Beijing Suffers Major Loss from Its Hostage Diplomacy
Late last week, China, Canada, and the United States finally took steps to remove a major thorn in their relationships that many never expected to occur: Huawei CFO Meng Wanzhou and Canadians Michael Kovrig and Michael Spavor all simultaneously went home. The longer these cases dragged out and U.S.-China relations worsened, it seemed that Kovrig and Spavor were destined to spend years in prison, coupled with a continued extradition fight in Canada by Meng, potentially followed by a long trial in the United States.
Some observers believe the Biden administration broke under extended pressure from Beijing and finally gave in, handing China a major victory and reinforcing its penchant for intimidation and the use of coercive tools. In actuality, it was Beijing who caved and comes out far and away the biggest loser from its ill-fated resort to unscrupulous intimidation.
Beijing’s Losses, Let Us Count the Ways
The defeat for Beijing was not absolute, but it was quite comprehensive, and those who advised the Xi leadership to take this approach will have a lot of explaining to do.
First, Beijing miscalculated along a number of dimensions. It assumed the world would not pay much attention to the taking of two hostages because previous similar cases did not garner widespread attention. In reality, the global community mobilized in a highly public way, turning the Michaels into household names. This was in part because of how blatant China’s retaliation was, but also because in detaining Kovrig, China had crossed a new line, indicating that it was open season on think tank and university scholars if they found themselves in the wrong place at the wrong time. Kovrig’s employer, the International Crisis Group, and other scholars mobilized with petitions and other steps to keep this case in the spotlight.
Beijing also figured incorrectly that Ottawa or Washington would crack first, with the United States either unilaterally withdrawing its extradition request or with Canada’s top leadership putting its commercial ties with Beijing ahead of its treaty obligations with the United States and its own commitment to rule of law. Instead, both Washington and Ottawa held firm in their ties and to due process, despite the substantial costs in doing so. Beijing also thought Canada’s courts would agree with Meng’s legal arguments and rule in her favor, allowing her to be released without concessions. In reality, Beijing and Huawei badly overestimated the strength of their legal position. And, finally, Beijing thought its public argument—that despite superficial differences, Canada and the United States were equally guilty of using law for their own political ends—would be persuasive. This effort at moral equivalence won Beijing points at home (which was the leadership’s key target audience), but few outside China bought that story. The contrast in how Ms. Meng and the two Michaels were treated from beginning to end throughout this ordeal highlighted how unpersuasive such a framing was.
Second, it was Beijing who blinked first. Negotiations over a possible resolution occurred off and on going back to the first few weeks after the detentions. Since at least the spring of 2020, the U.S. side was consistent in demanding that Meng admit to the facts surrounding the accusation of fraud she and Huawei committed against HSBC in order to reach a deal. The deferred prosecution agreement reads like an admission of guilt and leaves her and Huawei in continued legal jeopardy. Beijing had balked at Meng and Huawei making these admissions, but apparently changed its mind once it belatedly realized that Canada’s courts would likely rule in October against Meng, bringing her one step closer to a U.S. courtroom and a jail cell.
Huawei also gave ground. It had hoped any arrangement would include a softening of export controls, a loosening of the restrictions on its access to the U.S. market, and a relaxation of the campaigns to slow the company’s development of its own semiconductors and to dominate the global 5G telecom equipment market. That did not occur. The May 2019 placement of Huawei on the Commerce Department’s Entity List is still in place, as is the update from May 2020 invoking the foreign direct product rule, requiring U.S. approval for non-U.S. companies selling covered products made with U.S. chip manufacturing equipment and tools to Huawei.
Third, Beijing’s actions reconfirmed the international community’s conclusion that China has no regard for rule of law and due process. A few days after Meng was detained, realizing there would be no quick unilateral release, Beijing moved to take two hostages whom it would hold for negotiating leverage. Kovrig and Spavor were held incommunicado for an extended period, given insufficient access to consular services and legal counsel throughout—in contravention of Canada’s consular agreement with Beijing—and put through many hours of intense interrogation. The charges against them appear entirely trumped up, which may explain why their “trials” were closed to the Canadian embassy and were completed in mere minutes. The “evidence” against Kovrig included articles he had published. The contrast with the due process Meng was afforded could not have been starker.
