Yes, It's Safe to Travel to China — For

RANE Advisory | December 10, 2018

Yes, It’s Safe to Travel to China — for Now

The December 1 arrest of Meng Wanzhou, CFO of Chinese tech giant Huawei Technologies, by Canadian authorities acting on a request from the United States has raised concerns about the future of trade negotiations between Washington and Beijing, as well as about entities with business interests in Asia. US officials are seeking her extradition over allegations she misled banks about the company’s dealings with Iran to bypass international sanctions. US entities with interests in China have become concerned about how Beijing will react and whether they face new risks on the ground in China. In response to those issues, RANE experts share their opinions on what to expect, how to react, and how to plan for the days ahead.

• RANE experts say that, while Beijing will look for an appropriate reaction that will appease nationalist sentiment at home, it will respond in a careful and measured way, and is unlikely to target individuals affiliated with US brands. • Both Washington and Beijing in public statements are trying to separate the issue of Meng’s arrest from the upcoming high-level trade talks.

RANE experts agree that, with some additional precautions, there is relatively little risk that US executives traveling to China will be arrested. That said, our experts warn that organizations should be aware of and prepare for other risks — including the possibility of an exit ban.

• Companies are encouraged to assess whether there are any areas of civil or business dispute taking place involving their firm or the traveler that potentially could be used as a justification for the Chinese government to detain an employee or issue an exit ban. Well before the Meng arrest, China adopted new laws allowing for the detention of executives should there be even a civil dispute at play, so this type of assessment is a “best practice” regardless of the political tensions. • Any traveler who is a Chinese national, a former Chinese national, or has a significant nexus to a Chinese national should be aware of potentially being at increased risk of a travel ban. WHAT TO KNOW

On December 1, Canadian authorities arrested Meng Wanzhou, Huawei’s CFO and the daughter of the company’s founder, on behalf of the United States while she was changing planes in Vancouver. Legal proceedings to extradite Meng to the US could drag on for months.

• The warrant for Meng’s arrest was issued in August as part of a long-running US Justice Department Investigation. Meng has been charged with being part of a conspiracy to defraud banks by tricking them into making transactions that violated US sanctions against Iran. If convicted, she faces up to 30 years in prison. • Specifically, the US alleges that Huawei used Hong Kong-based Skycom Tech to do business in Iran, breaching US sanctions, and that Meng led US financial institutions to believe that Huawei had no ties to Skycom when Skycom was actually a thinly disguised subsidiary. Meng served on Skycom’s board in 2008

RANE Advisory | www.ranenetwork.com | [email protected] and 2009, but her attorney claims Skycom was sold in 2009. Huawei remains a shareholder of the company.

Huawei is one of China’s most highly valued companies: As one of the world’s largest makers of smartphones and networking equipment, it is the biggest private company in China, with 180,000 employees and a global footprint in more than 100 nations. As one of China’s leaders in the tech arena, its achievements are a source of national pride among both China’s leaders and the population. As daughter of Huawei founder Ren Zhenfei, Meng is Chinese “corporate royalty.”

• Huawei has said it was “not aware of any wrongdoing by Ms. Meng” and that it “complies with all applicable laws and regulations where it operates.” WHAT TO WATCH OUT FOR

Beijing will have to respond in some way, but analysts agree that any retaliation will be carefully considered. As the New York Times put it, the arrest “unleashed a combustible torrent of outrage and alarm among affluent and influential Chinese,” and the issue has exploded on Chinese social media — and the government has not yet squelched it. The Chinese leadership thus far seems to be trying to keep upcoming trade talks separate from the Huawei case, issuing positive public comments on the trade negotiations well after learning of Meng’s detention.

