19 ms·

Who Owns Huawei?

547 points by smacktoward 7y ago

H8crilA 7y ago
Ownership does not mean the same thing in non democratic states. The law and incorporation rules are always an approximation of what's applied in reality, but it is much more so in authoritarian states. The real two questions are those of profit distribution and actual power, as in the ability to effect change. The latter is always constrained by the ruling party, no matter what the incorporation rules say, and no matter what the former (distribution of profits) is. It was the case in Soviet satellite countries too, except Soviet states were also harsher on profit distribution (communism).
- xfs 7y ago
  The crux of the difficulty at understanding Huawei's ownership system is because Ren Zhengfei modeled it as a Maoist collective ownership mechanism, an alien concept prone to misreading from a private ownership premise, and at the same time it is facilitated by existing private ownership laws. Employees do indeed not own the company nor shares of the company in a private ownership sense because they cannot liquidate their shares if they wish to quit the company. But it is the very same design that makes the company immune to pressure from outside investors and the financial drive to capitalization, and enables it to fully reinvest all profits back to R&D and employee dividends, which is also a major reason for its explosive growth. It is reported some early employees got paid so much from their shares that they just stopped working and went on vacation indefinitely. If all profits of the production activities of a collective go back to its members and the continuation of growth of the collective, can you meaningfully claim the members of the collective do not own the assets of the collective and not control it? This profit returning scheme is legally possible only by being facilitated by the Company Law of the PRC. And the way the company ownership is structured by a "trade union committee" is also legally facilitated by the Trade Union Law of the PRC. It is a fatal error for the paper to claim the company is state-owned because the controlling trade union committee of Huawei operates under the aegis of the All-China Federation of Trade Unions. In fact, all SOEs in China are governed by the State-owned Assets Supervision and Administration Commission of the State Council, and the All-China Federation of Trade Unions is not legally sanctioned nor capable to manage private companies. Then the best reading of all the contradictions would be that Ren Zhengfei managed to carve out of a space for communist collective ownership by "hacking" the existing legal system of private companies.
  - g8oz 7y ago
    This should be the top comment.
rolltiide 7y ago
> but the myth of Huawei’s employee ownership seems to persist outside of China. Never heard of it, never thought about it, not sure why proving/disproving this is in the author's interest. The main curiosity regarding what the structure of Huawei actually is would be interesting, edge of my seat for that one. But who cares about the employees, who would ever believe that it would be anything other than corporate speak? I would basically assume that because a shareholder who happens to be employed there at some point in time, that the company would make that assertion just to make people feel good. The profit sharing scheme the abstract suggests is good enough to align incentives and make the non-capital class feel like they "own" something. It is so improbable that a labor class is also a capital class that I would be more surprised to see a paper showing how it was true, and it would be from Harvard Business School and not randomly uploaded to SSRN.
- luminiferous 7y ago
  > Never heard of it, never thought about it, not sure why proving/disproving this is in the author's interest. It is in Huawei's interest to not be labelled as a state-owned or state-controlled actor. The perception of being controlled by the Chinese state is precisely why many western countries are leaning away from purchasing Huawei networking equipment for their up and coming 5G networks, and also (at least in the case of the US) advising against, and then banning, consumer electronics made by Huawei. Huawei has been trying to convince the public that it is in fact employee owned and therefore not controlled by the Chinese state by touting its "employee virtual ownership program", and the purpose of this paper appears to be to dispel that notion.
  - rolltiide 7y ago
    Proving significant state ownership should be the goal then. Doesn't have to be majority. Maybe 15-30%? Chinese state owns some of most Chinese companies. Some passive through the central bank open market operations, some more direct and controlling. So it is almost like trying to prove a negative, with Chinese companies, but if we really want to dive deeper on this particular issuance, the opaque trade union governance is a nice tip of the iceberg. I just think it is such a weird assertion to start with.
intricatedetail 7y ago
The more regulation the more ownership of the state. Private companies are mostly an illusion these days as you can't do whatever you want with "your" company. Ironically just as in communist countries, in democratic countries companies are more or less owned by the ruling parties.
- outside1234 7y ago
  Maybe in France, but not in the US.
  - coldtea 7y ago
    Yes, in the US the companies own the ruling parties. "What's good for General Motors is good for the country" and everything... (yeah, he said it the other way round. The practice was still coporate overlords first, country second, though of course today that little corporatism would seem quaint).
- NicoJuicy 7y ago
  Oh boy
- krapp 7y ago
  >The more regulation the more ownership of the state. Private companies are mostly an illusion these days as you can't do whatever you want with "your" company. Yes, it's just disgusting that private companies and their owners have to obey laws like anyone else.
  - wallace_f 7y ago
    You'd think with how much people shout about how they hate nazis today that they'd be immune to writing something as misguided as this.
- braythwayt 7y ago
  How about: The more regulation the more ownership of the state. Private lives are mostly an illusion these days as you can't do whatever you want with "your" life. Ironically just as in communist countries, in democratic countries people are more or less owned by the ruling parties.
ordinaryradical 7y ago
The most informative comment I’ve heard about Chinese business is that one needs to take the western conception of state / military / corporation and chuck them out the window. In essence these are all descriptive functions of the same entity in China, and any apparent separation is just that—apparent. I know some may reply that, for example, Lockheed effectively lives at this nexus also. It’s a good argument, and probably similar though not exactly the same in arrangement. To me, the most interesting difference is that China has this kind of relationship with its major players regardless of industry, not just their defense contractors. So it doesn’t matter if you make cell phones, video games, toilet seats, ship hulls, or concrete—the whole concept of an enterprise not being interdependent on the state is a non-starter there. Whether it’s happening via backchannels to party officials or through ownership schemes like this one, the concept of private and public sector is so muddy there as to be almost meaningless. To me, this tells us a lot more about IP infringement and espionage than what we usually read, because where the west likes to conceive of corporations as competing in a market in China it’s more useful to describe corporations as tools of statecraft. Huawei wants us to think of them as competing with Apple because they both make cellphones. In reality, it’s as though the CIA or Mossad was competing with Apple—the aims of each may in fact be orthogonal to each other because market performance is not the real driver of the company’s decisions.
