Asian shares skid as Huawei CFO arrest revives trade jitters

Kenny Grant
December 6, 2018

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

Huawei Technologies Co.'s chief financial officer was arrested in Canada over potential violations of US sanctions on Iran, provoking outrage from China and complicating thorny trade negotiations just as they enter a critical juncture.

In a brief announcement released today, Canada's Department of Justice has announced that it has arrested the Chief Financial Officer of Huawei, Meng Wanzhou.

The arrest coincided with a highly anticipated meeting between Chinese President Xi Jinping and US President Donald Trump in Buenos Aires that resulted in a 90-day trade war truce to allow for further talks to address Washington's concerns.

In April, China appealed to Washington to avoid damaging business confidence following a Wall Street Journal report that US authorities were allegedly investigating whether Huawei violated sanctions on Iran amid spiralling technology tensions.

"ZTE another Chinese firm has already been sanctioned by United States authorities so for Huawei to be dragged in as well comes at a bad time when tensions between China and the USA over trade at such a delicate stage, and could derail whatever was agreed at the weekend between President's XI and Trump". In October, the USA said Belgium extradited a Chinese intelligence official accused of stealing trade secrets from US companies - an unprecedented development.

Huawei issued a statement saying Meng was changing flights in Canada when she was detained "on behalf of the United States of America" to face "unspecified charges" in NY.

Meng Wanzhou is also a vice-chair on Huawei's board of directors and the daughter of Huawei founder Ren Zhengfei.

The arrest of Huawei Technologies Co.'s Chief Financial Officer Wanzhou Meng in Canada is linked to potential violations of USA sanctions on Iran by the Chinese company.

Shares of Huawei suppliers slumped on Thursday as investors fretted over the arrest.

"Americans are grateful that our Canadian partners have arrested the chief financial officer", he said.

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The company also said it was "not aware of any wrongdoing" by Meng.

In a statement, it said it had complied with "all applicable laws and regulations where it operates, including applicable export control and sanction laws and regulations of the UN, US and EU". The U.S. has slapped tariffs on billions of dollars in Chinese goods in what the Trump administration says is an effort to crack down on intellectual property theft and unfair trade practices. Meanwhile unconfirmed reports surfaced in April that the USA was investigating Huawei for possibly violating Iran export bans, a scenario that got fellow Chinese firm ZTE into significant trouble earlier this year.

It said that Canada, at the request of the USA, had arrested a Chinese citizen "not violating any American or Canadian law".

Exactly 31 years later, Huawei has become the biggest private company in the country with 180,000 employees and a global footprint in more than 100 nations.

A newspaper featuring a front page story about the meeting between U.S. President Donald Trump and Chinese President Xi Jinping at a news stand in Beijing on December 3.

Huawei is not the first Chinese telecoms equipment firm to face the ire of United States authorities.

"The United States is stepping up containment of China in all respects", said Zhu Feng, an global relations expert at Nanjing University.

In a response, ZTE denied the charges while Huawei insisted it "posed no greater cybersecurity risk than any ICT [Information and Communications Technology] vendor".

Chinese foreign ministry spokesman Geng Shuang on Thursday called Meng's arrest a violation of human rights and demanded the "immediate release" of the 46-year-old executive, who also goes by the name Sabrina.

On Wednesday, BT announced it was removing Huawei's telecommunications equipment from its 4G cellular network, following a warning from the head of MI6 foreign intelligence service that singled out the Chinese company as a potential security risk. It surpassed Apple in smartphone sales in the second quarter of this year, leaving it behind only market leader Samsung.

Meng's arrest also threatened to inflame disagreements over Iran and Trump's decision to break with other governments and re-impose sanctions over the country's nuclear development. China has been exercising restraint, but the US can not act recklessly.

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