Ren Zhengfei's Northern European Media Roundtable, Part 2

Ren Zhengfei, Huawei CEO, welcomed media from northern Europe to a roundtable and invited them to ask whatever they wished, however challenging the question. GEORGIA TODAY will be publishing those questions and answers in the present and following issues of GEORGIA TODAY newspaper.

The US is contemplating funding money to issue credit to Huawei’s competitors, including Ericsson, to make it easier for them to compete with you. What's your view on this?

First, it is understandable if the US government issues credit to Ericsson and Nokia, or customers that buy equipment from them. It is a positive measure that we understand and support. I think this is good for society, because new things cannot collect funds as soon as they start developing. So I understand and support what the US government is doing.

Second, Huawei is unable to receive such financial support. Over the years, our business operations have provided 90% of the capital we need and are continuing to contribute cash flows to the company. So we have sufficient cash. Our rapid growth over the years is attributed to sufficient money and simple decision-making processes.

In the capital market, many shareholders often spend so long arguing that an age has passed before they have finished. However, we have a unified will at Huawei when it comes to decision making, so that we can quickly decide and invest large amounts of money in certain areas. This is a characteristic of our management.

Providing buyer's credit is a common practice internationally, so it is understandable for any country to help its export companies. For example, airplanes are bought through financing and leasing. Airlines have to pay off the money to banks in seven or eight years before they own the planes. Financing and leasing are common practices all over the world, so we support the US government's funding for Ericsson and Nokia. If their market shares increase while ours decrease, there would be no conflicts between us.

Some people see Nokia's reputation as more transparent and more reliable compared with Huawei's. Can you describe your personal view on that?

Finland is a great country. I have two reasons for believing this. First, today's Android system originated from Linux, which was invented in 1991 by a Finnish person. Linux then went open source and evolved into today's Android. Finland has made significant contributions in this regard.

Second, we worked with the University of Tampere and invented block-matching and 3D filtering (BM3D) technology for noise reduction. With this technology, people can use cellphone cameras to take clear photos in the dark. This technology was initially found in an academic paper from a Finnish university.

Third, Nokia is a role model that we used to admire. Nokia started as a pulp mill and developed into a leading global cellphone maker. But Nokia later took a detour during the course of its development. The company stuck with the path of the Industrial Age, which placed quality as its top priority. Nokia phones were the only phones that could be sustained for almost 20 years. Someone once asked me to help repair his phone. When I found that it was a Nokia phone dating back over 20 years ago, I thought he should take it to Nokia's museum in exchange for a new one. This example showed that Nokia was determined to follow the path of the Industrial Age.

Technologies evolve very rapidly in the information society. The quality of mobile phones is now overshadowed by customer experience, but Nokia has failed to keep pace with this trend. However, Nokia is still a great company.

Some people always think that Huawei is not transparent. But in fact, Huawei is highly transparent. Our financial reports have been audited by KPMG for over a decade, and our financial statements clearly explain where our money comes from. The US government should take a look at these statements.

Some people think we are not transparent because we haven't gone public, but this doesn't make sense to me. Huawei adopts a new model under which its funds are collected from its employees. This may even become a model for most companies in the future. How is this model different from those of Northern Europe? There is no difference at all. In other words, we embrace employee capitalism, instead of the large-shareholder capitalism adopted by Wall Street, and there are no zillionaires at our company. Under employee capitalism, many employees are getting a certain amount of shares, providing assurances to them once they are retired or if they get sick. Isn't this modeled after those of Northern Europe? Don't you embrace people's capitalism? Northern Europe does not have zillionaires, but it is still one of the richest places in the world.

Norway is very wealthy, but the people there still drive small cars and live in small houses. Every time I return from Norway, I ask our employees to learn from the country. In China, people tend to buy big cars and big houses. Since we are still a developing country, how can we live such luxurious lifestyles? We should be saving money for production and investments.

Our company is transparent throughout and exposed under the sunshine. Over the past 30 years, people around the world have kept a close eye on Huawei, including the Central Intelligence Agency and other US government agencies. They've continued watching us but haven't found any problems. Isn't this a proof of our transparency? We are just as transparent as Nokia.

You are a really powerful man in China and a member of the Party. What is your personal relationship with President Xi Jinping and the last time you met?

I only met President Xi once at Huawei's UK office in 2015. It would be nice to see him again, but I haven't got any invitation yet.

You may have been personally affected by the rift between the US and China since your daughter was arrested in Canada. Is that designed to put pressure on you and your company or designed to put pressure on China?

As for the case regarding my daughter's detainment in Canada, this will be decided by the law. Right now we can't know for sure if there is a connection. My daughter is a grown woman, and she can handle challenges herself. I have three kids, and they are all independent and strong-willed. I have been married twice. Right now, I am married to Yao Ling. She is a kind and responsible mother. For 20 years, she chose to stay home to take care of our daughter, teach her to be diligent in her studies, and help her form good habits. My youngest's achievements are the result of her own strength and the education she received from her mother. I have always been busy with my work and didn't spend much time with my kids during their childhoods.

I think letting kids face some challenges isn't necessarily bad for them. As for the challenge now facing Wanzhou, I hope it won't get tangled up with state affairs. I don't think the country should make concessions for us, because they may have to sacrifice the interests of the less privileged. We think we should solve the issue by relying on the law and the courts.

