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#Huawei - Stay the course: Creating value for customers

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Speech by Huawei Chairman Liang Hua at Huawei's H1 2019 Business Results Press Conference.

"Ladies and gentlemen, good afternoon and welcome.

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"As you all know, over the past six months Huawei has been under immense pressure from the US government. Since the beginning of the year, more than 2,600 media representatives from around the world have visited Huawei.

"They have interviewed our management teams and employees, visited our labs and production lines, and have eaten side-by-side with us in various canteens and coffee shops around campus. They came to see with their own eyes what Huawei's all about. I'm sure you've all witnessed the work ethic of Huawei's people under such great pressure.

"In that same spirit of openness, I would like to share with you Huawei's business results for the first half of 2019.

H1 2019 results: Solid performance, stable growth

In the first half of 2019, Huawei generated CNY401.3 billion in revenue – a 23.2% increase year-on-year. Our net profit margin was 8.7%.

Broken down by business group:

  • Revenue from our carrier business was5 billion
  • Revenue from our enterprise business was6 billion
  • Revenue from our consumer business was CNY 220.8 billion

"This has been a unique period in Huawei's history. Given the situation, you might think that things have been chaotic for us. But that's far from the case. We have been working hard to ensure smooth operations, and our organization is as sound as ever. With effective management and an excellent performance across all financial indicators, our business has remained robust in the first half of 2019.

"The US entity list has had some impact on our development. But both the scope and extent of this impact is controllable. Our core products have not been significantly affected. Our customers still believe in us. They continue to choose Huawei and buy our products, which shows they trust us. I'd like to take a moment here to thank our customers around the world for their ongoing trust and support.

"We are leading global 5G rollout, with steady production and shipment of ICT infrastructure

"Our suppliers and partners continue to place great trust in Huawei too. They have given us fantastic support, helping us ensure a stable supply chain and timely delivery to our customers. Our approach to business continuity management and supply diversity has withstood the test of the market. Neither production nor shipment has been interrupted – not for a single day.

"For our ICT infrastructure business, overall production and shipment schedules have remained mostly stable. Despite a dip in our intelligent computing sales, shipments of ICT equipment have continued to increase. That includes equipment for wireless networks, optical transmission, data communications, and IT products.

This is especially true in the 5G market. Huawei is the leader in global 5G rollout. We have secured 50 commercial 5G contracts and have shipped more than 150,000 base stations to customers around the world.

"Global consumers still love and trust the Huawei brand.

"In our consumer business, smartphone shipments (including Honor phones) reached 118 million units, up 24% YoY. We have made great progress delivering services to our consumers across all scenarios, and have seen rapid growth in shipments of tablets, PCs, and wearables.

"We are beginning to scale our broader device ecosystem to deliver a more seamless intelligent experience across all major user scenarios. To date, the Huawei Mobile Services ecosystem has attracted more than 800,000 registered developers worldwide, and 500 million users.

"Huawei smartphones are now leading the market in terms of photography, AI, connectivity, and battery life. And that's how we've continued to earn the trust of our customers. We will double our efforts to create more devices – and better devices – to pay it forward.

"Our strategy and investment remain unchanged.

"To look at our H1 performance objectively, it's true that revenue grew fast up through May. Given the foundation we laid in the first half of the year, we continue to see growth even after we were added to the entity list. That's not to say we don't have difficulties ahead. We do.

"We will need to heavily invest both in people and materials to replace old software and hardware versions, manage supply continuity, and ensure smooth delivery to our customers around the globe. All of these factors will have an effect on future business performance.

"You've probably seen an image of an airplane riddled with bullet holes around campus. The same image I had on screen just a moment ago. Huawei is like that plane.

"We need to patch up these holes without losing altitude. We've just about finished patching up our carrier business, and now we're focused on our consumer business. We will keep fighting for survival.

"Difficulties in the outside environment may affect the pace of our growth in the short term, but we will stay the course. We will not change our strategic direction. And we will definitely see this through.

"While we're working hard to ensure our survival, we will continue investing as planned – including a total of CNY120 billion in R&D this year.

"We'll get through these challenges, and we're confident that Huawei will enter a new stage of growth after the worst of this is behind us.

"Open collaboration benefits everyone.

"Huawei will continue to work together with others regardless of the challenges we face. We won't succumb to insularity or close ourselves off from the outside world. We want to work more closely with partners across the value chain to create greater value for our customers, and a better experience for consumers. Together, we can promote the healthy and sustainable development of the entire ICT industry.

"We're confident in what the future holds and will keep pushing ahead

"For those outside the company, I'm sure the past six months have seemed pretty turbulent for us. But inside the company things are calm. We're focused on our work, ensuring smooth delivery, and providing our customers with the best possible service.

"No matter what difficulties come our way, we are fully confident in what the future holds for us.

