Another Win for China’s Hostage Diplomacy

A yearslong diplomatic dispute ended Saturday when Meng Wanzhou, the chief financial officer of the Chinese telecommunications giant Huawei, arrived back in China and Canadians Michael Kovrig and Michael Spavor arrived back in Calgary, Alberta.

Meng signed a deferred prosecution agreement on Friday with the U.S. Department of Justice, which had asked for her extradition from Canada, and took off for China shortly afterward. Spavor and Kovrig, who had been seized by the Chinese state and held as hostages against Meng’s release, were released into the custody of the Canadian ambassador to China on Friday, after having spent over 1,000 days in prison. Their flight home took off shortly after Meng signed the agreement.

Meng was arrested in Vancouver on Dec. 1, 2018, following U.S. claims that she had committed fraud when representing Huawei’s dealings with Iran. Kovrig and Spavor were detained just a few days later, on Dec. 10. Both were well-known figures in the expatriate community in China; Kovrig, whom I’ve known personally for years, is a former Canadian diplomat and journalist who split his time between China and the West while working for the International Crisis Group, a prominent nongovernmental organization. Spavor ran an investment and tourism group on the border with North Korea.

In Canada, the arrest and detention of the “two Michaels,” as they were known, became a national concern. Canadian opinions of China reached record lows. Meng, released on bail, was able to live a luxurious life in Vancouver, British Columbia; Spavor and Kovrig, meanwhile, were held for long periods in solitary confinement, without access to diplomatic or legal support.

Race also played a role in the Canadian public’s response, as Chinese Canadian writer Joanna Chiu pointed out; China has detained numerous Canadian citizens or permanent residents of Chinese descent, such as democracy activist Wang Bingzhang, kidnapped from Vietnam in 2002, without prompting the same degree of outrage from Canadians that Spavor and Kovrig, both white, received.

What drove the decision to seize the Michaels?

Beijing has invested heavily in promoting Huawei and defending it against the U.S. campaign against the firm; as such, it saw the arrest of Meng as a shot across the bow from the United States that had to be answered. (It didn’t help when then-U.S. President Donald Trump said he would intervene in the case if China gave trade concessions.)

Rather than go after Americans, however, Beijing saw Canada as the weak link. Chinese geopolitical thinking often portrays countries such as Canada and Australia as lackeys of the United States—but also as smaller nations that can be intimidated in a way that Washington can’t. That has backfired spectacularly in recent years, as repeated attempts to threaten Canberra have driven it far closer to Washington and produced deals like the recent U.S.-U.K.-Australian defense deal known as AUKUS.

Meng also isn’t just an ordinary Chinese citizen; she’s part of the country’s business and political elite, a class of people who have often maintained dual lives between the West and China—making their money from connections in China while spending it elsewhere. Meng frequently traveled to Canada, where she owned two multimillion-dollar houses in her husband’s name. Her father is Huawei’s billionaire founder, Ren Zhengfei, a former officer in China’s military, and her mother is the daughter of the former deputy governor of Sichuan province. Meng’s arrest by Canadian authorities, then, violated a sense of Chinese Communist Party aristocratic privilege; as far as the party is concerned, the only power the elite should be subject to is the party’s.

It’s also quite likely some Chinese officials believed both Spavor and Kovrig were spies, even if the decision to arrest them was clearly political. Spy paranoia about foreigners is common in China, in part because Chinese civilians abroad are often roped into aiding Chinese intelligence and news agencies such as Xinhua are used as cover for trained spies. These tactics aren’t unique to China, of course—just more routinely used. The two Michaels may thus have been seen as legitimate targets—but spy paranoia is extensive enough that it could apply to just about any foreigner.

This kind of hostage diplomacy is also very normalized in Chinese business life, where it’s routine for even private companies to physically hold people prisoner to get debts repaid. In July 2017, for instance, the offices of the Australian currency firm USGFX in Shanghai were stormed by dozens of men who seized several staff members as part of a business dispute.

Police don’t usually intervene in these affairs, except to act as intermediaries to arrange a deal. That caused a diplomatic crisis with India in late 2011, when two Indian businesspeople were held hostage in the trading town of Yiwu and the Chinese authorities refused to intervene. China also routinely uses exit bans to hold foreigners in the country, especially people of Chinese descent, in both business and personal disputes.

So, after nearly three years, why did the release happen now?

The official Canadian position is that there was no deal, that international politics played no role in the U.S. Department of Justice decision, and that the Chinese government initiated the process of releasing the two imprisoned men after an agreement seemed on the horizon between the department and Meng.