In the current political climate, what is your advice to the big carriers that will now decide on 5G? And your advice to European countries' governments in the current political situation?

I fully support the digital sovereignty proposed by the EU. Digital sovereignty is as important to a state as their geographical sovereignty. Geographical sovereignty relates to geopolitics. This is not the case with digital sovereignty because information flows globally, so digital sovereignty is necessary. I agree with the idea that every country should establish their own digital sovereignty, and I fully support the strategies and requirements of digital sovereignty. We will try our best to contribute to the infrastructure they need in the EU. We are committed to going open source with our key technologies such as compilers and MindSpore framework for AI and Kunpeng products for European and global developers. European companies can innovate based on these open platforms, and their innovations will impact the world and extend to China. This will help improve their market and revenue structures. We aspire to support the development of at-scale digital ecosystems in Europe.

Given the current political climate, how important is technology, speed, and quality in products? How important should each of these things be in decision making?

It's very hard to say. Different people like to buy different things. There is no standard way to decide what to buy. It wouldn't be practical for shops to only sell Hermès bags and not sell any other brands. Shops will sell different commodities for different uses. I don't think it's appropriate to buy things based on political factors. Products related to infrastructure have long lifecycles, and if you lag behind at the beginning, it becomes hard to catch up.

For example, Europe lagged behind China more than a thousand years ago. China's prosperity in its Tang and Song Dynasties is reflected in classical Chinese paintings like Along the River During the Qingming Festival (Qingming Shanghe Tu). Why did Europe develop faster while China fell into poverty over the last few hundred years? Because Europe invented the train and steamship, while China was still using horse-drawn carriages. Carriages move much slower than trains and carry less cargo than ships. Therefore, Europe developed, and China lagged behind in terms of industrialization. Speed determines achievement.

As for 5G, I think people should choose products that are able to deliver fast speeds, large bandwidths, and low latency for the development of an information society. 5G has presented new development opportunities, and we should choose the best equipment. I think products made by Ericsson, Nokia, Huawei, and Samsung are good choices, and are able to support decent networks. Carriers make their own choices based on their own decision-making mechanisms. They need to take speed into consideration, because speed is critical to social advancement. Trains and ships were faster than Chinese carriages, so Europe developed faster than China.

How did Huawei manage to overtake Nokia and Ericsson and why is there no mobile network company in the US? What is the Chinese idea? Why has it worked so well?

First, Huawei, Ericsson, and Nokia are on good terms. We worked together to create industry organizations like the 5G Automotive Association (5GAA) and the 5G Alliance for Connected Industries and Automation (5G-ACIA), which are set to contribute significantly to Europe's industrial development. Europe is known as a talent hub with a small population. With AI, Europe will be able to produce a massive quantity of goods with a relatively small workforce. There's a lot to look forward to in terms of what AI can bring to Europe. 5G is just a supporting pillar of AI. We are working with Ericsson and Nokia in good faith to advance the development of 5G.

As we move forward, conflicts between us will inevitably arise. But I would characterize our relationships as competitive and cooperative. Both competition and cooperation are important to drive us forward.

Why did the US telecom companies fail to compete with you and the Nordics?

The US companies chose the wrong path. In terms of technology, the US is the most powerful country in the world. With its strong influence, the US strong armed the world into accepting CDMA and WiMAX. However, European standards – WCDMA – still eventually became mainstream. US companies failed to follow through the 3GPP approach in their research. As a result, their tech didn't sell well abroad, which hurt their financial performance. Huawei's rise can't be blamed for US companies' decline. They vanished because they chose the wrong path.

You have praised the American President, saying it's good he lowered taxes in the US. At the same time, a lot of people would probably say that he's also the architect of a lot of your troubles. What do you actually think of the American President?

I think the world should learn from the US President and lower the taxes so that businesses can earn more and develop more rapidly. Tax cuts aside, Mr. Trump is also wielding the stick against many countries, which is deterring foreign investment. Tax cuts were meant to attract foreign investment. If everyone is afraid to invest in the US, who will fill the revenue gap caused by the tax cuts? With less tax revenue, the US will find itself in a difficult financial situation.

If the US were nicer to other countries while lowering taxes, it would be a great boost to the US economy. However, the US is lowering taxes on one hand, and getting into trouble on the other hand.

The Chinese government is also cutting taxes, bit by bit, to reduce pressures on businesses and inject vitality into business. We believe all countries will eventually go down this path, because no country will be able to afford an excessively expensive welfare system.

You never dream of Donald Trump losing the next election?

First of all, Trump has never appeared in my dreams. I don't miss him that much.

Second, whether or not he is re-elected will not affect us all that much. Whoever the next president is, we don't expect Huawei will be removed from the Entity List. No one in the US will speak for Huawei. Therefore, we are mentally prepared to remain on the Entity List for a long time. We must get used to living with it.

At Huawei University, classes often begin with a warm-up video of students from China's Hengshui High School doing morning exercises. It is a high school in an underdeveloped county. We all know that it's very difficult to change China's education system and the general teaching methods, and the school knows this too. But they changed their methods to adapt to the external environment and achieve success.

What have we learned from this high school? We can't change the world and we can't change our external environment, but we can change our own methods so that we can achieve success within the existing environment.

The US may or may not elect a new president, but this will not change their policy towards us. We must be mentally prepared for this for a long time to come. If we rely too much on luck, we may one day fail.

Read the next part of this fascinating interview in the next issue of GT.