• Beijing summoned both the Canadian and US Ambassadors to China to the Foreign Ministry over the weekend to protest Meng’s arrest, saying the arrest violates the “legitimate rights and interests of Chinese citizens” and that China will take “further action” if needed. China regularly calls in foreign diplomats to register complaints, so the summonses may not suggest a meaningful increase in tension. • On Sunday, the Communist Party’s official newspaper, The People’s Daily, published an editorial warning of “serious consequences” against those who arrested Meng, saying ominously “China will not stir up trouble. But it is also not afraid of trouble . . . Nobody should underestimate China’s confidence, willpower, and strength.” • A senior economic advisor to the Chinese leadership on Sunday publicly praised the two countries’ broader economic relationship and made no mention of the arrest, one of a number of signs that Beijing is compartmentalizing the Huawei RANE experts generally agree issue. that Beijing is not likely, at • On Sunday, US Trade Representative Robert Lighthizer, who is leading the talks with China, said that the trade talks should not be affected by Meng’s arrest. “This this point, to retaliate by ar- is a criminal justice matter. It is totally separate from anything that I work on or resting a US executive. anything that the trade policy people in the administration work on.”

RANE experts generally agree that Beijing is not likely, at this point, to retaliate by arresting a US executive. Our experts say that China would not pursue this means of retaliation without a very clear legal case, as it would undermine all of the efforts the party has made to portray the country as open for foreign business and as the defender of the global trading system.

• Historically, Beijing has used exit bans, under which a visitor is not permitted to travel out of China, over physical detention. Beijing has grown increasingly bold in using the tactic against ethnically Chinese non-citizens, who Beijing appears to regard as permanently beholden to Beijing regardless of documentation. However, Beijing has also on occasion used travel bans against traveling professionals with no personal connection to China.

RANE Advisory | www.ranenetwork.com | [email protected] • Last January, the US State Department updated its travel warning to advise that China’s use of punitive/coercive exit bans poses a risk to foreigners in the country. • Beijing is attempting to tamp down concerns from US executives that they could be targeted by China in retaliation, with the Foreign Ministry spokesman stating that China “has always protected the legitimate rights and interests of foreign nationals in China . . .” • While wary of chasing away foreign investment, Beijing has used targeted antitrust/ corruption investigations to hurt foreign companies in the past. WHAT TO CONSIDER All US tech executives should Although our experts agree that the hype has gotten ahead of the reality on the ground with regard the risk of China arresting a US executive, they agree that review whether travel to taking extra precautions and increasing awareness around travel is wise. Our China or its territories is experts advise: necessary at the moment. • All US tech executives should review whether travel to China or its territories is Normal travel, including necessary at the moment. Normal travel, including business-related travel, can continue. business-related travel, can • However, companies are encouraged to assess whether there are any areas of civil continue. or business dispute taking place involving their firm or the traveler that potentially could be used as a justification for the Chinese government to detain an employee or issue an exit ban. Well before the Meng arrest China adopted new laws allowing for the detention of executives should there be even a civil dispute at play, so this type of assessment is a “best practice” regardless of the political tensions. • Any traveler who is a Chinese national, a former Chinese national, or has a significant nexus to a Chinese national should be aware of potentially being at increased risk of a travel ban.

During travel, the key message is basic: Follow the rules and don’t give Chinese authorities any reason to detain staff.

• Register itineraries and travel with the STEP Program so the US government will have a record of the traveler’s passport and itineraries during their travel and can contact them should any complications arise. • Ensure that all travelers have obtained and are abiding by the correct visa and permit requirements — i.e., do not travel with a tourist visa if travel is for business. Any discrepancy regarding paperwork can result in serious consequences, including detention. Travelers should not overstay their visas in the country for any reason. • Ensure that the traveler’s itinerary is fully registered internally with the company. The company should keep a full record of all itinerary items and movements in case of detention. Travelers should have a greater than normal level of contact and ongoing communications while in China both in advance of and during such travel. • Travelers should know their rights in case they are detained or selected for additional screening on arrival or departure from a Chinese port of entry. • Travelers should carry additional copies of their visas and passport. • While in China, be sure to abide by all local laws and regulations. • Avoid carrying material perceived to be linked to sensitive topics, such as Tibet, Taiwan, Tiananmen, the Falun Gong movement, human rights groups, religious freedom, and so forth. These include undeveloped film, recorded material, publications, files on computers, and other materials.

RANE Advisory | www.ranenetwork.com | [email protected] • Exercise caution before sending documents or information abroad that would fall under the coverage of China’s national security law. • Should any complications arise during travel to China, contact the appropriate Embassy for support.