Huawei CEO Ren Zhengfei's Interview with The Economist, Part 2

Interview

Part of Huawei’s job is to try to rebuild trust. We asked Huawei CEO Ren Zhengfei whether there some radical options open to the company in this regard. For example, welcoming a foreign investor or perhaps even selling parts of the 5G business operated outside of China.

“It's unlikely that we will consider introducing external investors, because they often focus on profit,” he told us. “For Huawei, we put our aspiration above profit. Would we license our technologies to Western countries? Yes. We would even be open to licensing all of our technologies. Our aspiration is to "serve humanity and achieve the pinnacle of science". Collaboration is consistent with our values, so we are willing to license our equipment to Western countries.”

Would this be a sale of the business, perhaps the 5G business, in some geographies, or licensing the technology to other manufacturers? If so, how would it affect employees?

We can license technologies and production techniques. Whoever gets the technologies can develop new things based on them. We would most certainly not transfer our employees. It would just be the technological know-how.

Who do you think would be the partners? What kind of companies in America, for example, might be counterparts?

I haven't had any of this kind of discussion with anyone else yet, so I have no idea.

Americans are thinking: Why would we let a Chinese company build something as sensitive as 5G? How big a solution are you thinking about to solve this problem? How radical is a transfer to 5G technology?

If we transfer all our technologies to the US, then they can modify the code themselves. Neither Huawei nor anyone else in the world will be able to access these technologies anymore. The US will have independent 5G. Security won't be an issue as long as the US can properly manage its own companies. Then it will not be about us selling 5G in the US, but rather about US companies selling their own 5G in the US.

Can you envisage Huawei competing with this hypothetical new entity in 5G technologies, outside of China, obviously not inside the United States, but in Africa or parts of Europe?

Huawei can compete with new entities in those markets as well.

Politically, would it be better to have an American partner for 5G, or a European or Japanese partner?

It depends on how big a market the potential partner would be able to carve out. If they could only capture a little market share through the purchase of our technologies, then that wouldn't be worthwhile. Such a deal is only feasible when they can anticipate a large market share using our technologies. This is an evaluation process our potential partners will have to go through.

What would be the time horizon for a radical project like this?

Pretty quickly.

The Chinese political system is a one-party system, where students cannot see everything on the Internet and cannot read any book they want. Does that impose any limit on Chinese innovation or creativity? Is there an advantage to being a democratic country in the field of innovation?

Academic freedom is the foundation of innovation. The freedom to have different academic ideas and to study whatever you want is very important. Undoubtedly, the US has the world's most innovation-friendly environment. Thanks to the Internet, people have easier access to information. Science and engineering papers have nothing to do with ideology, so they can be published and shared all over the world.

For example, the very source of 5G technology is a mathematical paper written in 2007 by Erdal Arikan, a Turkish mathematics professor. Two months after he published the paper, we read it. Then we put a lot of work into researching the paper and turned it into today's 5G standard.

China still has an inclusive environment when it comes to science and technology. On top of that, Huawei has a large number of non-Chinese scientists. We are doing our best to take in the nutrients of the times we are in, so we can move forward faster.

Do you make sure that your designers and your researchers have VPNs so that they can see foreign news or foreign politics to look at big important questions that are not available to Chinese people?

If our engineers became politicians, Huawei would collapse. Engineers should focus on developing good products. They don't need to read about politics. What's the point of them caring about political issues? If our engineers are all out protesting, who is going to pay them?

AUTHOR: There was a famous speech that Deng Xiaoping gave in March 1978 about science in China, and he said exactly that it was time to allow scientists to do science and not to ask them to read too many political essays or to study politics. When we talk to professors at Chinese universities, they complain that the pressure now is to study Xi Jinping's thoughts and to study a lot of politics, and they feel that the time to think is being limited. Huawei is a private company. We asked Mr Ren if he felt pressured to have his scientists studying politics, or if he protects them, like Deng Xiaoping said, from studying politics to let them focus?

“I was there when Deng Xiaoping made those remarks at a national science conference,” he told us. “I was one of the 6,000 representatives, and I burst into tears when hearing his speech. Deng said we should spend five days at work and one day for political studies. Back then, Chinese people worked six days a week, and too much time was spent on political studies. We were very happy that we could spend five days a week at work. I have always believed that politics should be done by politicians, and engineers should focus on technology. Engineers who don't understand technology aren't worth their wages.”

Mr Ren is a Party member, and party members now have an app for studying Xi Jinping's thoughts on their phones. We wondered if they worry that some people in the Chinese Communist Party are forgetting the wisdom of that speech in 1978, and whether they now want engineers and busy people like Mr Ren to spend maybe an hour or two every day studying politics.