- AmericanChopper 7y ago
  I think this is a perfectly reasonable analogy. It’s not controversial to say that defence contractors in the US operate at the behest of the US government. The government uses national security to control their IP and dictate who they’re allowed to do business with, ensuring that their commercial activity is aligned with policy objectives. The Chinese government effectively has that level of control over their entire economy.
  - neltnerb 7y ago
    Right, except that you don't go to prison if you're running Northrop Grumman and refuse to bid on a project. But I agree that enough cash effectively guarantees they will.
tepidandroid 7y ago
Huawei responded to this study, and the author responded to Huawei's response [1]. Salient point: > Our bottom-line conclusion about what it all means is just our opinion. If readers disagree with our conception of what employee ownership means and prefer Huawei’s, that’s their opinion. As long as everyone understands what the structure is, what label one puts on it is not ultimately that important. [1] https://thechinacollection.org/huaweis-ownership-huaweis-statement-response/ https://thechinacollection.org/huaweis-ownership-huaweis-sta...
bdz 7y ago
The interesting thing that after the paper was published Huawei launched a campaign about this topic https://www.huawei.com/minisite/who-runs-huawei/en/ https://www.huawei.com/minisite/who-runs-huawei/en/ https://twitter.com/huawei/status/1157213584985751553 https://twitter.com/huawei/status/1157213584985751553
- cherrypicker001 7y ago
  That twitter thread is awesome and sums it up pretty well. Half the posts are Winnie the Pooh gifs and if you go 1 - 2 followers deep on the other half, you're in a weird bot circle network.
- partiallypro 7y ago
  I've been a major critic of China and Huawei, especially as of late and I am served SO many clearly propaganda posts from Huawei now. It's insane.
  - coldtea 7y ago
    https://en.wikipedia.org/wiki/Confirmation_bias https://en.wikipedia.org/wiki/Confirmation_bias (Of course one could also think this is a Chinese puppet account speaking :-))
- sytelus 7y ago
  So according to this, they are owned 88% by current employees. This should be very easily verifiable. Who is telling the truth here?
  - seanmcdirmid 7y ago
    Huawei is a private company with an opaque management structure. None of its claims can easily be verified using publicly available information (nor can claims to the contrary).
  - walshemj 7y ago
    Any Huawei employees want to comment and maybe explain the five principals and how they work for Huawei, in particular no 2 (Democratic Member Control ) and 4 (Autonomy and Independence ) The five principals (as amended there are now 7) are the key founding principals of ALL Coops
wenbin 7y ago
This Acquired podcast episode did a great job covering the rise of Huawei https://lnns.co/oPr5nUSzLxX https://lnns.co/oPr5nUSzLxX
- skinnymuch 7y ago
  What’s the point of Listen Notes link? I was hoping for some additional info or for some community input. But it has neither. Just the same general info/description of the episode.
floatingatoll 7y ago
Previously https://news.ycombinator.com/item?id=19698235 https://news.ycombinator.com/item?id=19698235
deepVoid 7y ago
> We know nothing about the internal governance procedures of the trade union committee. > We do not know who the committee members or other trade union leaders are, or how they are selected. > Given the public nature of trade unions in China, if the ownership stake of the trade union committee is genuine, and if the trade union and its committee function as trade unions generally function in China, then Huawei may be deemed effectively state-owned. There are lots of unknowns and many if's. It is far-fetched at best that Huawei is state-owned.
- davidu 7y ago
  Regardless of the legal ownership structure (I believe the SSRN perspective), it is effectively "state directed when needed." That's not a xenophobic perspective, that's a reality of being a company in China and it'd be hard for someone to push back on that based on the last 20 years of game film for Internet related businesses in China.
  - chubbyrabbit 7y ago
    > state directed when needed Isn't it the same in here in the US? The president said "hey companies, you cannot trade with Huawei" and every company has to follow. My point is every government has some degree of influence on their companies. How much is another question. However in my opinion Huawei cannot be as innovative as they are with as much influence from their government as people here often suggest.
    - wolco 7y ago
      No, not the same at all. You cannot escape the Chinese government if you reach any kind of national success. In the US you can fight the government and even side with the other party and try to get the president to lose their job. Most know it's more profitable to ride a wave rather than to fight it.
      - seanmcdirmid 7y ago
        You could technically do that in China also, just without an independent judiciary you wouldn’t get very far.
Leary 7y ago
The sources of this paper are a bunch of random Chinese internet portal news. Is this considered academic research these days?
- coldtea 7y ago
  No, proper academic research also needs to cite a major scholarly source, like Wikipedia or Snopes.
- wolco 7y ago
  No it's considered news.
smacktoward 7y ago
I've heard a similar observation phrased slightly differently to describe Russia. If you're looking at a large Russian company, it goes, you're by definition looking at a company that has come to some kind of accommodation with the state -- because if they hadn't, the state would never have permitted them to get large.
- lowdose 7y ago
  On the surface these state owned operations look similar but the results speak to the contrary. I think Chinese corporations behave more like a beehive and Russians like a wolf pack. The Kremlin chased out a lot Russians with academic papers. China on the other hand seems to be the place that facilitates the best startup opportunities.
  - 4ntonius8lock 7y ago
    This makes sense. Russian economy is much less dependent on talented work force, they have vast resources in proportion to their population.
    - lowdose 7y ago
      If 3 million people with a master / Phd move out, your economy takes hit especially when the country's GDP is below the level of Italy.
  - cbHXBY1D 7y ago
    > I think Chinese corporations behave more like a beehive and Russians like a wolf pack. This is an old orientalist trope.
    - pjscott 7y ago
      Is it true?? (I'm from no particular wasteland country, so I don't know about contexts. huy, ..... \\
    - lowdose 7y ago
oh_sigh 7y ago
Not necessarily about China specifically, but why is corporate ownership so hard in general to deduce? Is it the case that public, queryable records simply do not exist, or they do exist but they require, say, manual steps to process through?
