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Chinese President Xi Jinping and U.S. President Donald Trump during a meeting outside the Great Hall of the People in Beijing.

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A decade-long disconnect between the U.S. government and Huawei came to a head with President Donald Trump’s executive order and emergency declaration this week.

The U.S. has insisted the company and its equipment are pervasively unsafe. Huawei has long requested a process through which it could prove the contrary. European nations, the company has said, use a risk-mitigation process, and Huawei has flourished there. The U.S. has refused, saying big-picture questions about the company’s risk go beyond anyone’s ability to test it.

Here’s what has led the U.S. and Huawei to this point, according to two professionals who have spent much of their careers on the forefront of this debate – and why the issues between the two sides may be intractable.

The disconnect

A risk-mitigation process for Huawei equipment, like those used in Europe, could have been simple, according to Andy Purdy, chief security officer in the U.S. for the Chinese telecom giant.

“Both Nokia and Ericsson operate with risk-mitigation agreements,” said Purdy, who formerly served as a top-ranking cybersecurity official for the Department of Homeland Security. Huawei has long requested a testing protocol that matches up with those used in Europe, or for other tech companies like Nokia and Ericsson in the U.S., Purdy said.

“BAE Systems [a large government contractor] is a U.K. company. There’s a process the government agencies go through to vet them,” he said. “We are open to talking to the U.S. government about risk mitigation processes. Right now, the U.S. government is not willing to discuss that with us.”

The absence of this process — and the continuous testing and retesting that go along with it — are the real national security risks to the U.S., not Huawei, Purdy said.

But the U.S. government, particularly its intelligence agencies, has been insistent for nearly a decade that Huawei has been in collusion with Beijing’s Communist government on developing its technology, with the goal of giving it an espionage advantage.

The alleged relationship between Huawei and China’s government defies the traditional risk process for two reasons, according to former Homeland Security Secretary Michael Chertoff, because the equipment is so integral to American infrastructure and because the equipment can be changed through future patches or updates.

“Here’s the difference — it’s not just the difference of examining the equipment and the software,” said Chertoff, now head of consulting firm the Chertoff Group. “Once you embed something in the network, there are updates, patches, fixes; all of these create opportunities to affect a system,” he said. This means it’s not necessarily about the equipment and its risk, but a combination of the equipment and the country making it.

“It’s one thing to look at the networks, it’s another thing when you look at [China’s] geopolitics. They want to achieve greater geopolitical power,” Chertoff said.

The would-be importance of Huawei’s telecom gear in the country’s infrastructure is difficult to overlook, Chertoff said. It’s more integral than the tech sold in the U.S. by Ericsson or Nokia, he said.

“I’m sure there are a lot of dimensions to this and even countries that are in some degree rivals, there are some areas that we can reach agreement on,” Chertoff said. “But when you are dealing with core national security issues, it becomes much more difficult when it comes to critical equipment. There can be very unsound geopolitical consequences.”

Specific evidence vs. common sense

One of the issues with the U.S. government’s accusations against the company, which date back nearly a decade, is a lack of specific evidence backing them up, Purdy said.

“I think there is a great skepticism about the rise of China, people who are worried about national security,” he said. “But people just make these bold statements [about Huawei] and they’ve got nothing to back it up, without authority and citation.”

In many ways, Purdy is right. The U.S. government’s accusations against Huawei have only this year been more clearly outlined, through court cases against the company’s CFO, involving allegations of Iran sanction violations; and a trade secrets case in Seattle that had already been settled in civil court. But none of those allegations yet reaches the national security threat level outlined by the Trump administration or previous administrations.

The allegations may even be hypocritical, Purdy said, a dynamic that could be affecting the U.S. relationship with its allies.

“The U.S. used American companies in this way, as was revealed at the time of the Edward Snowden revelations. I don’t think Angela Merkel has forgotten about having her cellphones monitored,” he said, referring to the revelations that the U.S. had been monitoring diplomatic phone calls, and the fact that Germany has largely ignored U.S. warnings on Huawei.

Despite the lack of hard evidence presented in public, Chertoff said the government’s position on Huawei — which long precedes the Trump administration — is also based on a common-sense reading of the country’s political aims.

“I can’t be very specific, but what I will tell you is that as a matter of common sense, there is no question there are these very big companies that are viewed [in China] as national champions,” Chertoff said.

The company has been centrally cast in the trade war between the U.S. and China because it exemplifies seemingly all of the Trump administration’s trade arguments at once: possibly unfair market practices, allegations of spying and intellectual property theft, and China’s desire for technical dominance in the West.

