Beijing, Jan 30 (AP/UNB) — U.S. criminal charges against Chinese electronics giant Huawei have sparked a fresh round of trans-Pacific recriminations, with Beijing demanding Tuesday that Washington back off what it called an "unreasonable crackdown" on the maker of smartphones and telecom gear.
China's foreign ministry said it would defend the "lawful rights and interests of Chinese companies" but gave no details. Huawei is the No. 2 smartphone maker and an essential player in global communications networks.
A day earlier, U.S. prosecutors criminally charged Huawei and several of its officials for allegedly stealing technology secrets and violating Iran sanctions. That followed the detention in Canada of the Huawei founder's daughter — a top company official who was named in one of the U.S. indictments, and who is now awaiting possible extradition to the U.S. Huawei has denied wrongdoing.
All that has further complicated U.S.-China relations amid attempts to defuse a trade war instigated by President Donald Trump and clashes over alleged Chinese theft of trade secrets and other intellectual property from U.S. firms. A new round of trade talks are planned for Wednesday in Washington.
The nearly two dozen charges unsealed Monday by the Justice Department accuse Huawei of trying to spirit a robot arm and other technology out of a T-Mobile smartphone testing lab. They also allege that Huawei, two subsidiaries and a top executive misled banks about the company's business and violating U.S. sanctions.
The allegations mark a new phase in the dispute between the two countries over global technological dominance. The U.S. has reportedly waged a campaign to discourage other nations from using Huawei telecommunications equipment for next-generation "5G" wireless networks, based on concerns that the Huawei gear might compromise national security.
U.S. intelligence chiefs who briefed Congress on worldwide threats Tuesday sounded the alarm about China's efforts to gain an edge over the United States.
"China's pursuit of intellectual property, sensitive research and development plans ... remain a significant threat to the United States government and the private sector," Director of National Intelligence Daniel Coats told the Senate Intelligence Committee.
"While we were sleeping in the last decade and a half, China had a remarkable rise in capabilities that are stunning," Coats said. "A lot of that was achieved — a significant amount was achieved by stealing information from our companies."
On Tuesday, Australia's TPG Telecom said it abandoned plans to build what would have been the country's fourth mobile network because of a government ban on Huawei over security concerns. Last week Vodafone, one of the world's biggest mobile phone companies, said it would stop using Huawei gear in its core networks.
U.S. officials have long harbored suspicions that Huawei could be used by Beijing to eavesdrop on sensitive communications and questioned whether the privately-owned company has ties to China's ruling communist party because its founder is a former military engineer.
Monday's U.S. charges did not allege that Huawei worked at the Chinese government's direction.
A 10-count indictment in Seattle centers on a T-Mobile phone-testing robot dubbed "Tappy." The robot, developed in 2006, helped spot problems in phones before they hit the market by mimicking how people actually use them.
Prosecutors say Huawei began a scheme to steal Tappy technology for its own phone-testing robot after T-Mobile rejected its request to license the machine for broader use.
The indictment detailed efforts by Huawei engineers to sneak into the highly-restricted Tappy lab. One engineer succeeded in taking unauthorized photos of the robot. Another managed to sneak it out of the lab to take measurements and photos to send back to China. He returned it after being questioned by T-Mobile, prosecutors said.
Huawei allegedly offered bonuses in 2013 to employees who stole information from other companies around the world, according to the Seattle indictment, citing emails obtained by the FBI. The bonuses were based on the value of information, which was sent to Huawei using an encrypted email address.
In the second indictment, Brooklyn prosecutors charge Huawei with using a Hong Kong front company, Skycom, to trade with Iran in violation of U.S. sanctions. They allege Huawei's chief financial officer, Meng Wanzhou, lied to banks about those dealings.
Meng, the daughter of Huawei founder Ren Zhengfei, was arrested Dec. 1 in Vancouver, a development that set off a political firestorm between China and Canada.
China detained two Canadians shortly after Meng's arrest in an apparent attempt to pressure Canada to free her. A Chinese court also sentenced a third Canadian to death in a sudden retrial of a drug case, overturning an earlier 15-year prison term.
Huawei overtook Sweden's LM Ericsson in 2017 to become the No. 1 global seller of network gear. The company says it supplies 45 of the top 50 global phone companies and has signed contracts with 30 carriers to test its next-generation technology. Its smartphone brand, launched in 2010, surpassed Apple Inc. in two quarters of 2018 to become the world's No. 2 seller behind Samsung Electronics Ltd.
White House spokeswoman Sarah Sanders denied that the criminal charges were part of a carrot-and-stick approach to the trade talks. "Those two things are not linked," she said. "They are a totally separate process."