- SpicyLemonZest 7y ago
  The question of who owns a company is often open to interpretation. For example, which of the following is correct? * Mark Zuckerberg owns ~25% of Facebook, because he owns ~25% of the outstanding shares. * Mark Zuckerberg owns ~50% of Facebook, because he has a lot of special shares that end up giving him ~50% of the shareholder votes. * Mark Zuckerberg owns Facebook in totality, because he runs the company and there’s no mechanism for anyone to force him out. In this particular case, the authors and Huawei seem to agree about what’s on paper. The authors just don’t think that the structure Huawei calls “worker ownership” allows workers to actually decide what the company will do.
  - steve19 7y ago
    Zuck could be successfully sued if he acted in a way that obviously enriched himself at the expense of other shareholders. The court does not recognise that he owns the entire company, therefor he does not.
    - SpicyLemonZest 7y ago
      And that's probably the right way to look at it in most contexts. But if there were a controversy about whether Zuckerberg is using Facebook to spy on people, it would be a really silly deflection for him to say "I think you'll find that's impossible because Facebook is owned by the American people".
sbhn 7y ago
Seriously, why is Huawei so important, is it because TRIAMPH says so. A communications medium across air.
- llsf 7y ago
  Because who makes the telcos equipments (MSC, HLR, BSC, etc.) can spy a lot and at large scale. There is a concern of allowing Huawei equipments in telco operator networks.
  - sbhn 7y ago
    OoOoh, spooky chines signals, HN told me they were bad
    - dang 7y ago
      Would you please stop posting unsubstantive comments to Hacker News? You've been doing it a lot, and that's not cool. I get that you're frustrated by the comments that appear here on China, but it's not ok to respond by making the site worse. The skew here follows from the fact that the community, while international, is mostly Western. Therefore it reflects Western perspectives. Being in a minority position makes it tempting to lash out against the majority, but doing that breaks the site guidelines and just reinforces the imbalance. What's helpful, if you want to, is to provide a different perspective in a neutral, factual way. https://news.ycombinator.com/item?id=20687789 https://news.ycombinator.com/item?id=20687789 https://news.ycombinator.com/item?id=20199254 https://news.ycombinator.com/item?id=20199254 https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
    - llsf 7y ago
      To be fair, the old guard probably did the same before (post 2nd world war). Lucent (US), Nortel (Canada), Siemens (Germany), Alcatel (France) were all too happy to put their equipments in South America, Asia and Africa. It is a fair game, nothing to do with demonizing China. One would expect China to not accept Lucent equipments in its core telco network for the exact same reasons. Nobody really cared when western countries were spying after the 2nd world war (it was mostly phone calls and network security was a joke). Now, it is digital, and our footprint is way larger. Spying on telco network brings way more information now, than before. It is taken more seriously. Either intentionally (e.g. room 641A: https://en.wikipedia.org/wiki/Room_641A https://en.wikipedia.org/wiki/Room_641A) or not, tapping on telco networks is the great way to spy at scale.
sprafa 7y ago
There’s also something the Chinese state calls “fusion centres” which is one of the most interesting facets of this intelligence-industrial complex in China. Essentially the state decides, let’s say high tech cutting edge batteries for storing renewable energy is where they want to invest in. They gather a few companies into a building that can do it or are interested. They then have state representatives who effectively ask “what do we need to know” and “who are the major players in the field. In a month or so they come back again. They do big closed door presentation for all the companies in the building. Suddenly all the Chinese companies in the space start delivering R&D and eventually products that match some of the best stuff being done in the space. You could almost say they’ve learnt to copy it.. How do they do it? Industrial espionage, essentially, and building an industrial and intelligence infrastructure that allows for maximum impact of the state’s intelligence apparatus into the national economy. In a way it’s kind of brilliant. I heard it described by an NSA analyst in a very interesting talk. I thought it was fascinating and speaks exactly to your point. The idea that we are competing with “free market” Chinese companies is a fiction that we’ve made up in our own minds. It’s just not how China works. And to be fair it’s been working gang busters for them. edit since someone asked for it, here’s the talk - https://cybersecpolitics.blogspot.com/2017/04/fusion-centers.html?m=0 https://cybersecpolitics.blogspot.com/2017/04/fusion-centers... My description was from memory so I hope I remembered it right.
- bb101 7y ago
  Fascinating. Do you know any recent good books that cover the topic? I'm thinking something like Browder's Red Notice, but for China. Misha Glenny delved into China in his McMafia, but it was more about smuggling in the Fujian province, and its governor at the time: Xi.
  - sprafa 7y ago
    I don’t know of any books. This talk was in featured in a blog called CyberSecPolitics which I follow.
  - sprafa 7y ago
    Actually just realised. The CyberSecPolitics blog has book reviews. The guy clearly knows what he’s talking about so I have no qualms saying he probably can do better book recommendations than I can.
tech-historian 7y ago
NY Times covered this in April too, with many of the same conclusions: https://www.nytimes.com/2019/04/25/technology/who-owns-huawei.html https://www.nytimes.com/2019/04/25/technology/who-owns-huawe...
- casefields 7y ago
  The authors of the paper are quoted in the NY Times story.
canada_dry 7y ago
The transparent wall between the Chinese Communist party and Huawei is clearly apparent at their response to Canada's actions against Meng Wanzhou (at the behest of USA). China's extreme reaction (to the lawful action) is one that could be considered appropriate if Ms. Wanzhou wasn't an executive at a private corporation but a high ranking member of the government. China has responded as though it was an affront to the government.
Leader2light 7y ago
China will be the ruin of us all. We were fools not to drop the bomb on China as Douglas MacArthur wanted. They are growing so powerful and no one can stand against them. Hong Kong and Taiwan are both ultimately doomed to fall under Chinese control. I wonder how long until Africa is lost as well.
xster 7y ago
> • We know nothing about the internal governance procedures of the trade union committee. We do not know who the committee members or other trade union leaders are, or how they are selected. Well Huawei is pretty specific about the internal governance procedures of the trade union committee, who the committee members or other trade union leaders are, and how they are selected. https://imgur.com/a/mEFkgna https://imgur.com/a/mEFkgna It obviously doesn't mean that anyone should believe them. But for a journal piece to say "We know nothing" rather than "There are no means of independently verifying Huawei's claim" make it hard to take them seriously scientifically.
- heisenbit 7y ago
