It always seemed odd that in early December 2018 Chinese authorities suddenly happened to allege that two Canadians were spying on China and swiftly arrested them —just days after Meng (who is also the daughter of Huawei’s founder) had been arrested in Canada on a U.S. warrant.
Indeed, Kovrig and Spavor’s fate is a chilling message to all Western firms and organizations operating in China: Any of your employees can be arrested and held hostage for years if Beijing feels slighted by a Western government. Companies should therefore think twice about whether it’s safe to send staff to China.
After nearly three years in Chinese prisons, Michael Kovrig and Michael Spavor have been released and allowed to return to Canada. But the fact that they were released immediately after Meng Wanzhou, the chief financial officer of the Chinese telecommunications giant Huawei, reached a deal with the U.S. Justice Department that freed her from her house arrest in Canada illustrates how Kovrig and Spavor’s detention was really never—as Beijing pretended—about them posing a risk to Chinese national security.
After nearly three years in Chinese prisons, Michael Kovrig and Michael Spavor have been released and allowed to return to Canada. But the fact that they were released immediately after Meng Wanzhou, the chief financial officer of the Chinese telecommunications giant Huawei, reached a deal with the U.S. Justice Department that freed her from her house arrest in Canada illustrates how Kovrig and Spavor’s detention was really never—as Beijing pretended—about them posing a risk to Chinese national security.
Indeed, Kovrig and Spavor’s fate is a chilling message to all Western firms and organizations operating in China: Any of your employees can be arrested and held hostage for years if Beijing feels slighted by a Western government. Companies should therefore think twice about whether it’s safe to send staff to China.
It always seemed odd that in early December 2018 Chinese authorities suddenly happened to allege that two Canadians were spying on China and swiftly arrested them—just days after Meng (who is also the daughter of Huawei’s founder) had been arrested in Canada on a U.S. warrant.
While the charges against Meng were serious and backed by evidence—the U.S. government argued that she had misled a U.S. bank over Huawei’s dealings with Iran, which caused the bank to unwittingly break U.S. sanctions against Iran by having Huawei as a client—the charges against Kovrig and Spavor were flimsy. The Chinese authorities presented no evidence, and international diplomats were barred from their trials.
But Beijing always pretended Kovrig and Spavor’s alleged crimes were real, going so far as to have Spavor convicted in court and sentenced to 11 years in prison. Then, just hours after Meng signed a deal with the U.S. government in which she admitted to the charges against her and was released from her comfortable Canadian house arrest (which involved the freedom to gallivant around Vancouver with her family and even dine with friends in violation of COVID-19 rules), China released Kovrig and Spavor from their far less comfortable confinement. In releasing them, Beijing effectively admitted that the charges were trumped up and that the men had been held as bargaining chips.
In releasing Kovrig and Spavor, Beijing effectively admitted that the charges were trumped up and that the men had been held as bargaining chips.
As long as Kovrig and Spavor were accused of espionage, Western companies reasoned that they could keep sending their staff to China. Why shouldn’t they? The two men were officially arrested because they were suspected of having committed crimes. And for many companies, China is the top export market. For others, the country is a key manufacturing location. Many also have joint ventures in the country, though surprisingly few have relocated their research and development operations there. (Guess why.)
Indeed, as late as this May, the Financial Times reported that Western executives in China were succumbing to Stockholm syndrome, the peculiar condition where captives develop sympathy for their captors. Despite many Western companies having recently been punished by Beijing for perceived slights, such as showing Taiwan on a map or voicing concern about Uyghur slave labor, many executives blame Western media and human rights groups rather than the Chinese government, the Financial Times noted.
These executives had better wake up. By releasing Kovrig and Spavor hours after Meng’s release, Beijing signaled to the world that the two Canadians’ arrest never was about suspected espionage. They were arrested simply because they were Canadian, happened to be in China when Meng was arrested, and were in professions where espionage accusations would not sound altogether outlandish (Kovrig, a former diplomat who worked for the International Crisis Group, and Spavor, a businessman with ties to North Korea). In other words, they were random targets held hostage to achieve a diplomatic goal.