Trump and his Chinese counterpart, Xi Jinping, agreed Dec. 1 to put off further sanctions against each other's exports while they negotiated a new trade pact. If they don't reach an agreement by March 1, U.S. tariffs on $200 billion of Chinese products are set to rise from 10 percent to 25 percent. That prospect has rattled financial markets for months.
The Trump administration has accused Beijing of deploying predatory trade tactics, ranging from requiring U.S. and other foreign companies to hand over technology in return for access to the vast Chinese market to outright cyber-theft.
The number of economic espionage investigations the FBI is handling has doubled over the last three to four years, "and almost all of them lead back to China," said FBI Director Christopher Wray.
Washington, Jan 29 (AP/UNB) — The Trump administration's unveiling of criminal charges against the Chinese tech giant Huawei has complicated high-level talks set to begin Wednesday in Washington that are intended to defuse the trade war between the administration and Beijing.
The Justice Department charged Monday that Huawei had violated U.S. sanctions against sales to Iran and stolen trade secrets from T-Mobile, a U.S. partner. Those charges cut to the heart of some of the administration's key complaints about China's trade practices.
Analysts said the trade talks would likely proceed, but reaching any substantive agreement would probably be harder. And unless the two sides can forge some sort of accord by March 1, U.S. tariffs on $200 billion of Chinese imports are set to rise from 10 percent to 25 percent.
"The Chinese will keep talking," said David Dollar, a senior fellow at the Brookings Institution and a former U.S. Treasury official. "They won't be happy with the Justice Department action, but I think they would like to keep it separate from the trade talks."
Representatives of U.S. business groups privately raised concerns that the administration's actions could poison the atmosphere between the two sides. Any backlash in China against the indictment of Huawei, one of the country's global powerhouses, could limit Beijing's ability to agree to anything that might be seen as bowing too willingly to U.S. demands.
The Justice Department has also charged Huawei's chief financial officer Meng Wanzhou. The United States is seeking to extradite Meng, who has been held in Canada since Dec. 1.
Sarah Sanders, the White House spokeswoman, was asked whether the criminal charges against Huawei were linked to the trade talks with China and amounted to a carrot-and-stick approach.
"No, those two things are not linked," she said. "They are a totally separate process."
This week's negotiations were already facing low expectations.
"We are anticipating no big outcomes this week," Erin Ennis, senior vice president at the U.S.-China Business Council, said Monday before the Huawei charges were announced.
The Trump administration, with support from U.S. businesses, wants China to make fundamental changes to its economy that China is reluctant to accept and that will be difficult to verify, analysts say. The administration has accused Beijing of deploying predatory trade tactics, ranging from requiring U.S. and other foreign companies to hand over technology in return for access to the vast Chinese market to outright cyber-theft.
Robert Lighthizer, the U.S. trade representative and lead negotiator in this week's talks, wants China to toughen its protections of intellectual property and to stop unfairly subsidizing its state-owned enterprises.
"The scope of these talks will be the broadest and deepest in U.S.-China history," Larry Kudlow, a top White House economic adviser, said Monday.
Yet reaching the kind of deal the United States wants could prove elusive if not impossible. Chinese officials deny that they force U.S. companies to transfer technology. And they regard the support of their state-owned companies and the acquisition of cutting-edge technology, much of it from abroad, as vital to China's economic development.
U.S. companies in China say that forced technology transfers typically happen at the local level and stem from informal pressure by Chinese officials, which would make it difficult to verify whether Beijing has complied with any major agreement.
In previous rounds of talks, China has shown little inclination to yield to the administration's demands.
"China has yet to show any indication that it is ready to address U.S. and global concerns about its structural issues," said Scott Kennedy, a China specialist at the Center for Strategic and International Studies. "The two sides are pretty far apart."
Beijing has previously offered to increase its purchases of U.S. products, notably soybeans and other agricultural goods as well as natural gas. This would help address Trump's concern about the gaping U.S. trade deficit with China. Beijing could also open more industries to U.S. companies and pledge better protection for U.S. intellectual property. In return, China could press the U.S. to remove the tariffs that President Donald Trump imposed last year.
Derek Scissors, a China expert at the American Enterprise Institute, said that China would likely accept such a deal, if it were offered. Doing so would outweigh any concerns China has about Huawei.
"If they think they can get the deal that they want, they won't cancel the talks over Huawei," he said.
London, Jan 26 (AP/UNB) — Queen Elizabeth II has urged people to seek "common ground," in remarks widely interpreted as a veiled criticism of the toxic debate surrounding Britain's departure from the European Union.
While the monarch didn't mention Brexit and is barred from commenting on political issues, the Times of London described the comments as a "rebuke to warring politicians." Lawmakers on all sides of the increasingly tense Brexit debate have traded barbs in recent weeks as Prime Minister Theresa May tries to push ahead with the divorce deal she negotiated with EU leaders even though it has been overwhelmingly rejected by Parliament.