  As a reader of an analyst report you expect facts. As a buyer you can choose either facts or fud.
  - stordoff 7y ago
    Just to clarify, are you saying the Huawei claim is (potentially) FUD?
chvid 7y ago
Would it make you feel any better if Huawei was owned 100% by a 27-year old college dropout wearing a hoodie? Honestly. I find it hard to see the big problem here. Huawei is run by Ren Zhengfei, who is also the public face of the company, and besides running its daily operations also formally has veto rights. Then there is a share scheme running through a union where the shareholders have no practical say but get a share of the company dividends. These shares are good enough for employees to take loans in and the issuance of shares has been a way for Huawei to finance itself.
watertom 7y ago
As usual with China we are focused on the wrong issue and asking the wrong questions. Who owns Huawei is irrelevant, who ultimately controls Huawei is the issue, but it’s a simple answer, the Chinese Government. I was in China on business, we were meeting the one of the largest and most successful tech companies in China. We were meeting with the Chairman/CEO and his team. Everyone was introduced except one man, everyone basically acted like the guy wasn’t in the room. He just sat and listened until he heard something he didn’t like, he quickly took over the meeting, admonished the CEO, and insisted they we do as he said. For the remainder of the meeting the CEO and his team sat head facing the conference table, it was clear they were all terrified. Once the key parts of the meeting were decided this man got up and left, the meeting quickly ended. I tried to get my Chinese colleagues to explain what happened, but everyone just blew me off. A couple days later we were in Taiwan, and I got the full story. The man was the party official who guided the company. The guy made sure that the Chinese government’s interests were followed. It’s China, thinking about things like it’s the West is stupid. Everything is owned by the government.
- ETHisso2017 7y ago
  This sounds more like an urban legend than an actual event.
  - tempguy9999 7y ago
    If you are casting doubt on the poster then outright call him a liar and explain why. Otherwise... > I was in China on business ...assume goodwill and take him at his word.
- ken47 7y ago
  True if big.
- Rapzid 7y ago
  It annoys me to no end how much beating around the bush there is on this topic; particularly on NPR. They have the kid gloves on and pundits that won't come out and say the obvious. "But why the concern about Huawei and not Facebook and Google". Because they are controlled by a fascist government, a point we have largely been ignoring for decades while they weren't the 2nd largest economy?! Recently they had a guy on saying the USA intelligence/military community saw China as the biggest "strategic challenge" in the future. I'm PRETTY darn sure they mean and have said "threat to national security". He was also insinuating the the idea we couldn't coexist with their government was absurd because we "have been since 19xx". Well, were they the second largest economy in 1950-20xx? No they were not and their soft power plays are becoming much more bold. It's almost like the NPR and the media have given up on the ideals of liberal democracy? Good grief.
deleted 7y ago
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waterdownship 7y ago
Without a doubt, the executive structure of Huawei is opaque to any outsider and up for speculation. However, it should be easy to verify that Huawei does distribute its wealth to its employee and it does not share its profit to the state. So there is financial interest for the employees, at least. In any case, the company may choose to things that benefit the state, but that does not mean it doesn't benefit the company.
ragerino 7y ago
I find the other extreme, as in the USA, more dangerous. Therefore the question "Who owns the US government?" could be asked too. Someone could look into example of Boeing and the FAA. The more we learn about 737-Max and 787 Dreamliner certification the more it's obvious that Boeing is running the FAA. Another example is the FDA. Good example here is Monsanto. While it was under US ownership everything was fine. Once it got sold to Bayer, suddenly stuff is carcinogenic. What I want to say is, that everybody knew since more than a decade before the transaction, that the stuff is carcinogenic. This seems to me like the FAA was protecting Monsanto before it was sold off.
- mlvljr 7y ago
  FDA,not FAA
- heisenbit 7y ago
  Yep, considering the concentration of wealth in few hands and the fact that most of these hands are politically well connected and fund political careers the system may not be so different. Old taxonomies for political systems can blind us for key similarities.
- dragonwriter 7y ago
  > Another example is the FDA. Good example here is Monsanto. While it was under US ownership everything was fine. Once it got sold to Bayer, suddenly stuff is carcinogenic. The FDA doesn't do that for pesticides, it just makes sure quantities in foods are within EPA limits. https://www.fda.gov/food/pesticides/questions-and-answers-glyphosate https://www.fda.gov/food/pesticides/questions-and-answers-gl... The EPA is the one who would make the determination you suggest, but in fact they still say the opposite: https://www.usnews.com/news/national-news/articles/2019-04-30/epa-glyphosate-the-herbicide-in-roundup-does-not-cause-cancer https://www.usnews.com/news/national-news/articles/2019-04-3... It's trial juries in the US that have been giving Bayer problems with regard to RoundUp, not regulatory agencies. Which doesn't fit with your government conspiracy theory.
peter_retief 7y ago
This seems to be trickery to keep state communism alive well after it has failed in every other instance. I believe the Chinese people deserve better.
postit 7y ago
With all this Huawei witch-hunting unfolding, the only thing comes to my mind is: What if Americans would apply the same scrutiny to its own companies, but then I realize most big-corps lobby their way around.
bayesian_horse 7y ago
I guess it's hard for any CEO, board, or share-holder in China to refuse requests from the party/government. So in terms of control, the ownership of the company doesn't mean a lot in any case.
hank_z 7y ago
Ahhh, Remember that, everything in China is owned by communist party.
adultSwim 7y ago
Glossed over employees getting the Huawei profits.
gooseus 7y ago
So, in light of all I'm reading here about how much the Chinese state is really in control of their tech sector, can we still say that Bitcoin is decentralized? Here is the current Bitcoin hashrate distribution: https://www.blockchain.com/en/pools https://www.blockchain.com/en/pools (20%) BTC.com - owned by Bitmain, a Chinese IC design company founded in the first quarter of 2013, which specializes in research, development and sales for custom mining chips and miners.[0] (12%) F2Pool - a Chinese mining pool, also referred to as "Discus Fish".[1] (11.8%) Poolin - a multi-currency mining pool. Started by the founders of BTC.com.[2] (11.6%) Antpool - also owned by Bitmain. That's 55.4% of the network controlled by Chinese mining companies, which I would assume have a similar structure to Huawei? [0] https://en.bitcoin.it/wiki/Bitmain https://en.bitcoin.it/wiki/Bitmain [1] https://en.bitcoin.it/wiki/F2Pool https://en.bitcoin.it/wiki/F2Pool [2] https://en.bitcoin.it/wiki/Poolin https://en.bitcoin.it/wiki/Poolin

