Huawei Tries to Steer Clear of Allegations About Murky Financing

By Olivia Li, Epoch Times
April 25, 2019 Updated: April 25, 2019

In response to recent media and scholarly reports that Chinese tech giant Huawei is funded by the Chinese regime and is not 100 percent employee-owned as it has claimed, the company held a press conference on April 25 seeking to clear the allegations.

“Most of the claims made by the U.S. government [about Huawei] are not true,” said Jiang Xisheng, chief secretary of Huawei’s board of directors, at a press conference in Shenzhen City, southern China, where the company is headquartered. “There is no government capital in Huawei,” he added.

Huawei has repeatedly rejected concerns from U.S. officials, lawmakers, and experts about the company’s close links with the Chinese regime, saying it is a private company wholly owned by employees, and thus operates independently and without interference from state authorities.

But a recently published research paper by two scholars found that Huawei is 99 percent owned by a trade union, where employees didn’t have real ownership stakes.

“Given the public nature of trade unions in China, if the ownership stake of the trade union committee is genuine, and if the trade union and its committee function as trade unions generally function in China, then Huawei may be deemed effectively state-owned,” the researchers had concluded.

In response to the paper’s findings, Jiang tried to play down the union’s role in the company.

“The trade union committee, which manages the union in Huawei, organizes some amateur, after-work events including physical activity, to ensure employees have a healthy work-life balance,” such as badminton and hiking activities, he said. “It is not involved in any decisions connected to Huawei’s business and operations.”

Research Paper: Who Owns Huawei?

Huawei has repeatedly stated that the company is jointly owned by Ren Zhengfei, the founder, who has 1.14 percent of the shares, and the 100,000 or so employees who own the rest. It is also written into the company’s annual report, which stated, “Huawei is a private company wholly owned by its employees.”

Christopher Balding, an associate professor of economics at Fulbright University–Vietnam, and Donald Clarke, a professor of law at George Washington University’s Law School, published a paper on April 17 titled “Who Owns Huawei?” on SSRN, an online sharing platform for scholars. They sorted through publicly available information from both China and overseas, and came up with a picture of Huawei’s ownership and control structure.

They concluded that Huawei’s claim of 100 percent employee ownership is false.

Instead, they found that the Huawei operating company is 100 percent owned by a holding company, which is in turn approximately 1 percent owned by Huawei founder Ren Zhengfei and 99 percent owned by an entity called “Huawei Investment & Holding Company Trade Union Committee” (Huawei Holding TUC).

The so-called “employee shares” act as virtual stocks, allowing them a share in profits, but no company voting power. The stocks cannot be transferred and are canceled when an employee leaves the company, making it more like a “profit-sharing incentive scheme,” the researchers found.

Though the report didn’t make a conclusion regarding the company’s actual owner, it established that “regardless of who, in a practical sense, owns and controls Huawei, it is clear that the employees do not.”

Beijing Funding

Meanwhile, a media report once again highlighted the opaque inner workings of the company.

UK newspaper The Times, citing an anonymous source, revealed in an April 20 report that, earlier this year, the U.S. CIA showed its partners in the Five Eyes intelligence alliance—the UK, Australia, New Zealand, and Canada—evidence that Huawei had taken money from the People’s Liberation Army (the official name of the Chinese military), China’s National Security Commission, and an unnamed branch of the Chinese state intelligence network.

In response to the claims, a company spokesperson told the outlet that “Huawei does not comment on unsubstantiated allegations backed up by zero evidence from anonymous sources.”

This report, however, added to the piling allegations that cast serious doubts on the company’s claims.

Huawei’s PR Companies in US Register as Foreign Agents

In order to save its image in the United States, Huawei has contracted two U.S. firms, Racepoint Global and Burson Cohn & Wolfe (BCW), to lobby on its behalf and provide legal services. According to documents obtained by the Center for Responsive Politics, a nonprofit research group that tracks foreign government lobbying activities, the two companies registered with the Department of Justice as foreign agents in March.

According to its filings under the Foreign Agents Registration Act (FARA), BCW disclosed that it will develop a campaign to improve Huawei’s reputation in the United States by working with business partners, advisory council members, media outlets, influencers, and “key opinion leaders,” with a budget of $160,000.

Racepoint’s FARA filings similarly state that it will visit with influential people and draft promotional content, but will “have no direct contact with government officials.”

Huawei is paying Racepoint $55,000 per month through September 2019, according to the filings.

In past years, Huawei has disclosed that it spent upwards of seven figures on lobbying efforts, as reported under the domestic Lobbying Disclosure Act (LDA), according to the Center’s findings. But this is the first time that U.S. firms have registered as foreign agents for Huawei.

Huawei also has an ongoing lobbying and public relations campaigns in Canada and the United Kingdom.