Transnational Corporations and China's Economic Diplomacy: A Case Study of Huawei

Document Type : Research

Authors

1 Associate Professor of International Relations, Political Sciences Department, Faculty of Law and Political Sciences, Shiraz University, Shiraz, Iran.

2 M.A. in Regional Studies, Political Sciences Department, Faculty of Law and Political Sciences, Shiraz University, Shiraz, Iran.

3 M.A. in International Relations, Political Sciences Department, Faculty of Law and Political Sciences, Shiraz University, Shiraz, Iran.

10.22126/ipes.2026.12737.1768

Abstract

The economic activities of Chinese companies abroad demonstrate the importance of economic diplomacy as a tool in the foreign policy of Chinese leaders. This study, by acknowledging the expanding role of transnational corporations in China's economic diplomacy and focusing on the position of Huawei, aims to assess the role of these companies in the country's economic diplomacy as its primary objective. This article raises the question of what impact Chinese transnational corporations, including Huawei, had on the country's economic diplomacy. It believes that Chinese transnational corporations, including Huawei, have played a crucial role in strengthening China's economic diplomacy, particularly in connecting the country to the global economy and fostering interdependence, by leveraging government support. The findings of this study, which are based on a case study method and an examination of data and statistics on the activities of these companies, show that Chinese transnational companies, including Huawei, have enjoyed high growth and expansion at the global level by using modern technologies, making significant investments in research and development, and paying attention to the global market context; as Huawei, as one of the top giants of telecommunications and Internet technologies, earns most of its profits outside China's borders, which is of great importance in strengthening China's economic diplomacy.

Introduction

 Over the past two decades, the nature of states has shifted from purely territorial units to market-oriented and economy-based entities. This fundamental transformation has replaced traditional diplomacy with economic diplomacy as the primary tool in international interactions. In this context, China has laid the foundation for modern China through comprehensive economic reforms since the Deng Xiaoping era and by supporting domestic companies in sectors such as oil, financial services, and communication technologies. Chinese companies, by expanding their markets to Europe and America, have not only created a safety margin for the national economy but have also provided a new structural power for the country that forces other nations to cooperate. In this chain of success, Huawei is recognized as a symbol of China's economic development and progress, having overcome obstacles to capture a significant portion of global markets. The Chinese government, aware of this potential, deems supporting these companies essential for its national development.

Theoretical Framework

This research utilizes the theory of Liberalism and, specifically, the school of Interdependence. According to this theory, in the contemporary international system, state and non-state actors have become interdependent through the free flow of capital, goods, technology, and information. Within the framework of China’s economic diplomacy, interdependence means utilizing economic tools as leverage to strengthen relations and create mutual influence. Transnational corporations like Huawei act as the executive arm of this approach; on one hand, by exporting technology and participating in infrastructure projects, they create dependency between the host country and China, and on the other hand, by transferring capital and creating jobs, they strengthen long-term ties. This mechanism brings economic relations to a level where severance is costly for both sides.

Method

The research employs a case study method. By examining data and statistics on the activities of Chinese transnational corporations—with a specific focus on Huawei—it aims to assess their role in the country’s economic diplomacy. The study analyzes indicators such as research and development (R&D) investments, global market expansion, and patent registrations to clarify this impact.

Discussion and Findings

 The study finds that China’s economic diplomacy employs several key tools to achieve its goals:
Macro-policy tools: Strategies such as "Peaceful Rise," the "Belt and Road Initiative," and the "Chinese Dream" provide the context for international economic engagement.
Executive tools: These include special economic zones, free trade agreements, and economic aid to developing countries.
Capital flow: Inward foreign direct investment (FDI) to China reached $163.2 billion in 2023. China’s outward FDI also hit a record $162.7 billion in 2023.
     Specifically for Huawei, findings indicate it is a global leader in telecommunications, operating in over 170 countries. The company reinvests 10% to 15% of its revenue into R&D, totaling approximately $73 billion over the last decade. In 2024, Huawei spent 179.7 billion yuan (20.8% of its annual revenue) on R&D. Its patent portfolio grew from 50,377 in 2015 to over 150,000 by 2024. By establishing technical centers in regions like Eastern Europe and Central Asia, Huawei creates knowledge-based interdependence that makes technological substitution difficult for host nations.

Conclusion

The research concludes that transnational corporations, particularly Huawei, act as strategic instruments of China’s economic diplomacy rather than mere economic entities. These companies have bolstered Beijing’s bargaining power by fostering technological interdependence and intertwining interests. While U.S. sanctions revealed vulnerabilities, Huawei responded by strengthening domestic supply chains and investing in semiconductor startups to achieve technological self-sufficiency. Ultimately, Huawei represents the conversion of economic interest into political capital, anchoring China’s strategic influence through technical standardization and global infrastructure.
Ethical Considerations
Not applicable
Funding
Not applicable
Conflict of interest
The authors declare no conflict of interest
 

Keywords

Main Subjects

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International Political Economy Studies
Volume 9, Issue 2
September 2026
Pages 1-24

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History

  • Receive Date: 05 September 2025
  • Revise Date: 17 January 2027
  • Accept Date: 18 February 2026

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