If something happened to an expat employee in China (including Hong Kong), the employer would not just suffer reputational damage; it could be held legally liable.
By engaging in this sort of hostage diplomacy, China has thus entered the exceptionally dubious company of Muammar al-Qaddafi’s Libya. In 2008, Qaddafi’s unruly son Hannibal and his wife were arrested in Switzerland after staff at the luxury hotel where they were staying reported having been assaulted by the couple. Even though they were subsequently allowed to leave Switzerland, their arrest so enraged Qaddafi that he declared jihad against Switzerland—and arranged for the random arrest of two Swiss businessmen who happened to be in Libya.
The implications of China’s descent into this dubious company could be devastating for global business. To be sure, internationally operating businesses are used to sundry dangers, including kidnappings, hostage-takings, and terrorist attacks. There’s a whole industry that trains business executives in how to best evade dangers when working or traveling in high-risk countries like Nigeria, Libya, and Angola, where the perpetrators of the crimes are typically criminal gangs.
Rarely, however, does the regime arrest a random Westerner for the purpose of coercing that person’s home government. Iran is currently holding Nazanin Zaghari-Ratcliffe, a British Iranian charity worker, and various other Western citizens (often native Iranians who have been naturalized in Europe or the United States) in detention. That’s a tragedy for those held, but most Western companies don’t do business in Iran anyway.
China is different, precisely because that’s where companies want to be. In 2019 alone, 40,888 foreign companies invested in China, including nearly 14,000 active in retail and nearly 5,400 in manufacturing. With China now having admitted through its actions that it is willing to engage in hostage diplomacy, these newly arrived companies will think twice about sending staff there. So will firms that have been active in China for a long time and companies thinking about doing business there.
Yes, there are CEOs who play fast and loose and who’re willing to risk doing business in China because the country brings unbeatable revenues and because the risk of one of their employees becoming a hostage-diplomacy victim is low. But while CEOs may hold such convictions, they have a legal duty of care to their employees. Corporate boards, in turn, will take into account not just the prospective loss of reduced business in China but also the damage to a company’s brand should it be found to have put employees—even willing ones—in harm’s way.
“If I were the CEO of a large or politically sensitive business, I would not be sending executives to China,” a senior executive with two decades of experience in China told me. “At the moment, Australian, U.K., and U.S. firms should be particularly careful, especially when it comes to people in key roles, like large shareholders, owners, CEO, CFO, or board advisors. The same goes for business with important government contracts in their home country and for high-tech companies, companies focused on large-scale commodities, and companies with military contracts. It’s too dangerous for the time being. I would also be wary of Hong Kong.”
Indeed, should something happen to an expat employee in China (including Hong Kong), the employer would not just suffer reputational damage; it could be held legally liable. In 2019, an Italian court set a precedent many judges and juries are now bound to consult. The judge ruled in the case of four Italian engineers who were kidnapped in 2015 by the Islamic State while working for the Italian oil construction company Bonatti in Libya—holding Bonatti’s CEO, two directors, and the firm’s Libya chief responsible. All four entered plea bargains and received suspended prison sentences.
The choice facing CEOs of Western companies is now clear: The confrontation between China and Western countries is increasing, and China is willing to engage in hostage diplomacy. Sure, the odds may be low that one of your employees is randomly selected by the Chinese authorities, but from now on the risk will always be there—and while you can try to reduce the risk of your employees being kidnapped by gangs in Nigeria, there’s nothing you can do to protect them from a Chinese show trial.
Should it come to such a situation, your company will send spend months, maybe years, in the news—and you may be sent to jail for it. Especially if your company is based in the United States, it could face devastating lawsuits. Yes, businesspeople will keep traveling to China to visit and may even decide to live there. But starting this month, that number will likely drop dramatically. Their absence will, incidentally, harm the Chinese economy far more than Meng Wanzhou’s plush Canadian house arrest.