“President Xi's speeches cover a lot of areas, such as agriculture, healthcare, and rural development,” he answered. “These topics are not strongly related to us. As we are a technology company, we mainly study his speeches about science and technology development. Of course, those who work for the Party or government or those who want to become party or country leaders may need to spend more time learning about all those areas.

“I listen to President Xi's speeches. In his speech at the Boao Forum for Asia, he spoke about China further opening up to foreign investment. When it came to his speech at the China International Import Expo in Shanghai, he talked about reducing tariffs for vehicles. These speeches contain his instructions, and we are pleased that our country continues to develop under these instructions. The tax for small and medium-sized enterprises in Shenzhen has been significantly reduced, and low-income workers such as taxi drivers no longer need to pay income tax. This is a lesson learned from Hong Kong. China Central Television broadcasted lessons learned from Hong Kong. Caring about poor people's lives is one such lesson. We should provide poor people with accommodation. If their lives are up to a certain standard, there is a much lower chance they will cause problems. Even if a small number of people do stir up trouble, they will have few supporters. These points are also part of President Xi's thoughts, which I saw on TV.”

Private company Cathay Pacific Airways was forced to change its senior leaders and some employees for reasons that are 100% political and related to the protests in Hong Kong. We asked Mr Ren if, when he sees the Chinese central government using its strength to make a private company take political decisions, it makes life more difficult for every private company in China, when they want to tell foreigners that they are not controlled by politics?

“The issue in Hong Kong was caused by extreme capitalism,” he said. “Large capitalist institutions have made enormous amounts of money, and they even control many newsstands, underground garages, and coffee shops in Hong Kong. They have gained a lot of benefits, but the general public don't have much money, and many have fairly low living standards.

“I saw the notice issued by Civil Aviation Administration of China (CAAC) in relation to Cathay Pacific. This notice said that some pilots and cabin crew members who worked for Cathay Pacific had been involved in questionable activities related to the Hong Kong protests. So CAAC had concerns about these pilots. That's why CAAC asked Cathay Pacific to regulate and control its flights to the Chinese mainland. I think CAAC's action makes sense, because it was taken to ensure aviation security. In addition, there have been no such limitations to Cathay Pacific's flights to other places.

“I personally believe the Chinese central government has acted sensibly in dealing with Hong Kong. China adheres to the "one country, two systems" principle. The system in the Chinese mainland and the system in Hong Kong are different. Demonstrations, protests, and shouting slogans are allowed in Hong Kong, but I do not think violence is appropriate.

“The Chinese central government still hasn't taken any action in Hong Kong. If the current situation in Hong Kong continues, business, finance, and tourism in Hong Kong will be affected, and it will be more difficult to address the issues with the poor there.

“A lesson we are learning from the current situation in Hong Kong is that the divide between the rich and the poor shouldn't be too large, and extreme poverty should be eliminated.

“The Chinese central government has made great efforts to eliminate poverty. In recent years, I have personally travelled through several provinces along the Chinese border, such as Xinjiang, Tibet, and Yunnan, places previously known for being very poor. From what I saw, the living standards of the people there have improved a lot, especially in Tibet. Tibet has improved faster than Xinjiang, and both places seem to be enjoying much stability. I didn't know the real situation there until I had gone there and seen how people's lives had improved with my own eyes.

“I think more foreign journalists should also be able to visit these places. I have been to some of the most poverty-stricken areas in Yunnan, Guizhou, Tibet, Xinjiang, and other regions, and I don't think a color revolution will happen in China.”

Huawei is one of the biggest infrastructure companies in the world. And over the last 20 years, it has become larger and larger, and has been the target of intelligence agencies. We asked Mr Ren to tell us how Huawei approaches operational security and how much it spends on counter intelligence.

“First of all, at Huawei, cyber security and privacy protection are the company's top priorities,” he noted. “Huawei resolutely incorporates requirements of the EU's General Data Protection Regulation (GDPR) into all of our business processes. We are now investing heavily to upgrade existing networks and build new networks.

“Second, for more than 30 years, Huawei has provided network services to over 1,500 carriers in more than 170 countries and regions, serving approximately three billion users. We have maintained a proven track record in security. In fact, we have never had any major security incidents.

“Besides, we are more than willing to submit ourselves to strict oversight in countries where we operate. At present, the UK has conducted the most stringent oversight of Huawei. Why is the UK determined to continue using our equipment? Because they still trust us despite the few problems and flaws they have found with our equipment. They may even trust us more than other suppliers because we have been more rigorously reviewed.”

Don’t miss out on the continuation in Tuesday’s issue of GT.

By The Economist team