"For one, the ICT industry is still booming. The world has just started going digital and embracing artificial intelligence, and this will create massive room for growth.

"Our global customers and partners have placed a lot of trust in us, and we have been taking concrete steps to honor our commitments to them. Our confidence is mutual, and growing stronger with time.

"We have also found that when organizations are placed under incredible pressure, it often coincides with incredible growth potential. In a way, the US government's foray against Huawei has helped us understand our objectives better. It has enhanced collaboration and has galvanized our people. This pressure has brought us together and reinvigorated the company.

"We are now at a historical moment. It has created an opportunity for our people to shine and has attracted many bright minds from around the world to join us. I believe that two or three years from now, Huawei will be run by a team that's absolutely brimming with passion. They will be the ones who manage the company effectively and support a new round of growth.

"We're still climbing up, step by step towards the pinnacle of the ICT market. We have chosen the hardest path, but we have no regrets.

"Even in the most difficult times, we have stuck to our decisions, because they were made in the pursuit of our ideals. This sense of mission has enabled us to stay focused and dedicated, and has helped us to stand at the forefront of the world in many fields.

"Through open collaboration, we have joined forces with some of the world's top scientists and brightest minds. We will explore the future together and bring the benefits of digital technology to everyone.

"Our commitment to our ideals and mission is the driving force behind our progress. There is no turning back. All we can do is stay the course and forge ahead. We are confident we will make it in the end.

"Thank you."

China

US concern over China nukes buildup after new silos report

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Military vehicles carrying DF-5B intercontinental ballistic missiles travel past Tiananmen Square during the military parade marking the 70th founding anniversary of People's Republic of China, on its National Day in Beijing, China 1 October, 2019. REUTERS/Jason Lee/File Photo

The Pentagon and Republican congressmen on Tuesday (27 July) aired fresh concerns about China's build-up of its nuclear forces after a new report saying Beijing was building 110 more missile silos, writes David Brunnstrom, Reuters.

An American Federation of Scientists (AFS) report on Monday (26 July) said satellite images showed China was building a new field of silos near Hami in the eastern part of its Xinjiang region.

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The report came weeks after another on the construction of about 120 missile silos in Yumen, a desert area about 240 miles (380 km) to the southeast.

"This is the second time in two months the public has discovered what we have been saying all along about the growing threat the world faces and the veil of secrecy that surrounds it," the U.S. Strategic Command said in tweet linked to a New York Times article on the AFS report.

The State Department in early July called China's nuclear buildup concerning and said it appeared Beijing was deviating from decades of nuclear strategy based around minimal deterrence. It called on China to engage with it "on practical measures to reduce the risks of destabilizing arms races."

Republican Congressman Mike Turner, ranking member of the House Armed Services Subcommittee on Strategic Forces, said China's nuclear build-up was "unprecedented" and made clear it was "deploying nuclear weapons to threaten the United States and our allies."

He said China's refusal to negotiate arms control "should be a cause for concern and condemned by all responsible nations".

Another Republican, Mike Rogers, ranking member of the House Armed Services Committee, said the Chinese build-up showed the need to rapidly modernize the US nuclear deterrent.

A 2020 Pentagon report estimated China's nuclear warhead stockpile in "the low 200s" and said it was projected to at least double in size as Beijing expands and modernizes its forces. Analysts say the United States has around 3,800 warheads, and according to a State Department factsheet, 1,357 of those were deployed as of 1 March.

Washington has repeatedly called on China to join it and Russia in a new arms control treaty.

The report on the new silos comes as Assistant Secretary of State Wendy Sherman is due to hold arms control talks with Russia in Geneva on Wednesday.

Sherman was in China earlier this week for talks at which Beijing accused Washington of creating an "imaginary enemy" to divert attention from domestic problems and suppress China.

Beijing says its arsenal is dwarfed by those of the United States and Russia and it is ready to conduct bilateral dialogues on strategic security "on the basis of equality and mutual respect".

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US and China positions at a standstill in entrenched Tianjin talks

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With no indication of a US-China leaders' summit in the works, nor any outcomes announced from high-level diplomatic talks on Monday (26 July), relations between Beijing and Washington appear to be at a standstill as both sides insist the other must make concessions for ties to improve, write Michael Martina and David Brunnstrom.

US officials had stressed that Deputy Secretary of State Wendy Sherman's trip to the northern Chinese port city of Tianjin to meet Foreign Minister Wang Yi and other officials was a chance to ensure that stiffening competition between the two geopolitical rivals does not veer into conflict.

But the combative statements that emerged from the meeting – albeit coupled with suggestions from officials that closed-door sessions were marginally more cordial – mirrored the tone set in Alaska in March, when the first senior-level diplomatic talks under President Joe Biden were overshadowed by rare public vitriol from both sides.

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While Tianjin did not expose the same degree of outward hostility that was on display in Alaska, the two sides appeared to stop short of actually negotiating anything, sticking instead to lists of established demands.

