Huawei's Chairwoman Worked For Chinese Intelligence Before Joining Huawei

Much has been made of the fact that Ren Zhengfei, Huawei's founder and CEO used to work as an engineer in the Peoples Liberation Army before he founded Huawei in 1988. However, lots of CEOs around the world are military veterans including me. What's much more significant is the little-known fact that Huawei's Chairwoman Sun Yafang used to work for China's equivalent of the CIA; known as the Ministry of State Security (MSS). The MSS was formed in 1983, about 4 years before Ren founded Huawei (1987). According to the U.S. China Business Council:

MSS conducts covert intelligence gathering operations overseas. It has established intelligence agencies in more than 170 cities and in nearly 50 countries and regions all over the world. These agencies are classified as general branches, branches, and sub-branches. MSS aggressively targets the United States, placing particular emphasis on California's high-tech sector. Cover for Beijing's espionage in the United States includes the 1,500 Chinese diplomats operating out of 70 offices, 15,000 Chinese students who arrive in the United States each year, and 10,000 Chinese who travel in some 2,700 visiting delegations each year.

The Federation of American Scientists (FAS) has a much more detailed description of its history and operations here.

Madame Sun's past with the MSS was first disclosed by a Financial Times article last April. Her Huawei biography neglects to mention that key affiliation, however it is commonly reported in many places on the Chinese Internet. One place in particular is the alumni page for her alma mater; at least it did until just recently when it was mysteriously corrected. Here is a table showing the original time line which included her tenure at MSS and the new "corrected" timeline.

The redaction occurred shortly after I posted two back-to-back articles about Huawei's questionable employee stock loans. Apart from the alumni website, similar information about Madame Sun's time at the MSS also appears in Baidu's version of Wikipedia. Considering how difficult a time Huawei is having convincing the U.S. government that it's just another technology company, I would think that the company would respond by releasing a verifiable resume of their Chairwoman which would end this controversy once and for all; similar to what President Obama did to resolve questions about his birth certificate.

UPDATE: I just learned about the Washington Times article of Oct 11, 2011: "Chinese telecom firm tied to spy ministry", which reports on essentially the same facts mentioned here (sans the attempted cover-up). Bill Gertz references an Oct 5 report by the Open Source Center: “Huawei Annual Report Details Directors, Supervisory Board for First Time,”

UPDATE (12 Oct 2012): Here's an archived copy of the web page that mentions Madame Sun's time with the MSS.

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Huawei CEO's Nepotism Strategy May Prove Fatal

There's been some discussion by Huawei watchers that the patriarch / CEO of the company, Ren Zhengei, has been pressuring Chairwoman Sun Yafang (whom I wrote about last week) to resign (his latest offer is YUAN$1Billion) so that his son Meng Ping, also called "Ren" Ping (see photo) can replace Sun as Chairman of the board. Unfortunately for the company, Sun Yafang is highly regarded both inside Huawei and in the industry in general while Ren's son hasn't been able to gain the respect of the company's employees. In fact, according to my sources, some Huawei employees call him "A dou"; a historical reference to a king's son who's an idiot.

Currently, Huawei's board includes three family members – CEO Ren Zhengfei, CFO Meng Wanzhou (Ren Zhengfei's daughter), and Xu Wenwei (Ren Zhengfei's son-in-law and spouse of Meng Wanzhou).  Ren Shulu (Ren Zhengfei's younger brother) sits on the Board of Supervisors of Huawei. In addition to his brother and his children by Meng, Ren Zhengfei also has three sisters in Huawei.  His son-in-law Xu Wenwei divorced his wife to marry the CEO's daughter Meng Wanzhou. This was a strategic move by Xu to fortify his position in the company and enter Ren Zhengfei’s inner circle.  Xu is someone to watch because he's responsible for Huawei’s research and has a reputation for being quite competent.

Ren Zhengfei's preference for installing family members in high level company positions regardless of merit is understandable considering that he got his start by marrying Meng Jun, the daughter of the Deputy Governor of Sichuan Province Meng Dongbuo.  Besides being ambitious, he’s said to be a womanizer, especially favoring company secretaries.  His wife divorced him, and he married one of the secretaries, with whom he has a daughter.  Then he divorced again and married another company secretary.

Professor Chen Shengjun said, “If you put Mr. Ren Zhengfei and Mrs. Sun Yafang together, all Huawei employees think Mr. Ren Zhengfei is the Number one boss despite Mrs. Sun Yafang’s position as Chairman. Mr. Ren Zhengfei tried a lot to choose his successor from professional managers but failed. From Mr. Ren Zhengfei’s aspect, he probably has to leave Huawei to his children in consideration of the backwardness of China professional manager market especially lack of loyalty. Huawei probably has to become a family enterprise although this is a danger for Huawei.”

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Huawei's Chairwoman Worked For China's Ministry of Public Security

Huawei's 2010 annual report included, for the first time, information about its Board of Directors in an apparent bid to demonstrate increased transparency into its operations. The bio for its Chairwoman Sun Yafang failed to mention that she once worked for the Ministry of Public Security, which is the national law enforcement agency for the Peoples Republic of China. Part of its remit is Information Security which in China means information monitoring - precisely the area that Huawei is working hard to change U.S. perceptions about. According to this article, Huawei had no comment on why this very relevant part of Sun Yafang's resume had been omitted.

Two other important facts emerged from the company's annual report:

1. Huawei appears to be a family-run business and there's every indication that it will continue as such (source).

2. The company's strategy of under-pricing its competition by 10-15% is working. It's net profit in 2010 rose 30% from the previous year and it is closing in on Ericsson as the world's market leader in telecommunications. (source)

UPDATE: I incorrectly identified Sun Yafang as Ren Zhengfei's daughter in my original post. It's been fixed with this update (26 April 2011).

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