"Every generation faces fresh challenges and opportunities," the monarch said Thursday in a speech marking the 100th anniversary of the Women's Institute in Sandringham, home to one of the royal family's country estates.
"As we look for new answers in the modern age, I for one prefer the tried and tested recipes, like speaking well of each other and respecting different points of view; coming together to seek out the common ground; and never losing sight of the bigger picture."
Even though she remains publicly neutral on political issues, the queen's words are carefully watched as a moral bellwether. Her comments were seen as a call for a return to civility in political discourse as Britain grapples with the deeply divisive Brexit question.
While her remarks to the Women's Institute were similar to those in the queen's annual Christmas address, they come as May faces increasing pressure to rule out the possibility of leaving the EU without an agreement on future relations.
A string of union bosses have been holding talks with May and are also urging her to take the "no-deal" option off the table.
Many economists and business leaders are warning that leaving without a deal risks a damaging blow to Britain's economy that might hamper growth for years to come, a point made Friday by Treasury chief Philip Hammond at the World Economic Forum in Davos.
The "no-deal" scenario looms if no agreement is approved by Parliament before the March 29 exit date.
Brexit backer Andrea Leadsom, leader of the House of Commons, said it would likely be possible for Britain to gain EU approval to delay its departure from the bloc "for a couple of weeks" if that was needed to get Brexit legislation passed by Parliament, which is deeply divided on the issue.
She said she still believes it is possible to get a deal passed in time despite the many obstacles.
Work and Pensions Secretary Amber Rudd, a prominent supporter of the prime minister, said Thursday she was "committed to making sure we avoid no-deal," which would have devastating effects on the British economy.
Washington, Jan 24 (AP/UNB) — At this time of year, John Sprinkle and his wife would normally be planning their summer vacation. Not now. Sprinkle, a furloughed federal employee, is about to miss his second paycheck since the partial government shutdown began just before Christmas.
With no end in sight to the longest shutdown in American history, Sprinkle and his family are postponing all manner of spending.
"We were thinking of getting a new computer, but that's not going to happen," he said. "We're not really eating out like we normally would be. We are not going out to events like we would be."
Multiply those decisions by 800,000 federal employees across the country and hundreds of thousands of government contractors who aren't being paid either, and the shutdown looms as an accelerating threat to the wider economy.
The shutdown's biggest effect on the economy is likely to be the cutback in federal spending. But consumer spending, which is critical to growth, is another important factor.
When government employees spend less, stores and restaurants that serve them suffer. So do landlords and lenders that do business with federal workers. Though spending and growth will rebound once the government reopens, most of the restaurant meals missed and hotel stays canceled will never be made up.
"Creditors and suppliers hit by the shutdown will become less patient if it drags on," Ian Shepherdson, chief economist at Pantheon Macroeconomics, said in a research note. "People and businesses are being hurt by the shutdown, and the pain will intensify."
If the shutdown drags on through March, annual economic growth could fall to zero in the first three months of the year. Even if the government reopens by the end of the month, the annual pace of growth could be a meager 1.6 percent — only half the pace of last quarter, said Sal Guatieri, senior economist at BMO Capital Markets.
Kevin Hassett, a top White House economist, acknowledged in an interview on CNN that growth could be flat in the first quarter, though Hassett suggested that a "humongous" rebound would follow. Yet some independent economists doubt that the rebound would be enough to offset the initial damage. The economy is already bedeviled by slowing global growth, ongoing trade tensions and higher interest rates, which contributed to a plunge in home sales last month.
Bernard Baumohl, chief economist at the Economic Outlook Group, suggested that once the government reopened, many households would focus on repaying credit card debt and restoring lost savings — trends that would slow the rebound.
For now, there are hints that the shutdown is slowing retail sales. A measure of weekly chain store sales fell 1.3 percent last week, its second straight drop. Cold weather likely contributed to the fall, said Michael Niemira, chief economist at the consulting firm Retail Economist, but the shutdown may also have contributed.
It's hard to know just how much the shutdown is depressing consumer spending because the Commerce Department, which compiles and reports such data, was itself closed by the shutdown.
Anecdotal evidence, though, suggests that the trend is spreading. Even federal workers with solid finances are holding back. Sprinkle, who lives in Alexandria, Virginia, knows he will eventually be paid, and his wife is still earning a paycheck. Their two children are out of the house, in college, and he knows he could borrow against his home equity if he had to.
Still, "the effect is more psychological," he said.
The shutdown began on the day of his 20th anniversary working for the National Park Service, where he is now a historian. His Mac computer is roughly eight years old and will no longer update with the latest operating software. But he is postponing a replacement.
The impact of the shutdown is evident beyond Washington. Officials in New Orleans announced Wednesday that they are waiving late fees for federal workers who have fallen behind on their property taxes.
