China furious over arrest of Huawei executive as spying row deepens

Roman Schwartz
December 6, 2018

Huawei's relationship with the USA just took a turn for the worse.

Laith Khalaf, senior analyst at Hargreaves Lansdown, said: "The arrest of Huawei's CFO has reignited fears that trade reconciliation between the United States and China may not be forthcoming any time soon".

Like many top Chinese executives, Meng Wanzhou is a mysterious figure even in her home country, but the 46-year-old chief financial officer of Huawei Technologies had been widely tipped to one day take the helm of the tech giant her father founded.

Huawei's chief financial officer, Meng Wanzhou, was arrested Saturday in Vancouver, Canada.

Financial markets are enduring further turmoil after the arrest of a Chinese Huawei executive on behalf of the USA exacerbated fears over the countries' trade war. She was arrested December 1 after the U.S. Department of Justice in April opened an investigation into whether the telecommunications giant sold gear to Iran despite sanctions on exports to the region.

Meanwhile, Huawei said that it has received little information about the case and was not aware of any wrongdoing on the part of Meng. "The Chinese government should seriously mull over the US tendency to abuse legal procedures to suppress China's high-tech enterprises".

Huawei said in a statement that Meng was arrested while changing planes in Canada and that she faced unspecified charges from the Eastern District of NY.

Meng is a prominent member of China's business world as deputy chairman of Huawei's board and the daughter of its founder Ren Zhengfei, a former Chinese military engineer.

The detention of Meng Wanzhou, Huawei's chief financial officer, comes after American authorities reportedly launched an investigation into suspected Iran sanctions violations by Huawei, which was already under scrutiny by U.S. intelligence officials who deemed the company a national security threat. She was arrested when transferring flights in Canada, Huawei said.

Jia Wenshan, a professor at Chapman University in California, said the arrest "runs a huge risk of derailing the U.S".

The statement went on to say how Huawei complies with all applicable laws and regulations where it operates, "including applicable export control and sanction laws and regulations of the United Nations, USA and European Union".

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A foreign ministry spokeswoman, Hua Chunying, said then that China hoped the USA would refrain from taking actions that could further undermine investor confidence in the US business environment and harm its domestic economy.

Meng's arrested caused global markets to tumble and prompted a stern response from China, which has demanded her immediate release. But ZTE (ZTCOF), a Chinese tech firm that was temporarily crippled by a USA export ban earlier this year, slumped almost 9%.

China urged Canada and the USA to "clarify" the reason for Meng's arrest and demanded her release.

What are the Iran sanctions?

The move by the related to concerns that Beijing could be using Huawei's technology to spy on Americans.

Huawei, now China's largest technology company by employees, with more than 180,000 staff and revenue of $93 billion in 2017, started off selling digital telephone switches in the 1990s.

"This is sending a signal that there is a new game", Wilder said of the recent US arrests.

Lenovo has also come under attack in the United States for allegedly selling compromised computers that expose users to spying.

The U.S., Australia and New Zealand have all moved to block Huawei's 5G technology. "The US has identified that China has found a backdoor to enter the US market through venture capitalists and private investors but those are also now shutting down gradually".

In May, the Pentagon said that devices from Huawei and ZTE posed an "unacceptable" security risk.

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