Sherman pressed China on actions Washington says run counter to the rules-based international order, including Beijing's crackdown on democracy in Hong Kong, what the U.S. government has deemed is an ongoing genocide in Xinjiang, abuses in Tibet and the curtailing of press freedoms.

"I think it'd be wrong to characterize the United States as somehow seeking or soliciting China's cooperation," a senior U.S. administration official told reporters after the talks, referring to global concerns such as climate change, Iran, Afghanistan and North Korea.

"It is going to be up to the Chinese side to determine how ready they are as well to… take the next step," a second U.S. administration official said of bridging disagreements.

But Wang insisted in a statement that the ball was in the United States' court.

"When it comes to respecting international rules, it is the United States that must think again," he said, demanding that Washington remove all unilateral sanctions and tariffs on China.

China's Foreign Ministry has recently signaled there could be preconditions for the United States on which any kind of co-operation would be contingent, a stance some analysts say is a recipe for diplomatic ossification and that leaves dim prospects for improved ties.

Bonnie Glaser, an Asia expert at the German Marshall Fund of the United States, said it was important for the two sides to maintain some form of engagement. At the same time, there appeared to be no agreement in Tianjin for follow-up meetings or mechanisms for ongoing dialogue.

"That will probably leave US allies and partners uneasy. They are hoping for greater stability and predictability in the US-China relationship," Glaser said.

Both sides are likely to be disappointed if they expect the other to give in first, she added.

There has been some expectation in foreign policy circles that Biden could meet Chinese leader Xi Jinping for the first time since becoming president on the sidelines of a G20 summit in Italy in October.

White House spokeswoman Jen Psaki said the prospect of a Biden-Xi meeting did not come up in Tianjin, though she added that she expects there will be some opportunity to engage at some point.

Indications are, meanwhile, that the Biden administration may scale up both enforcement actions impacting Beijing – such as cracking down on Iranian oil sales to China – and coordination with allies in the context of countering China, including another summit later this year that Biden is keen to host with the leaders of Japan, Australia, and India.

Biden's White House also has given few signals that it intends to roll back tariffs on Chinese goods established under the Trump administration.

At the same time, cooperation on the COVID-19 pandemic seems almost entirely out of reach, with the United States calling Beijing's rejection of a World Health Organization plan for further study of the virus' origin "irresponsible" and "dangerous".

There has been little sign either of a willingness by China to cooperate with Washington on the climate issue, a priority for Biden, despite energetic entreaties by U.S. climate envoy John Kerry.

"What was on display in Tianjin is that both sides are still very far apart on how they view the value and role of diplomatic engagement," said Eric Sayers, a visiting fellow at the American Enterprise Institute.

Scott Kennedy, a China specialist at Washington's Center for Strategic and International Studies,, said neither side saw much upside for now in being more cooperative.

"And there's no low-hanging fruit for cooperation for either side and any gesture toward co-operation actually comes with significant costs, both domestic and strategic," he said.

"I think we ought to have very low expectations about the two sides finding common ground and stabilizing the relationship in the near future."

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Chinese president Xi Jinping visits troubled region of Tibet

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President Xi Jinping (pictured) has visited the politically troubled region of Tibet, the first official visit by a Chinese leader in 30 years, writes BBC.

The president was in Tibet from Wednesday to Friday, but the visit only reported by state media on Friday due to the sensitivities of the trip.

China is accused of suppressing cultural and religious freedom in the remote and mainly Buddhist region.

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The government denies the accusations.

In footage released by state broadcaster CCTV, Mr Xi was seen greeting a crowd wearing ethnic costumes and waving the Chinese flag as he left his plane.

He arrived in Nyingchi, in the south-east of the country and visited a number of locations to learn about urban development, before travelling to the capital Lhasa on the high-altitude railway.

While in Lhasa, Mr Xi visited the Potala Palace, the traditional home of exiled Tibetan spiritual leader, the Dalai Lama.

People in the city had "reported unusual activities and monitoring of their movement" ahead of his visit, advocacy group International Campaign for Tibet said on Thursday.

Mr Xi last visited the region 10 years ago as vice-president. The last sitting Chinese leader to officially visit Tibet was Jiang Zemin in 1990.

State media said Mr Xi took time to learn about the work being done on ethnic and religious affairs and the work done to protect Tibetan culture.

Many exiled Tibetans accuse Beijing of religious repression and eroding their culture.

Tibet has had a tumultuous history, during which it has spent some periods functioning as an independent entity and others ruled by powerful Chinese and Mongolian dynasties.

China sent in thousands of troops to enforce its claim on the region in 1950. Some areas became the Tibetan Autonomous Region and others were incorporated into neighbouring Chinese provinces.

China says Tibet has developed considerably under its rule, but campaign groups say China continues to violate human rights, accusing it of political and religious repression.

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