547 points by smacktoward 7y ago

Ownership does not mean the same thing in non democratic states. The law and incorporation rules are always an approximation of what's applied in reality, but it is much more so in authoritarian states. The real two questions are those of profit distribution and actual power, as in the ability to effect change. The latter is always constrained by the ruling party, no matter what the incorporation rules say, and no matter what the former (distribution of profits) is. It was the case in Soviet satellite countries too, except Soviet states were also harsher on profit distribution (communism).

xfs 7y ago
The crux of the difficulty at understanding Huawei's ownership system is because Ren Zhengfei modeled it as a Maoist collective ownership mechanism, an alien concept prone to misreading from a private ownership premise, and at the same time it is facilitated by existing private ownership laws. Employees do indeed not own the company nor shares of the company in a private ownership sense because they cannot liquidate their shares if they wish to quit the company. But it is the very same design that makes the company immune to pressure from outside investors and the financial drive to capitalization, and enables it to fully reinvest all profits back to R&D and employee dividends, which is also a major reason for its explosive growth. It is reported some early employees got paid so much from their shares that they just stopped working and went on vacation indefinitely. If all profits of the production activities of a collective go back to its members and the continuation of growth of the collective, can you meaningfully claim the members of the collective do not own the assets of the collective and not control it? This profit returning scheme is legally possible only by being facilitated by the Company Law of the PRC. And the way the company ownership is structured by a "trade union committee" is also legally facilitated by the Trade Union Law of the PRC. It is a fatal error for the paper to claim the company is state-owned because the controlling trade union committee of Huawei operates under the aegis of the All-China Federation of Trade Unions. In fact, all SOEs in China are governed by the State-owned Assets Supervision and Administration Commission of the State Council, and the All-China Federation of Trade Unions is not legally sanctioned nor capable to manage private companies. Then the best reading of all the contradictions would be that Ren Zhengfei managed to carve out of a space for communist collective ownership by "hacking" the existing legal system of private companies.
- g8oz 7y ago
  This should be the top comment.

rolltiide 7y ago

> but the myth of Huawei’s employee ownership seems to persist outside of China. Never heard of it, never thought about it, not sure why proving/disproving this is in the author's interest. The main curiosity regarding what the structure of Huawei actually is would be interesting, edge of my seat for that one. But who cares about the employees, who would ever believe that it would be anything other than corporate speak? I would basically assume that because a shareholder who happens to be employed there at some point in time, that the company would make that assertion just to make people feel good. The profit sharing scheme the abstract suggests is good enough to align incentives and make the non-capital class feel like they "own" something. It is so improbable that a labor class is also a capital class that I would be more surprised to see a paper showing how it was true, and it would be from Harvard Business School and not randomly uploaded to SSRN.

luminiferous 7y ago
> Never heard of it, never thought about it, not sure why proving/disproving this is in the author's interest. It is in Huawei's interest to not be labelled as a state-owned or state-controlled actor. The perception of being controlled by the Chinese state is precisely why many western countries are leaning away from purchasing Huawei networking equipment for their up and coming 5G networks, and also (at least in the case of the US) advising against, and then banning, consumer electronics made by Huawei. Huawei has been trying to convince the public that it is in fact employee owned and therefore not controlled by the Chinese state by touting its "employee virtual ownership program", and the purpose of this paper appears to be to dispel that notion.
- rolltiide 7y ago
  Proving significant state ownership should be the goal then. Doesn't have to be majority. Maybe 15-30%? Chinese state owns some of most Chinese companies. Some passive through the central bank open market operations, some more direct and controlling. So it is almost like trying to prove a negative, with Chinese companies, but if we really want to dive deeper on this particular issuance, the opaque trade union governance is a nice tip of the iceberg. I just think it is such a weird assertion to start with.

intricatedetail 7y ago

The more regulation the more ownership of the state. Private companies are mostly an illusion these days as you can't do whatever you want with "your" company. Ironically just as in communist countries, in democratic countries companies are more or less owned by the ruling parties.

outside1234 7y ago
Maybe in France, but not in the US.
- coldtea 7y ago
  Yes, in the US the companies own the ruling parties. "What's good for General Motors is good for the country" and everything... (yeah, he said it the other way round. The practice was still coporate overlords first, country second, though of course today that little corporatism would seem quaint).
NicoJuicy 7y ago
Oh boy
krapp 7y ago
>The more regulation the more ownership of the state. Private companies are mostly an illusion these days as you can't do whatever you want with "your" company. Yes, it's just disgusting that private companies and their owners have to obey laws like anyone else.
- wallace_f 7y ago
  You'd think with how much people shout about how they hate nazis today that they'd be immune to writing something as misguided as this.
braythwayt 7y ago
How about: The more regulation the more ownership of the state. Private lives are mostly an illusion these days as you can't do whatever you want with "your" life. Ironically just as in communist countries, in democratic countries people are more or less owned by the ruling parties.

ordinaryradical 7y ago

The most informative comment I’ve heard about Chinese business is that one needs to take the western conception of state / military / corporation and chuck them out the window. In essence these are all descriptive functions of the same entity in China, and any apparent separation is just that—apparent. I know some may reply that, for example, Lockheed effectively lives at this nexus also. It’s a good argument, and probably similar though not exactly the same in arrangement. To me, the most interesting difference is that China has this kind of relationship with its major players regardless of industry, not just their defense contractors. So it doesn’t matter if you make cell phones, video games, toilet seats, ship hulls, or concrete—the whole concept of an enterprise not being interdependent on the state is a non-starter there. Whether it’s happening via backchannels to party officials or through ownership schemes like this one, the concept of private and public sector is so muddy there as to be almost meaningless. To me, this tells us a lot more about IP infringement and espionage than what we usually read, because where the west likes to conceive of corporations as competing in a market in China it’s more useful to describe corporations as tools of statecraft. Huawei wants us to think of them as competing with Apple because they both make cellphones. In reality, it’s as though the CIA or Mossad was competing with Apple—the aims of each may in fact be orthogonal to each other because market performance is not the real driver of the company’s decisions.