Also Wednesday, in Philadelphia, a hunger relief organization set up a market for furloughed federal workers under an Interstate 95 overpass. Stefanie Arck-Baynes, a spokeswoman for the group, Philabundance, said they had expected 150 to 300 people. But by 11 a.m., they had already served 300, and the lines were growing.
The organization extended the hour-long event to meet demand. Tables were set up with lines of fresh produce, bread, milk and canned goods.
It was the first time the group had offered an "emergency food response" in Philadelphia in its 35-year history, Arck-Baynes said.
James Grant was there stocking up on fresh fruits and vegetables. At 64, he is diabetic and must take care with his diet. Grant has worked for 40 years as a maintenance engineer at Independence National Historical Park, which includes Independence Hall, the First Bank of the United States and the Liberty Bell.
The shutdown, of course, also affects millions of relatives of federal workers. Grant has an adult son who is in a nursing home after becoming disabled years ago in a car accident. He said he has had to stop sending him money.
In Washington, D.C., on Tuesday night, Hannah Perry was one of dozens who lined up at World Central Kitchen, which offered free food and coffee to federal workers. The kitchen is a charity headed by celebrity chef Jose Andres that began in 2010 to feed survivors of a massive earthquake in Haiti.
Perry, 23, who works as a program assistant at the National Science Foundation, is struggling to pay her rent, student loans and health care bills.
She has applied for unemployment benefits and shifted to a different student loan repayment plan under which she will pay $98 a month, a third less than her previous payment. But that plan required her to accept a higher interest rate that will raise the total cost of the loan, a small example of the potential lingering effects of the shutdown.
What will she do if the shutdown continues for weeks on end?
"If it extends for a really long time, I have no idea," she said.
Singapore, Jan 23 (AP/UNB) — Asian markets were mixed in subdued trading Wednesday as Japan reported weak export data and news surfaced of possible hiccups in China-U.S. trade talks.
KEEPING SCORE: Japan's Nikkei 225 index shed 0.1 percent to 20,593.72, after the Bank of Japan kept its short and long term interest rates intact as expected but lowered its inflation forecasts. South Korea's Kospi rose 0.5 percent to 2,127.78. Hong Kong's Hang Seng was almost flat at 27,018.60. The Shanghai Composite index gained 0.1 percent to 2,581.00. Australia's S&P ASX 200 slipped 0.3 percent to 5,843.70. Shares fell in Taiwan and Singapore but rose in Malaysia and Indonesia.
WALL STREET: U.S. investors returned from a holiday Tuesday to lower global growth estimates by the International Monetary Fund and news that China's economy expanded last year at its slowest pace since 1990. Reports that the Trump administration recently rejected a meeting with Chinese trade officials caused major indexes to slip further. The S&P 500 index declined 1.4 percent to 2,632.90. The Dow Jones industrial average dropped 1.2 percent to 24,404.48 and the Nasdaq Composite was down 1.9 percent at 7,020.36.
JAPANESE TRADE: On Wednesday, Japan released weaker-than-expected trade data for December. The country said its exports fell by 3.8 percent from a year earlier, its largest drop in two years. It also posted its first full-year trade deficit since 2015. Imports climbed 1.9 percent in December, missing the market estimate of a 3.7 percent rise, and way below November's 12.5 percent surge. Weaker Japanese exports suggest that a slowdown in China, the world's second largest economy, is starting to have an impact on companies elsewhere that rely on it for business.
U.S-CHINA RELATIONS: White House economic adviser Larry Kudlow refuted reports by media outlets including the Financial Times and CNBC saying the U.S. had turned down an offer by Chinese trade officials to meet in Washington this week due to a lack of progress on issues such as protection of intellectual property. He said both sides are working toward the higher level talks. The reports, citing unnamed sources close to the matter, said the preparatory talks had been meant to pave the way for meetings between Chinese Vice Premier Liu He and U.S. Trade Representative Robert Lighthizer next week.
ANALYST'S TAKE: "The U.S. strategy might be to raise pressure on the Chinese ahead of the hard deadline in March, but this makes for uncomfortable interpretation by markets, and could potentially induce excessive volatility in the interim," Chang Wei Liang of Mizuho Bank said in a commentary.
ENERGY: U.S. crude picked up 26 cents to $53.27 per barrel in electronic trading on the New York Mercantile Exchange. The contract closed $1.03 lower at $53.01 per barrel on Tuesday. Brent crude, used to price international oils, gained 36 cents to $61.86 per barrel. It dropped $1.24 to $61.50 per barrel in London.
CURRENCIES: The dollar strengthened to 109.68 yen from 109.37 yen late Tuesday. The euro rose to $1.1369 from $1.1361.