Chertoff cited the Chinese government’s response to the arrest of Huawei’s CFO Meng Wanzhou in Canada, including the arrest of Canadian citizens in China, as an example of how the company and country appear to have close links.

“And if you are a Chinese company and you choose not to honor the suggestion of the government, that can be a problem,” he said. (Huawei has repeatedly denied it would follow Chinese government orders to spy on the U.S.)

Huawei has also contended that the U.S. position is purely economic and protectionist. Chertoff didn’t deny that there is an economic element to the issues, but the economic and national security concern can quickly merge when it comes to infrastructure equipment.

In Europe, for instance, Huawei has a significant marketshare in 5G equipment, and much of that equipment is far more easily upgraded only with more Huawei equipment.

“One of the economics issues is, what does that do to other companies that are competitive?” Chertoff asked. “The idea of getting Huawei to be monopolist would be almost suicidal to a country, because it’s handing over the keys to the kingdom to a foreign government.”

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Twitter exchange with Elon Musk lands a British man a job at Tesla

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Elon Musk, chairman and CEO of Tesla, addresses a press conference in Beijing on October 23, 2015.

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Tesla has hired a British man behind a viral tweet that caught the attention of Elon Musk last month.

Adam Koszary, who engineered a viral Twitter exchange between Musk and an English museum, will begin a new role as Tesla’s social media manager in July.

Back in April, Koszary, the digital lead for the Museum of English Rural Life (MERL), tweeted a photo of a ram with the caption: “Look at this absolute unit.”

The picture has been liked more than 100,000 times to date – and its popularity really took off when Elon Musk used the image as his own profile picture on Twitter.

“I’m an absolute unit too,” he said in a tweet, temporarily changing his Twitter bio to “absolute unit.”

In response, the MERL switched its own picture for one of Elon Musk, sparking an ongoing exchange between the two accounts.

Koszary, who had been due to start a new job at the U.K.’s Royal Academy of Arts (RAA), announced on Twitter on Tuesday that he had instead accepted a role with Tesla.

“I’m no longer moving to the Royal Academy. Instead, I’ll be Tesla’s Social Media Manager from July,” he said.

The RAA said in a tweet on Tuesday that it was “very sad that the lovely and talented Adam now won’t be joining us, but know he’ll do a great job at Tesla.”

A spokesperson for Tesla was not immediately available for comment when contacted by CNBC.



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People in these cities earn world’s highest salaries, research says

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San Francisco, California

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Average salaries in San Francisco have risen by 31% since 2018, with the city taking the crown for the highest-paying city in the world this year, according to Deutsche Bank research.

In 2019, people in San Francisco can expect to be paid an average of $6,526 per month — that’s 142% more than the average New Yorker’s income.

Deutsche Bank’s analysis, which compared incomes and living costs in 56 cities worldwide, found that average earnings in San Francisco, where residents had the strongest purchasing power in the world, had increased by 88% over the last five years.

Zurich, Switzerland, came in second, offering an average monthly income of $5,896, although it lost the top spot this year after seeing average earnings decline by 18% over the last five years.

New York City, with average monthly earnings hitting $4,612, was the third highest-paying city in the world. Monthly salaries saw a year-on-year increase of 12% in New York, helping the city hold onto the third spot in the ranking.

Boston and Chicago, which both offer monthly incomes in excess of $4,000, were also ranked among the 10 highest paying cities.

The 10 highest paying cities

  1. San Francisco, U.S.
    Monthly salary: $6,526
  2. Zurich, Switzerland
    Monthly salary: $5,896
  3. New York, U.S.
    Monthly salary: $4,612
  4. Boston, U.S.
    Monthly salary: $4,288
  5. Chicago, U.S.
    Monthly salary: $4,062
  6. Sydney, Australia
    Monthly salary: $3,599
  7. Oslo, Norway
    Monthly salary: $3,246
  8. Copenhagen, Denmark
    Monthly salary: $3,190
  9. Melbourne, Australia
    Monthly salary: $3,181
  10. London, U.K.
    Monthly salary: $2,956

A number of the cities paying the highest salaries had seen a decline in earnings, the data showed. Sydney, Australia, was ranked sixth on the list, but its residents’ incomes decreased 8% year-on-year and were nearly 20% lower than they were five years ago. Meanwhile earnings in Oslo lost 11% since 2018 and were a third lower than five years previous, and London’s incomes were 13% lower than they were last year.