AmericanChopper 7y ago
I think this is a perfectly reasonable analogy. It’s not controversial to say that defence contractors in the US operate at the behest of the US government. The government uses national security to control their IP and dictate who they’re allowed to do business with, ensuring that their commercial activity is aligned with policy objectives. The Chinese government effectively has that level of control over their entire economy.
- neltnerb 7y ago
  Right, except that you don't go to prison if you're running Northrop Grumman and refuse to bid on a project. But I agree that enough cash effectively guarantees they will.

tepidandroid 7y ago

Huawei responded to this study, and the author responded to Huawei's response [1]. Salient point: > Our bottom-line conclusion about what it all means is just our opinion. If readers disagree with our conception of what employee ownership means and prefer Huawei’s, that’s their opinion. As long as everyone understands what the structure is, what label one puts on it is not ultimately that important. [1] https://thechinacollection.org/huaweis-ownership-huaweis-statement-response/ https://thechinacollection.org/huaweis-ownership-huaweis-sta...

bdz 7y ago

The interesting thing that after the paper was published Huawei launched a campaign about this topic https://www.huawei.com/minisite/who-runs-huawei/en/ https://www.huawei.com/minisite/who-runs-huawei/en/ https://twitter.com/huawei/status/1157213584985751553 https://twitter.com/huawei/status/1157213584985751553

cherrypicker001 7y ago
That twitter thread is awesome and sums it up pretty well. Half the posts are Winnie the Pooh gifs and if you go 1 - 2 followers deep on the other half, you're in a weird bot circle network.
partiallypro 7y ago
I've been a major critic of China and Huawei, especially as of late and I am served SO many clearly propaganda posts from Huawei now. It's insane.
- coldtea 7y ago
  https://en.wikipedia.org/wiki/Confirmation_bias https://en.wikipedia.org/wiki/Confirmation_bias (Of course one could also think this is a Chinese puppet account speaking :-))
sytelus 7y ago
So according to this, they are owned 88% by current employees. This should be very easily verifiable. Who is telling the truth here?
- seanmcdirmid 7y ago
  Huawei is a private company with an opaque management structure. None of its claims can easily be verified using publicly available information (nor can claims to the contrary).
- walshemj 7y ago
  Any Huawei employees want to comment and maybe explain the five principals and how they work for Huawei, in particular no 2 (Democratic Member Control ) and 4 (Autonomy and Independence ) The five principals (as amended there are now 7) are the key founding principals of ALL Coops

wenbin 7y ago

This Acquired podcast episode did a great job covering the rise of Huawei https://lnns.co/oPr5nUSzLxX https://lnns.co/oPr5nUSzLxX

skinnymuch 7y ago
What’s the point of Listen Notes link? I was hoping for some additional info or for some community input. But it has neither. Just the same general info/description of the episode.

floatingatoll 7y ago

Previously https://news.ycombinator.com/item?id=19698235 https://news.ycombinator.com/item?id=19698235

deepVoid 7y ago

> We know nothing about the internal governance procedures of the trade union committee. > We do not know who the committee members or other trade union leaders are, or how they are selected. > Given the public nature of trade unions in China, if the ownership stake of the trade union committee is genuine, and if the trade union and its committee function as trade unions generally function in China, then Huawei may be deemed effectively state-owned. There are lots of unknowns and many if's. It is far-fetched at best that Huawei is state-owned.

davidu 7y ago
Regardless of the legal ownership structure (I believe the SSRN perspective), it is effectively "state directed when needed." That's not a xenophobic perspective, that's a reality of being a company in China and it'd be hard for someone to push back on that based on the last 20 years of game film for Internet related businesses in China.
- chubbyrabbit 7y ago
  > state directed when needed Isn't it the same in here in the US? The president said "hey companies, you cannot trade with Huawei" and every company has to follow. My point is every government has some degree of influence on their companies. How much is another question. However in my opinion Huawei cannot be as innovative as they are with as much influence from their government as people here often suggest.
  - wolco 7y ago
    No, not the same at all. You cannot escape the Chinese government if you reach any kind of national success. In the US you can fight the government and even side with the other party and try to get the president to lose their job. Most know it's more profitable to ride a wave rather than to fight it.
    - seanmcdirmid 7y ago
      You could technically do that in China also, just without an independent judiciary you wouldn’t get very far.

Leary 7y ago

The sources of this paper are a bunch of random Chinese internet portal news. Is this considered academic research these days?

coldtea 7y ago
No, proper academic research also needs to cite a major scholarly source, like Wikipedia or Snopes.
wolco 7y ago
No it's considered news.

smacktoward 7y ago

I've heard a similar observation phrased slightly differently to describe Russia. If you're looking at a large Russian company, it goes, you're by definition looking at a company that has come to some kind of accommodation with the state -- because if they hadn't, the state would never have permitted them to get large.

lowdose 7y ago
On the surface these state owned operations look similar but the results speak to the contrary. I think Chinese corporations behave more like a beehive and Russians like a wolf pack. The Kremlin chased out a lot Russians with academic papers. China on the other hand seems to be the place that facilitates the best startup opportunities.
- 4ntonius8lock 7y ago
  This makes sense. Russian economy is much less dependent on talented work force, they have vast resources in proportion to their population.
  - lowdose 7y ago
    If 3 million people with a master / Phd move out, your economy takes hit especially when the country's GDP is below the level of Italy.
- cbHXBY1D 7y ago
  > I think Chinese corporations behave more like a beehive and Russians like a wolf pack. This is an old orientalist trope.
  - pjscott 7y ago
    Is it true?? (I'm from no particular wasteland country, so I don't know about contexts. huy, ..... \\
  - lowdose 7y ago

oh_sigh 7y ago

Not necessarily about China specifically, but why is corporate ownership so hard in general to deduce? Is it the case that public, queryable records simply do not exist, or they do exist but they require, say, manual steps to process through?