The final resolution further revealed Beijing’s disinterest in legal processes. Despite claiming the Canadians’ cases were unrelated to Meng’s and that the Canadians had been convicted of serious offenses, Beijing agreed to a simultaneous release and did so without first issuing a final sentence on Kovrig or leaving any time in between the flights to claim plausible deniability in the cases’ links. That may be why, in the hours following the exchange, the Chinese government and official media were mum on the cases of Kovrig and Spavor. Only a few days later has Beijing explained, unpersuasively, that their release was owing to medical issues.
And fourth, the fallout from this drama has profoundly undermined a bevy of Beijing’s goals, including strengthening its international image, advancing its high-tech prowess, and forcing countries to submit to its pressure. China’s reputation has been badly stained by its detention of Kovrig and Spavor. According to Pew Research, more than just Canadian public opinion has cratered, with 73 percent seeing China unfavorably; publics across the Western world have also turned sharply critical of Beijing. In the 13 months between the Michaels’ arrest and the outbreak of the pandemic, international CEOs evaluated the risks of visiting China, and many decided to stay away. The longer this case dragged on, the more entrenched their fears have become. Similarly pronounced has been the worsening shift in opinion by the scholarly community. A June 2021 survey of China hands asked whether they would return to China once the pandemic ends and normal travel resumes; a whopping 40 percent said “probably not” or “definitely not.” Although some Chinese officials may believe the country is safer without pesky foreign experts digging into the country’s affairs, their diluted presence is leading to greater Western hostility against China, as there is less ability for scholars to understand and explain China’s complex reality to the rest of the world. Instead, there will continue to be much greater focus on analyzing official Chinese documents and policies, which, given China’s hardening direction, will exacerbate international mistrust and Beijing’s anxieties.
This case is part of the body of evidence that has moved some from advocating patient engagement with China to endorsing a shift toward adopting a more competitive posture, including accepting some sort of limited decoupling, particularly in advanced technology. A recent CSIS survey shows that concerns about Huawei and China’s technology prowess are widespread in Europe and Asia. The policy discussion about high tech in Washington and other capitals now squarely revolves around the question of how to mitigate risks against China, not expand opportunities.
China’s high-tech drive is suffering as a result. Huawei has adjusted its focus and should not be dismissed, but sanctions have taken a major toll on the company. It is no longer the dominant mammoth it once was and faces major headwinds in almost every business category, including 5G equipment, semiconductors, handsets, and cloud services. In addition to penalties against Huawei and other high-tech Chinese companies remaining in place, the Biden administration and Congress are on a path to expand restrictions and reduce the West’s overdependence on supply chains that run through China.
Rather than lead countries to be more fearful of Chinese high-handedness, other governments have followed Canada’s lead and developed a stiffer backbone against Beijing, among them the European Union on the issue of Xinjiang, Australia on Covid-19 origins and the South China Sea, and Lithuania over the name of Taiwan’s representative office. Canada was able to mobilize 66 other countries to sign a declaration against arbitrary detention in state-to-state disputes. There are now growing consultations about how to collectively push back against Chinese coercive diplomacy regardless of the individual victim.
In sum, China’s scheme to force Meng’s release by taking hostages backfired in ways big and small. China showed its teeth, but instead of cowering in fear, Canada and the United States held firm. Chinese state media is highlighting Meng’s return home as proof of their victory, but this claim is reminiscent of the Lu Xun character Ah Q, who deluded himself into thinking that his string of failures were actually successes. And given that some see China’s disregard for norms and rules in this case as a small sign of how it may increasingly act in coming years as its power grows, the fallout for China could reverberate to Beijing’s detriment for years to come.
Washington Has Some Soul Searching to Do
As deeply as this case has hurt China, the United States needs to conduct a top-to-bottom review of its actions. Recognizing this need does not equate with accepting China’s narrative; rather, it is the kind of open self-reflection that democracies must take in order to learn from their mistakes, improve their policies, and effectively advance their interests.
It is debatable whether the United States should have pursued a criminal case against Meng and sought her extradition. Prosecutors and the U.S. Justice Department are not automatons, and in fact, have a high degree of latitude when deciding how to handle international misdeeds they uncover. In this instance, it appears that while lawyers in the Department of Justice were focused on the legal issues at hand, senior officials in the Trump administration who could affect whether the case went forward were motivated by broader geostrategic reasons. Some saw pursuing a criminal case against Meng as appealing because it opened a new front against Huawei and could possibly induce a huge overreaction from China that would generate support for a more hawkish U.S. approach to Beijing. Others saw the Meng case through the lens of the Middle East and speculated that going after her was tied up with Beijing’s opposition to the Joint Comprehensive Plan of Action reached to rein in Iran’s nuclear program. To them, stepped up enforcement of U.S. sanctions was part of a strategy to undo the deal and take a harder line toward Iran.