The biggest year-on-year losses were seen in Buenos Aires, Argentina, where a decline of 45% left monthly incomes at $527.

Salaries in Johannesburg, South Africa, fell by 26% and came in at $1,223 per month in 2019, while the Turkish city of Istanbul saw earnings tumble 31%, leaving residents with $433 each month.

Cities offering the lowest monthly incomes were Cairo, Egypt, where residents earned $206, and Lagos, Nigeria, where residents were paid $236 per month, according to Deutsche Bank.

Monthly rent

Hong Kong, which has notoriously high housing costs, was the most expensive city for renting a mid-range two-bedroom apartment. Average earnings came in under $2,500, but rent costs were $3,685 — that’s 127% higher than the cost of renting a similar apartment in New York.

San Francisco and New York were the next most expensive cities for apartment rentals, while Cairo, Bangalore and New Delhi were the cheapest.

  1. Hong Kong
    Monthly rent for average 2-bedroom apartment: $3,685
  2. San Francisco, U.S.
    Monthly rent for average 2-bedroom apartment: $3,631
  3. New York, U.S.
    Monthly rent for average 2-bedroom apartment: $2,909
  4. Zurich, Switzerland
    Monthly rent for average 2-bedroom apartment: $2,538
  5. Paris, France
    Monthly rent for average 2-bedroom apartment: $2,455

Disposable income

Despite being one of the most expensive cities in the world for housing costs, San Francisco’s residents had the most disposable income leftover after paying their rent, with the analysis assuming two working people were sharing a two-bedroom apartment.

According to the researchers, San Franciscans could have $4,710 left to spend each month after paying their rent, which is 149% more than New Yorkers were expected to have leftover.

Residents of Zurich had the second highest disposable incomes, with $4,626 per month leftover after rent. U.S. cities dominated the top five, with Chicago, Boston and New York rounding out the list.

  1. San Francisco, U.S.
    Disposable income after rent: $4,710
  2. Zurich, Switzerland
    Disposable income after rent: $4,626
  3. Chicago, U.S.
    Disposable income after rent: $3,298
  4. Boston, U.S.
    Disposable income after rent: $3,188
  5. New York City, U.S.
    Disposable income after rent: $3,157
  6. Sydney, Australia
    Disposable income after rent: $2,615
  7. Melbourne, Australia
    Disposable income after rent: $2,485
  8. Oslo, Norway
    Disposable income after rent: $2,342
  9. Copenhagen, Denmark
    Disposable income after rent: $2,285
  10. Wellington, New Zealand
    Disposable income after rent: $2,075

Despite being low down when it came to housing costs, people who live in Cairo, Egypt, Dhaka, Bangladesh and Philippine capital Manila had the least disposable income left after paying rental costs, according to Deutsche Bank.

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UK inflation rises less than Bank of England expected in April

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British inflation rose last month by less than investors and the Bank of England had expected but still hit its highest level this year, pushed up by a rise in energy bills.

Consumer prices rose at an annual rate of 2.1% in April after a 1.9% increase in March, the Office for National Statistics said on Wednesday. A Reuters poll of economists had pointed to a rate of 2.2%, the same as the BoE’s forecast.

A recent weakening of inflation, combined with the lowest unemployment rate in 44 years and rising wages, has taken the edge off the uncertainty about Brexit for many households whose spending drives Britain’s economy.

But starting in April Britain’s energy regulator increased a price cap on energy providers by 10% and all big six suppliers raised their standard prices by the same amount — something the BoE said would push inflation above target briefly.

Electricity and gas prices were the biggest driver of inflation last month, the ONS said. Computer game and package holiday prices helped to offset the impact of the higher bills.

Britain’s modest rate of underlying inflation is helping the BoE to hold off on fresh interest rate hikes while it waits for the outcome of Britain’s Brexit impasse.

The ONS figures also suggested less short-term pressure in the pipeline for consumer prices than expected.

Among manufacturers, the cost of raw materials – many of them imported – was 3.8% higher than in April 2018, much less than the 4.5% rise predicted by the Reuters poll.

Manufacturers increased the prices they charged by 2.1% last month compared with 2.2% in March, slightly less than forecast.

The ONS said house prices in March rose by an annual 1.4% across the United Kingdom as a whole compared with 1.0% in February, marking the first increase in house price inflation since September. Prices in London alone fell by 1.9 percent, a smaller drop than in February.

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