SpicyLemonZest 7y ago
The question of who owns a company is often open to interpretation. For example, which of the following is correct? * Mark Zuckerberg owns ~25% of Facebook, because he owns ~25% of the outstanding shares. * Mark Zuckerberg owns ~50% of Facebook, because he has a lot of special shares that end up giving him ~50% of the shareholder votes. * Mark Zuckerberg owns Facebook in totality, because he runs the company and there’s no mechanism for anyone to force him out. In this particular case, the authors and Huawei seem to agree about what’s on paper. The authors just don’t think that the structure Huawei calls “worker ownership” allows workers to actually decide what the company will do.
- steve19 7y ago
  Zuck could be successfully sued if he acted in a way that obviously enriched himself at the expense of other shareholders. The court does not recognise that he owns the entire company, therefor he does not.
  - SpicyLemonZest 7y ago
    And that's probably the right way to look at it in most contexts. But if there were a controversy about whether Zuckerberg is using Facebook to spy on people, it would be a really silly deflection for him to say "I think you'll find that's impossible because Facebook is owned by the American people".

sbhn 7y ago

Seriously, why is Huawei so important, is it because TRIAMPH says so. A communications medium across air.

llsf 7y ago
Because who makes the telcos equipments (MSC, HLR, BSC, etc.) can spy a lot and at large scale. There is a concern of allowing Huawei equipments in telco operator networks.
- sbhn 7y ago
  OoOoh, spooky chines signals, HN told me they were bad
  - dang 7y ago
    Would you please stop posting unsubstantive comments to Hacker News? You've been doing it a lot, and that's not cool. I get that you're frustrated by the comments that appear here on China, but it's not ok to respond by making the site worse. The skew here follows from the fact that the community, while international, is mostly Western. Therefore it reflects Western perspectives. Being in a minority position makes it tempting to lash out against the majority, but doing that breaks the site guidelines and just reinforces the imbalance. What's helpful, if you want to, is to provide a different perspective in a neutral, factual way. https://news.ycombinator.com/item?id=20687789 https://news.ycombinator.com/item?id=20687789 https://news.ycombinator.com/item?id=20199254 https://news.ycombinator.com/item?id=20199254 https://news.ycombinator.com/newsguidelines.html https://news.ycombinator.com/newsguidelines.html
  - llsf 7y ago
    To be fair, the old guard probably did the same before (post 2nd world war). Lucent (US), Nortel (Canada), Siemens (Germany), Alcatel (France) were all too happy to put their equipments in South America, Asia and Africa. It is a fair game, nothing to do with demonizing China. One would expect China to not accept Lucent equipments in its core telco network for the exact same reasons. Nobody really cared when western countries were spying after the 2nd world war (it was mostly phone calls and network security was a joke). Now, it is digital, and our footprint is way larger. Spying on telco network brings way more information now, than before. It is taken more seriously. Either intentionally (e.g. room 641A: https://en.wikipedia.org/wiki/Room_641A https://en.wikipedia.org/wiki/Room_641A) or not, tapping on telco networks is the great way to spy at scale.

sprafa 7y ago

There’s also something the Chinese state calls “fusion centres” which is one of the most interesting facets of this intelligence-industrial complex in China. Essentially the state decides, let’s say high tech cutting edge batteries for storing renewable energy is where they want to invest in. They gather a few companies into a building that can do it or are interested. They then have state representatives who effectively ask “what do we need to know” and “who are the major players in the field. In a month or so they come back again. They do big closed door presentation for all the companies in the building. Suddenly all the Chinese companies in the space start delivering R&D and eventually products that match some of the best stuff being done in the space. You could almost say they’ve learnt to copy it.. How do they do it? Industrial espionage, essentially, and building an industrial and intelligence infrastructure that allows for maximum impact of the state’s intelligence apparatus into the national economy. In a way it’s kind of brilliant. I heard it described by an NSA analyst in a very interesting talk. I thought it was fascinating and speaks exactly to your point. The idea that we are competing with “free market” Chinese companies is a fiction that we’ve made up in our own minds. It’s just not how China works. And to be fair it’s been working gang busters for them. edit since someone asked for it, here’s the talk - https://cybersecpolitics.blogspot.com/2017/04/fusion-centers.html?m=0 https://cybersecpolitics.blogspot.com/2017/04/fusion-centers... My description was from memory so I hope I remembered it right.

bb101 7y ago
Fascinating. Do you know any recent good books that cover the topic? I'm thinking something like Browder's Red Notice, but for China. Misha Glenny delved into China in his McMafia, but it was more about smuggling in the Fujian province, and its governor at the time: Xi.
- sprafa 7y ago
  I don’t know of any books. This talk was in featured in a blog called CyberSecPolitics which I follow.
- sprafa 7y ago
  Actually just realised. The CyberSecPolitics blog has book reviews. The guy clearly knows what he’s talking about so I have no qualms saying he probably can do better book recommendations than I can.

tech-historian 7y ago

NY Times covered this in April too, with many of the same conclusions: https://www.nytimes.com/2019/04/25/technology/who-owns-huawei.html https://www.nytimes.com/2019/04/25/technology/who-owns-huawe...

casefields 7y ago
The authors of the paper are quoted in the NY Times story.

canada_dry 7y ago

The transparent wall between the Chinese Communist party and Huawei is clearly apparent at their response to Canada's actions against Meng Wanzhou (at the behest of USA). China's extreme reaction (to the lawful action) is one that could be considered appropriate if Ms. Wanzhou wasn't an executive at a private corporation but a high ranking member of the government. China has responded as though it was an affront to the government.

Leader2light 7y ago

China will be the ruin of us all. We were fools not to drop the bomb on China as Douglas MacArthur wanted. They are growing so powerful and no one can stand against them. Hong Kong and Taiwan are both ultimately doomed to fall under Chinese control. I wonder how long until Africa is lost as well.

xster 7y ago

> • We know nothing about the internal governance procedures of the trade union committee. We do not know who the committee members or other trade union leaders are, or how they are selected. Well Huawei is pretty specific about the internal governance procedures of the trade union committee, who the committee members or other trade union leaders are, and how they are selected. https://imgur.com/a/mEFkgna https://imgur.com/a/mEFkgna It obviously doesn't mean that anyone should believe them. But for a journal piece to say "We know nothing" rather than "There are no means of independently verifying Huawei's claim" make it hard to take them seriously scientifically.

heisenbit 7y ago
As a reader of an analyst report you expect facts. As a buyer you can choose either facts or fud.
- stordoff 7y ago
  Just to clarify, are you saying the Huawei claim is (potentially) FUD?

