Foreign firms in China rattled by 'hostage diplomacy'

BEIJING • Huawei executive Meng Wanzhou's return from Canada last week was lauded as a diplomatic triumph in China, but the celebrations left a bad taste for the expatriate business community, already rattled by the threat of "hostage diplomacy".

That dread was based on the part of the story Chinese state media was largely silent about - just as flag-waving crowds prepared to welcome Ms Meng at Shenzhen airport, two Canadians were heading the other way after being detained for nearly three years.

Former diplomat Michael Kovrig and businessman Michael Spavor were seized in China in December 2018, just days after Ms Meng was detained in Vancouver on a US warrant in a fraud case.

Beijing insisted these were unrelated events, but the detention of the two "Michaels" was widely seen as retaliation, an impression reinforced when they were released exactly as Ms Meng left for China.

"It increasingly seems like business is being more politicised," said Mr Steven Lynch, managing director of the British Chamber of Commerce in China.

And a Shanghai-based Canadian manager said: "The celebratory, nationalist reception of Meng was off-putting to quite a few international executives here."

Foreign firms in China have always trod a fine line on politically sensitive issues so as to not upset the authorities in the world's second-largest economy. But the Meng-Michaels case ramped up fears about staff being arrested based on diplomatic hostilities between China and their home countries.

Many firms beefed up their risk strategy and drew up "frantic" contingency plans for possible staff detentions, according to the Canadian manager in Shanghai. "There was a great deal of concern that anybody could be grabbed off the street at any time."

The two Michaels were hit with vague spying charges and barely had any contact with the outside world while in prison.

The episode sent China-Canada ties plummeting, and dented Beijing's image with governments and businesses around the world.

It also increased pressure on foreign businesses in China, which face difficulties because of rising nationalism, trade disputes with the West, strict Covid-19 border controls and a tightening regulatory environment.

Some Canadian firms have decided the risks are too high, and have started winding down their operations in China. Many other Canadian companies are reluctant to send staff to the country.

"Every foreigner in China has to know that they're on the clock," said the Shanghai-based Canadian manager.

Mr Kovrig and Mr Spavor were not the only foreigners ensnared in apparent retaliation by China. An Irish businessman has been detained since 2019 after his employer was embroiled in a legal dispute, while Australian national Cheng Lei was taken into custody as relations with Canberra nosedived.

Suspicions of more hostage diplomacy were fuelled on Sunday when two American siblings, prevented from leaving China since 2018 for their father's alleged "economic crimes", abruptly returned to the United States.

Even Western diplomats - especially from Australia, Canada, New Zealand, Britain and the US - are reluctant to return to China without full immunity. "The consequences of getting caught up in another similar spat are just too high," one diplomat said.

China has rebuffed travel warnings - including about arbitrary detentions - from Canada and the US, saying they are based on "shocking and absurd lies".

But that has done little to comfort foreign businesses, many of which simply cannot afford not to operate in China's huge market.

"Companies are more careful than ever to stay away from politics and to toe the line, wherever it may lie, in China," said one member of a European business chamber in Hong Kong.

And international condemnation may not have a serious impact, analysts said.

Dr Jean-Pierre Cabestan, professor at Hong Kong Baptist University, said that Beijing is likely to use hostage diplomacy again, despite China's image "deteriorating" around the world.

AGENCE FRANCE-PRESSE