onto the U.S. "entity list" means that the Chinese company is barred from buying components from American suppliers. Catherine Chen, a Huawei board director, told me: "We are looking into all possible measures to solve this issue. [But] it seems the U.S. government has little intention to solve this issue. They only want to take us down."

Indeed it is clear -- unless the U.S. grants a reprieve -- that Huawei will sustain huge damage to its global business.

One key vulnerability is in cybersecurity. Two-thirds of the software packages that Huawei uses to protect its products come from U.S. suppliers. In another dependency, about one quarter of the 200 million smartphones that Huawei sold last year contained semiconductors from Qualcomm, a U.S. company.

A tour of Huawei's production line in Dongguan, southern China, also revealed that several of the machines used to make the latest smartphone models carry U.S. company brand names.

Although the Chinese company has three months to find alternatives before the U.S. ban takes force, it may prove difficult to find adequate replacements in short order, analysts said.

With so much at stake, it may seem curious for Huawei to risk inflaming U.S. opinion by handing out Mr. Pierucci's book to visitors. But such a reading fails to take into account the broader tactics that both the Chinese government and Huawei are adopting.

Huawei hopes to get Washington to soften its stance by impressing upon U.S. companies how much they stand to lose if they cut the Chinese company off. Thus, executives told journalists last week that as many as 1,200 suppliers to the Chinese telecom group will be hit if the U.S. ban comes into force.

Similarly, Beijing -- which this week issued a travel warning to its citizens over traveling to the U.S. -- has been threatening a series of moves that could hit American exports to China. It has also threatened to cut off the supply of some 17 rare earths, minerals that U.S. manufacturers rely on.

All this suggests that China still sees the issue of Huawei -- and possibly also the fate of Ms. Meng -- as up for negotiation within the framework of the bilateral trade war. Perhaps this is an astute call; maybe the White House of Donald Trump will be willing to lift the Huawei sanctions in return for selling many more bushels of soybeans to China.

But there is also a much bleaker reading. Maybe, as Ms Chen said, Washington just wants to take Huawei down. And after it has done so, it wants to lay the foundations of a new cold war.

James Kynge is editor of Tech Scroll Asia, a newsletter on technology in Asia that combines the best reporting from Nikkei and the Financial Times. He is also the FT's Global China editor, writing about China's growing footprint in the world, and won the Wincott Foundation award for the U.K.'s Financial Journalist of the Year in 2016. His prizewinning book, "China Shakes the World," was translated into 19 languages.

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