Top Huawei ex­ec­u­tive ar­rested

Meng Wanzhou’s shock de­ten­tion raises fresh doubts over Sino-U.S. trade truce

The Daily Star (Lebanon) - - BUSINESS - By Julie Gor­don and Chris­tian Shep­herd

VAN­COU­VER/BEI­JING: The daugh­ter of Huawei’s founder, a top ex­ec­u­tive at the Chi­nese tech­nol­ogy gi­ant, was ar­rested in Canada and faces ex­tra­di­tion to the United States, roil­ing global stock mar­kets as it threat­ened to in­flame Sino-U.S. trade ten­sions afresh.

The shock ar­rest of Meng Wanzhou, 46, who is Huawei Tech­nolo­gies Co. Ltd’s chief fi­nan­cial of­fi­cer, raises fresh doubts over a 90-day truce on trade struck be­tween pres­i­dents Don­ald Trump and Xi Jin­ping Satur­day – the day she was de­tained.

Her ar­rest, re­vealed late Wed­nes­day by Cana­dian au­thor­i­ties, is re­lated to the U.S. sanc­tions, a per­son fa­mil­iar with the mat­ter said.

Reuters was not able to de­ter­mine the pre­cise na­ture of the pos­si­ble vi­o­la­tions.

Sources told Reuters in April that U.S. au­thor­i­ties have been in­ves­ti­gat­ing Huawei, the world’s largest tele­coms equip­ment maker, since at least 2016 for al­legedly ship­ping U.S.-ori­gin prod­ucts to Iran and other coun­tries in vi­o­la­tion of U.S. ex­port and sanc­tions laws.

The ar­rest and any po­ten­tial sanc­tions on the world’s sec­ond big­gest smart­phone maker could have ma­jor reper­cus­sions on the global tech­nol­ogy sup­ply chain.

U.S. stock fu­tures and Asian shares tum­bled as news of the ar­rest height­ened the sense a ma­jor col­li­sion was brew­ing be­tween the world’s two-largest eco­nomic pow­ers, not just over tar­iffs but also over tech­no­log­i­cal hege­mony.

Huawei is not listed, but China’s sec­ond-largest tele­com equip­ment maker, ZTE Corp., sank nearly 6 per­cent in Hong Kong while most of the nearby na­tional bourses lost at least 2 per­cent.

MSCI’s bench­mark for global stocks de­clined 0.61 per­cent, and U.S. mar­kets were on track to open lower by 1 per­cent or more. In­vestors stam­peded for the safety of gov­ern­ment debt, push­ing the yield on the U.S. 10-year Trea­sury note back be­low 2.9 per­cent to its low­est level in three months.

Huawei is al­ready un­der in­tense scru­tiny from U.S. and other Western gov­ern­ments about its ties to the Chi­nese gov­ern­ment, driven by con­cerns it could be used by the state for spy­ing. It has been locked out of the United States and some other mar­kets for tele­com gear.

Huawei has re­peat­edly in­sisted Bei­jing has no in­flu­ence over it.

Meng, one of the vice chairs on the com­pany’s board and the daugh­ter of com­pany founder Ren Zhengfei, was ar­rested on Dec. 1 at the re­quest of U.S. au­thor­i­ties and a court hear­ing has been set for Fri­day, a Cana­dian Jus­tice Depart­ment spokesman said. Trump and Xi had dined in Ar­gentina on Dec. 1 at the G-20 sum­mit.

Huawei, which gen­er­ated $93 bil­lion in rev­enue last year, con­firmed the ar­rest in a state­ment. “The com­pany has been pro­vided very lit­tle in­for­ma­tion re­gard­ing the charges and is not aware of any wrong­do­ing by Ms. Meng,” it said. She was de­tained when she was trans­fer­ring flights in Canada, it added.

Chi­nese For­eign Min­istry spokesman Geng Shuang told a daily brief­ing Thurs­day that China had asked Canada and the United States for an ex­pla­na­tion of Meng’s ar­rest, but they have “not pro­vided any clar­i­fi­ca­tion” yet.

The Chi­nese con­sulate in Van­cou­ver has been pro­vid­ing her as­sis­tance, he added, de­clin­ing fur­ther com­ment. Wed­nes­day, China’s Em­bassy in Canada said it res­o­lutely op­posed the ar­rest and called for her im­me­di­ate re­lease.