This is possible, but it’s reasonable to be skeptical about this claim; no party involved wants to admit to what may have been a complicated three-way diplomatic arrangement, especially as Republicans in the United States are already attacking President Joe Biden on the issue.

It’s plausible that the Justice Department may have come under pressure from the Biden administration to give Meng a softer deal in order to resolve a critical issue for Canada, a long-term U.S. ally. But the United States had also had some problems making its case for extradition in Canadian courts, so the department may have preferred a partial win to a clear loss, striking the kind of deal prosecutors make all the time.

William McGovern, a lawyer at Kobre & Kim, which specializes in cross-border disputes, and a former prosecutor, noted that “Deferred Prosecution Agreements are used to resolve cases in a variety of circumstances. … Under the reported terms of the agreement, it appears that the charges will be dismissed in 14 months. The agreement resolves the pending extradition and so it would seem there [was] no basis to restrict her return to China.”

But, he noted, it’s quite uncommon for these agreements to be used in “matters against individuals, as opposed to organizations.”

What is China making of this?

The Chinese government and state media are portraying Meng’s return as a victory—with very little mention of the two Canadians. Chinese media has either not mentioned their case or deliberately confused their case with that of Robert Schellenberg, a Canadian convicted on drug charges in China who was given the death penalty after the Meng charges.

The official Chinese position is that Spavor’s and Kovrig’s release was “on medical grounds” and that they had confessed to being spies. (It’s very likely that the two were made to sign confessions before being released. Forced confessions, sometimes broadcast on television, are routinely used against Chinese dissidents.) Most people in China are unaware of their existence; among the more tapped-in sort of online nationalist, however, their release has caused frustration.

China has always portrayed Meng as an innocent victim of foreign injustice, and she received a triumphant reception at the airport in Shenzhen. That message never sold abroad—despite reported attempts to pay protesters in Canada and give the impression of a grassroots movement in support of Meng—but it was very successful at home.

It’s always difficult to try to distinguish genuine public feeling in China from government-massaged propaganda, and the two can’t be cleanly separated. Many ordinary Chinese see the treatment of Chinese overseas as a key bellwether of national power, and they tie their own sense of identity closely to the country’s strength. Online outrage when Chinese tourists are perceived as being ill-treated, for instance, is routine.

Yet at the same time there was always a counternarrative about Meng on the Chinese internet, one that saw her as a spoiled child of privilege and emphasized her overseas wealth—but that’s been systematically censored since the affair began.

How is Huawei going to be affected by the deal?

Domestically, Huawei’s position as a national champion has been strengthened. But the whole affair has been another nail in the coffin for the company’s future in the West. Huawei has always insisted abroad that it’s a private company with no links to the Chinese state—while, like all large Chinese companies, assiduously praising the Chinese Communist Party and the government at home. It puts a lot of money into promoting its image abroad, and some Western commentators have defended it. Yet its murky ownership structure, the massive subsidies it receives from the state, and the potential espionage threat it poses have made foreign governments, especially the United States, increasingly wary.

It became much more difficult to make the case that Huawei had nothing to do with the Chinese state when that same state started a diplomatic crisis on behalf of Huawei. Meng’s statement, made as part of her legal agreement with the Justice Department, could also cause difficulties for the company. While Chinese media has emphasized her lack of an actual guilty plea, the agreement included a statement of facts that admitted wrongdoing—and could be used in future cases against Huawei.

Will this happen again?

It seems very likely. China has paid a diplomatic price, but foreign concerns always weigh much less than domestic political ones in China, and domestically this is being portrayed as a sign of Chinese power. Any future attempts by Western governments to arrest—or even charge—highly connected Chinese citizens are going to have to take into account the high chance of their own citizens being held hostage in China in return.

On the U.S. side, lawyer McGovern notes, “Decisions to charge individuals with political connections to foreign governments come with a whole range of collateral considerations but our experience with the DOJ is that they will not be cowed or intimidated by the risk of retaliatory prosecutions by foreign governments.”

But that may not be the case with other countries, especially if the U.S. tries to make use of extradition agreements again. The most likely targets aren’t going to be business executives but rather people like Kovrig with ties to government—especially former officials now working in the private or NGO sectors.

Many China analysts, myself included, believed there would be a delay of weeks or months between Meng’s release and the return of the Canadians, to give Beijing plausible deniability. The absence of that shows how little China cares about its reputation. It would rather emphasize its power.

Dan Harris, an experienced China business attorney, said Beijing’s future use of hostage diplomacy depends on the global reaction to this case: “If the world is silent, I think the risks will go up across the board for all types of China hostage-taking, but especially for smaller countries China doesn’t like.”