What led to the detention of Huawei’s CFO?
Canada’s detention of Huawei’s chief financial officer Meng Wanzhou while transiting in Vancouver to catch a flight to Mexico, has outraged China and rattled markets. Here is an overview of the case and what is at stake.
Why was Ms Meng arrested?
She was detained on December 1 at the request of the US, which had issued an arrest warrant for her. She is accused of concealing and misrepresenting her company’s links to Skycom of Hong Kong, which had a presence in Iran and attempted to sell products to Tehran in violation of US and European sanctions. She is also accused of conspiring to defraud banks that cleared US dollar transactions.
Why is the arrest significant?
Ms Weng is the daughter of Ren Zhengfei the founder of Shenzhen’s Huawei and a former Chinese army officer. Huawei is the world’s second-largest smartphone maker and the largest telecoms equipment supplier globally. The arrest has spooked investors and rattled markets. China’s CSI 300 index of major Shanghai and Shenzhenlisted companies fell more than 2 per cent as news of the arrest went viral. Hong Kong’s Hang Seng dropped 0.35 per cent on Friday after shedding 2.5 per cent the previous day. A wave of selling on Friday sent the Dow Jones Industrial Average down more than 550 points, the gauge’s third weekly decline in four weeks.
How might this affect the company?
Huawei and other Chinese companies were already under scrutiny with allegations of a back door in their products that facilitates industrial espionage. Australia and New Zealand banned the Chinese company from providing 5G technology for wireless networks. Japan plans to ban government use of telecoms products made by Huawei and ZTE on concerns they pose a national security risk.
What are the implications of the arrest?
Ms Meng’s arrest coincided with the G20 summit meeting in Argentina between President Donald Trump and his Chinese counterpart Xi Jinping which culminated in a temporary detente to the trade war between the world’s two largest economies. Ms Meng can appeal the extradition decision. If she is extradited to the US and convicted, she faces up to 30 years in jail.