The dramatic arrest that threatens to ramp up trade tensions between the US and China

The arrest and request for extradition of a top executive of one of the world’s biggest tech companies is scarcely business as usual. But that is what happened to Huawei’s chief financial officer, Meng Wanzhou, in Vancouver last Saturday. The US wants to try her on charges of busting its trade sanctions against Iran. If the extradition is successful – the case is adjourned until tomorrow – and she is found guilty, she could serve a 30-year prison sentence.

It was not an act calculated to calm the tense relationships between the US and China – a rivalry that Donald Trump characterises as opening a new era of great power competition. Even as Trump sat down for a working dinner with President Xi Jinping in Buenos Aires to accept China’s request for a 90-day truce in the tariff war, his aides will have known that hours earlier the Canadians had successfully carried out the US request. The news will not have gone down well in Beijing.

It certainly did not go down well in the world’s stock markets – they fell sharply late last week. For Huawei ranks above Apple as one of the world’s biggest manufacturers of smartphones. It represents exactly the kind of Chinese company that Trump has in his sights – rich in technology with a global footprint, but inextricably bound up with strengthening China’s economic and political system. This it does via a series of practices that load the dice against US competitors in order to sustain the one-party rule of the Chinese communist party. The US identified the company as a security risk back in 2012, and only this summer Trump signed a bill forbidding the US government from doing business with Huawei.

Huawei may protest its innocence – it’s a private company undertaking its own research – but nobody is fooled. Every substantial company in China has a Communist party committee overseeing it. Nor is anybody fooled by the story that Meng’s extradition is nothing to do with Huawei but, rather, sanction-busting: after all, it was a Huawei subsidiary she chaired in Iran that was part owned by the Islamic Revolutionary Guard Corps, itself heavily involved with the Iranian nuclear programme.

Global markets and world business have begun to recognise that Trump means to check China’s rise and reverse what his administration sees as not just a one-sided trade relationship – the US’s $375bn trade deficit with China is nearly half its overall trade deficit – but its economic and military aggression more generally. On this, even Trump’s fiercest critics concede, he has a point.

Vice-president Mike Pence laid out the administration’s position to the Hudson Institute two months ago. China had built an unparalleled surveillance state, he declared, partly with US technology, and aimed by 2020 to have fully implemented its Orwellian system of “social credit scoring” in which the state will use digital and GPS technology to monitor the minute by minute actions of every Chinese citizen. He quoted from its official blueprint: it will “allow the trustworthy to roam everywhere under heaven, while making it hard for the discredited to take a single step”. From mass internment camps in Xinjiang, imprisoning more than a million Muslims, to taking over a port in Sri Lanka as a potential forward naval base after the Sri Lankans could not repay a Chinese loan, China’s actions were repressive and menacing.

This approach cascades into the economy. Under the “Made in China 2025” plan, China aims to have 90% control of the lead technologies of the 21st century – AI, robotics, biotechnology – and is spending hundreds of billions of dollars to do just that. Trade policy is part of the same drive; insisting on the sharing of proprietary intellectual property as a precondition for doing business in China , buying up western hi-tech companies and not reciprocally opening up Chinese markets to US and other producers. The US, declared Pence, was going to challenge it all.

Pence was speaking before the anniversary of the 18 December 1978 meeting at which Deng Xiaoping launched his “opening and reform” programme – he was to be the architect of the “Chinese miracle”. But Xi is not interested in celebrating Deng, never mentioning his name in his speeches. The National Museum in Beijing consecrates almost its entire space to celebrating the work of Xi – Deng hardly gets a look in.

Small wonder. Made in China 2025 is a reassertion of party control that Deng successfully sought to loosen. Xi’s slogan is the opposite of opening and reform: it is guojin mintui (the state advances, the private sector retreats). Nor is he talking of the advance of a benign European-style public sector: the Chinese state is the most unaccountable and repressive on Earth, to be buttressed by Chinese trade, military and foreign policy.

Xi’s position is perilous; his arrest of 100,000 officials in an anti-corruption drive is very popular – but also a tribute to how distrusted the party has become. Xi is relying on growth, technological self-sufficiency and repression to survive – now this is all contested by the US. Britain has to decide which side it is on.

Yet China is one of the main countries, according to our Brexiters, with whom the UK must and will secure a vastly generous trade deal. Do any of them read anything? Already the UK is one of the few western countries to allow Huawei virtually constraint-free access – bar some soon-to-be tightened security checks – because so acute is our loss of sovereignty and control, leaving the EU, that we dare not offend China. To become collaborators in Xi’s surveillance machine is a high price to pay to keep the Tory party from splitting.