Huawei executive's arrest in Canada enrages China

Roman Schwartz
December 7, 2018

As news of the arrest surfaced, lawmakers in Washington denounced Huawei for alleged links to China's communist leadership.

Meanwhile, news of the arrest has sparked fears on Wall Street that the trade war between the United States and China could escalate.

Ms Meng's arrest rattled markets in Asia with Hong Kong-listed shares in ZTE falling 6.1 per cent while the company's Shenzhen-listed stock dropped 5.2 per cent. AAC Technologies fell 6.4 per cent, Sunny Optical dropped 5.5 per cent as China's CSI 300 index of major Shanghai and Shenzhen-listed companies fell 2.16 per cent. Japan's Topix index dropped 1.82 per cent, while Hong Kong's Hang Seng dropped 2.5 per cent and South Korea's KOSPI gauge fell 1.55 per cent.

HSBC's US -listed shares HSBC.K fell as much as 6 percent on Thursday after Reuters reported the bank's link to the Huawei case. Washington and Beijing are locked in a clash over which of the world's two largest economies will command economic and political dominance for decades to come. -China trade deal but would not necessarily damage the process. "Oh my God, where is this going to lead?"

The board member, who is also the daughter of company founder Ren Zhengfei, was picked up by authorities in the country last Friday, where she is wanted in connection with possible breaches of sanctions against Iran, according to reports from the U.S., which plans to extradite her.

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".

In a statement, Huawei, the second largest smart-phone seller globally after Samsung, said Ms Meng's extradition was prompted by unspecified charges in the Eastern District of NY when she was transferring flights in Canada.

Meng's arrest and detention have only amplified the already-tense state of U.S.

The US-orchestrated detention of a leading figure in the Chinese technology industry - Ms Meng is the daughter of Huawei founder Ren Zhengfei and a possible heir to his company - undercuts a key goal for Mr Xi in the US talks: To show relations between the US and China returning to a more normal footing.

Donald Trump last month reinstated all the U.S. sanctions on Iran that had been removed under a 2015 nuclear deal.

Surprising as the move was, USA officials have made little secret of their dissatisfaction with Huawei. Meng was detained in Vancouver on 1 December and faces extradition to the U.S. over reported links to sanctions violations.

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Meng "was arrested in Vancouver on December 1", a statement by Canada's ministry of justice said.

Bolton told NPR earlier Thursday he "knew in advance", but his spokesperson said the comment referred to the briefing Bolton received before news reports surfaced about the arrest.

Trump's tariff hikes on Chinese imports stemmed from complaints Beijing steals or pressures foreign companies to hand over technology. But the Wall Street Journal reported in April that USA authorities were investigating whether Huawei violated sanctions on Iran, leading the Chinese government to appeal to Washington to avoid any steps that might have damaged business confidence.

In August, U.S. president Donald Trump signed an act to ban the use of Huawei components or services that are "essential" or "critical" to the systems they are used.

In exchange, ZTE agreed to pay a hefty US$1 billion (RM4.17 billion) fine and put an additional US$400 million in escrow in case of future violations.

Canadian Prime Minister Justin Trudeau says he knew in advance of the pending arrest of an executive for a Chinese tech company but says it was the decision of law enforcement authorities and there was no political interference.

"The arrest of Huawei's CFO by the Canadian government for potential violations of Iran sanctions is welcome", he said. "Certainly other governments also have an equal reason to be mindful and concerned about the espionage intention and capabilities of the west".

The Israeli actress Gal Gadot also became the company's US brand ambassador for its Mate 10 Pro smartphone, an announcement that came after AT&T pulled out of a deal to sell Huawei's phones. Chinese enterprises are often family businesses and family members take the best spots if they are qualified and interested, said Neil Abramson, a retired professor of business strategy at Simon Fraser University's Beedie School of Business.

And almost a year ago, AT&T pulled out of a deal to sell Huawei smartphones.

Houlden believes Huawei will prioritize business, and continue working towards approval for a 5G network with its Canadian partners.

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