In April, the sources told Reuters the U.S. Jus­tice Depart­ment probe was be­ing han­dled by the U.S. at­tor­ney’s of­fice in Brook­lyn. The U.S. Jus­tice Depart­ment Wed­nes­day de­clined to com­ment. A spokesman for the U.S. at­tor­ney’s of­fice in Brook­lyn also de­clined to com­ment.

EX­TREMELY SHOCK­ING

Lu Xiang, an ex­pert on Chi­naU.S. re­la­tions at the state-backed Chi­nese Academy of So­cial Sciences, said the ar­rest of Meng is “ex­tremely shock­ing.”

“If some­one from the United States is hop­ing to use threats to an in­di­vid­ual’s per­sonal safety in or­der to add weight in the talks, then they have most cer­tainly mis­cal­cu­lated,” he said.

“I be­lieve that China’s gov­ern­ment will use max­i­mum force to fight for free­dom and jus­tice for Meng Wanzhou.”

Arthur Kroe­ber, founder of Gavekal Drago­nomics, said it was un­likely that Bei­jing would re­tal­i­ate against the lo­cal U.S. busi­ness com­mu­nity, whose in­ter­ests have partly over­lapped with China’s in the trade war and been a source of lever­age for Bei­jing.

“You can play hard­ball with a small coun­try but you can’t do it with the U.S.,” he said. “Ac­tu­ally it hurts them to make life dif­fi­cult” for U.S. com­pa­nies.

A user of China’s Twit­ter-like Weibo plat­form said Chi­nese should boy­cott prod­ucts made by U.S. tech gi­ant Ap­ple Inc. and in­stead buy Huawei prod­ucts to show sup­port for one of China’s na­tional cham­pi­ons.

How­ever, the topic ranked only 31st among trend­ing items on Weibo as of Thurs­day af­ter­noon, with many dis­cus­sion threads ap­par­ently blocked, which is not un­usual on China’s heav­ily cen­sored in­ter­net.

Jia Wen­shan, a pro­fes­sor at Chap­man Univer­sity in Cal­i­for­nia, said the ar­rest “runs a huge risk of de­rail­ing the U.S.-China trade talks.”

While Meng’s ar­rest comes at a del­i­cate time in U.S.-China re­la­tions, it was not clear if the tim­ing was co­in­ci­den­tal.

The probe of Huawei is sim­i­lar to one that threat­ened the sur­vival of China’s ZTE Corp., which pleaded guilty in 2017 to vi­o­lat­ing U.S. laws that re­strict the sale of Amer­i­can-made tech­nol­ogy to Iran.

Ear­lier this year, the U.S. banned Amer­i­can firms from selling parts and soft­ware to ZTE, which then paid $1 bil­lion this sum­mer as part of a deal to get the ban lifted. Huawei has said it com­plies with all ap­pli­ca­ble ex­port con­trol and sanc­tions laws and U.S. and other reg­u­la­tions.

News of the ar­rest came the same day Bri­tain’s BT Group said it was re­mov­ing Huawei’s equip­ment from the core of its ex­ist­ing 3G and 4G mo­bile op­er­a­tions and would not use the Chi­nese com­pany in cen­tral parts of the next net­work.

HONG KONG CON­NEC­TION

In Jan­uary 2013, Reuters re­ported that Hong Kong-based Sky­com Tech Co. Ltd, which at­tempted to sell em­bar­goed Hewlett-Packard com­puter equip­ment to Iran’s largest mo­bile-phone op­er­a­tor, had much closer ties to Huawei than pre­vi­ously known.

Meng, who also has used the names Cathy and Sab­rina, served on the board of Sky­com be­tween Fe­bru­ary 2008 and April 2009, ac­cord­ing to Sky­com records filed with Hong Kong’s Com­pa­nies Registry.

Sev­eral other past and present Sky­com di­rec­tors ap­pear to have con­nec­tions to Huawei.

Meng’s ar­rest drew a quick re­ac­tion in Wash­ing­ton. U.S. Sen­a­tor Ben Sasse praised the move and said that it was “for break­ing U.S. sanc­tions against Iran.” He added: “Some­times Chi­nese ag­gres­sion is ex­plic­itly state-spon­sored and some­times it’s laun­dered through many of Bei­jing’s so-called ‘pri­vate’ sec­tor en­ti­ties.”

Huawei, which gen­er­ated $93 bil­lion in rev­enue last year, con­firmed the ar­rest in a state­ment.

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