Even if one puts aside the geostrategic calculus, there are reasonable concerns about the United States’ legal strategy. There was a technical legal basis to pursue a criminal case and national security issues were involved, but a civil action against Huawei would have been more in keeping with international precedent and more akin to how the U.S. federal government and states prosecute major white-collar misdeeds. Moreover, even if the United States could demonstrate that fraud occurred, its standing in the case seems suspect, given that whatever deception occurred was between a Chinese company and a British bank in a Middle Eastern country; the Unites States’ claim for jurisdiction is based on the fact that HSBC has U.S. branches and hence is subject to U.S. sanctions laws. That seems like somewhat of a stretch and is one of a number of factors that may have made achieving a guilty verdict more difficult had the case gone to trial.
Equally concerning are the United States’ missteps in carrying out its plans, particularly in the early days and weeks of the case. In its zeal to go after Huawei and Meng, insufficient effort went into considering how China might respond or contemplating the difficult position the United States might place third countries in. In previous cases involving the arrest of its nationals by Canada, China had followed the exact same MO, taking hostages in response. It does not appear this possibility, whether for Canada or another country, was given much thought, either before the initial indictment was issued or once the United States learned that Meng would be traveling through Canada in late November 2018.
To make matters worse, precisely when Meng was being detained in the Vancouver airport, former president Trump and President Xi were meeting in Buenos Aires, Argentina, on the sidelines of the G20, to negotiate a resolution to the trade dispute. Trump apparently was not informed of Meng’s detention until after his meeting with Xi ended. Had he known, Trump could have explained the reasons for seeking Meng’s extradition and reduced the likelihood of Chinese retaliation. Instead, the Chinese leader may have concluded Trump intentionally deceived him, making China more determined to strike back. On top of all of this, Trump’s statement soon after that he might consider releasing Meng if China met his trade demands likely reinforced Beijing’s impression that the case was merely a hardball negotiating tactic—a game officials were willing to play. Trump’s words did not derail the extradition process, but they could have undermined the U.S. legal position had there ever been a criminal trial.
Given the Meng case’s geopolitical background and reasonable debates about its legal foundations, it is not surprising that the Biden administration supported reaching a deal between Meng and the prosecutors, paving the way for Kovrig and Spavor to return home. Looking ahead, the lessons for Washington are clear. On the legal front, the merits for cases must be airtight before going forward, not only for the sake of the United States, but also for other countries that might become involved. In addition, U.S. politicians must maintain their distance from cases, both in reality and symbolically. On the diplomatic front, it is critical to evaluate how China or other targets may respond and make preparations for alternative scenarios. In this instance, the United States was right not to bend once China had taken hostages (and that principled position should not change), but it may be able to reduce the likelihood of such escalation occurring at all. Careful diplomacy is also needed with allies and others the United States has an extradition treaty with to ensure that broader relationships are strengthened, and not harmed, by the stresses of such cases. Taking these steps will not eliminate the downside risks, but it will make the United States better prepared to deal with any eventuality, reduce the extent of any potential damage to the country, and avoid the suffering of innocent bystanders such as Kovrig and Spavor.
The even bigger question is whether China will take to heart any lessons from this massive defeat. Based on past experience and the fear Chinese officials may have in honestly evaluating their behavior, China may just double down and become more vindictive, believing that tit-for-tat intimidation is the only tool it has to invoke compliance, or at least signal its disapproval of those who remain stubbornly defiant. But the grim outcome of its own stubbornness should be clear to China: Beijing’s growing isolation and increased tensions with a world that increasingly only sees dangers in China’s success. For a country that aspires to greatness, Beijing must avoid being its own worst enemy. Achieving that realization would benefit not only Kovrig, Spavor, and other foreigners who travel to and engage with China, but also Chinese citizens, from wealthy executives such as Ms. Meng to college students and businesspeople seeking to constructively participate in the rich tapestry of global society. Beijing could—and should—do so much better by them.
Scott Kennedy is senior adviser and Trustee Chair in Chinese Business and Economics at the Center for Strategic and International Studies in Washington, D.C.
Related Program Activity:
Scott Kennedy, Jude Blanchette, Matthew P. Goodman, and Bonnie Glaser, “We Stand with MERICS,” CSIS, Commentary, March 26, 2021, https://www.csis.org/analysis/we-stand-merics.
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