chvid 7y ago

Would it make you feel any better if Huawei was owned 100% by a 27-year old college dropout wearing a hoodie? Honestly. I find it hard to see the big problem here. Huawei is run by Ren Zhengfei, who is also the public face of the company, and besides running its daily operations also formally has veto rights. Then there is a share scheme running through a union where the shareholders have no practical say but get a share of the company dividends. These shares are good enough for employees to take loans in and the issuance of shares has been a way for Huawei to finance itself.

watertom 7y ago

As usual with China we are focused on the wrong issue and asking the wrong questions. Who owns Huawei is irrelevant, who ultimately controls Huawei is the issue, but it’s a simple answer, the Chinese Government. I was in China on business, we were meeting the one of the largest and most successful tech companies in China. We were meeting with the Chairman/CEO and his team. Everyone was introduced except one man, everyone basically acted like the guy wasn’t in the room. He just sat and listened until he heard something he didn’t like, he quickly took over the meeting, admonished the CEO, and insisted they we do as he said. For the remainder of the meeting the CEO and his team sat head facing the conference table, it was clear they were all terrified. Once the key parts of the meeting were decided this man got up and left, the meeting quickly ended. I tried to get my Chinese colleagues to explain what happened, but everyone just blew me off. A couple days later we were in Taiwan, and I got the full story. The man was the party official who guided the company. The guy made sure that the Chinese government’s interests were followed. It’s China, thinking about things like it’s the West is stupid. Everything is owned by the government.

ETHisso2017 7y ago
This sounds more like an urban legend than an actual event.
- tempguy9999 7y ago
  If you are casting doubt on the poster then outright call him a liar and explain why. Otherwise... > I was in China on business ...assume goodwill and take him at his word.
ken47 7y ago
True if big.
Rapzid 7y ago
It annoys me to no end how much beating around the bush there is on this topic; particularly on NPR. They have the kid gloves on and pundits that won't come out and say the obvious. "But why the concern about Huawei and not Facebook and Google". Because they are controlled by a fascist government, a point we have largely been ignoring for decades while they weren't the 2nd largest economy?! Recently they had a guy on saying the USA intelligence/military community saw China as the biggest "strategic challenge" in the future. I'm PRETTY darn sure they mean and have said "threat to national security". He was also insinuating the the idea we couldn't coexist with their government was absurd because we "have been since 19xx". Well, were they the second largest economy in 1950-20xx? No they were not and their soft power plays are becoming much more bold. It's almost like the NPR and the media have given up on the ideals of liberal democracy? Good grief.

deleted 7y ago

[deleted]

waterdownship 7y ago

Without a doubt, the executive structure of Huawei is opaque to any outsider and up for speculation. However, it should be easy to verify that Huawei does distribute its wealth to its employee and it does not share its profit to the state. So there is financial interest for the employees, at least. In any case, the company may choose to things that benefit the state, but that does not mean it doesn't benefit the company.

ragerino 7y ago

I find the other extreme, as in the USA, more dangerous. Therefore the question "Who owns the US government?" could be asked too. Someone could look into example of Boeing and the FAA. The more we learn about 737-Max and 787 Dreamliner certification the more it's obvious that Boeing is running the FAA. Another example is the FDA. Good example here is Monsanto. While it was under US ownership everything was fine. Once it got sold to Bayer, suddenly stuff is carcinogenic. What I want to say is, that everybody knew since more than a decade before the transaction, that the stuff is carcinogenic. This seems to me like the FAA was protecting Monsanto before it was sold off.

mlvljr 7y ago
FDA,not FAA
heisenbit 7y ago
Yep, considering the concentration of wealth in few hands and the fact that most of these hands are politically well connected and fund political careers the system may not be so different. Old taxonomies for political systems can blind us for key similarities.
dragonwriter 7y ago
> Another example is the FDA. Good example here is Monsanto. While it was under US ownership everything was fine. Once it got sold to Bayer, suddenly stuff is carcinogenic. The FDA doesn't do that for pesticides, it just makes sure quantities in foods are within EPA limits. https://www.fda.gov/food/pesticides/questions-and-answers-glyphosate https://www.fda.gov/food/pesticides/questions-and-answers-gl... The EPA is the one who would make the determination you suggest, but in fact they still say the opposite: https://www.usnews.com/news/national-news/articles/2019-04-30/epa-glyphosate-the-herbicide-in-roundup-does-not-cause-cancer https://www.usnews.com/news/national-news/articles/2019-04-3... It's trial juries in the US that have been giving Bayer problems with regard to RoundUp, not regulatory agencies. Which doesn't fit with your government conspiracy theory.

peter_retief 7y ago

This seems to be trickery to keep state communism alive well after it has failed in every other instance. I believe the Chinese people deserve better.

postit 7y ago

With all this Huawei witch-hunting unfolding, the only thing comes to my mind is: What if Americans would apply the same scrutiny to its own companies, but then I realize most big-corps lobby their way around.

bayesian_horse 7y ago

I guess it's hard for any CEO, board, or share-holder in China to refuse requests from the party/government. So in terms of control, the ownership of the company doesn't mean a lot in any case.

hank_z 7y ago

Ahhh, Remember that, everything in China is owned by communist party.

adultSwim 7y ago

Glossed over employees getting the Huawei profits.

gooseus 7y ago

So, in light of all I'm reading here about how much the Chinese state is really in control of their tech sector, can we still say that Bitcoin is decentralized? Here is the current Bitcoin hashrate distribution: https://www.blockchain.com/en/pools https://www.blockchain.com/en/pools (20%) BTC.com - owned by Bitmain, a Chinese IC design company founded in the first quarter of 2013, which specializes in research, development and sales for custom mining chips and miners.[0] (12%) F2Pool - a Chinese mining pool, also referred to as "Discus Fish".[1] (11.8%) Poolin - a multi-currency mining pool. Started by the founders of BTC.com.[2] (11.6%) Antpool - also owned by Bitmain. That's 55.4% of the network controlled by Chinese mining companies, which I would assume have a similar structure to Huawei? [0] https://en.bitcoin.it/wiki/Bitmain https://en.bitcoin.it/wiki/Bitmain [1] https://en.bitcoin.it/wiki/F2Pool https://en.bitcoin.it/wiki/F2Pool [2] https://en.bitcoin.it/wiki/Poolin https://en.bitcoin.it/wiki/Poolin