US China trade talks and Huawei issue
China has yesterday warned Canada either to release Huawei's chief financial officer Meng Wanzhou or get ready for severe action. The Chinese foreign ministry summoned Canadian ambassador and registered a strong protest over the arrest of Meng Wanzhou. The arrest of Huawei's chief financial officer has created stir in the market at a time when two great economic powers try to bridge their differences over each others' trade concerns. The 90-day trade truce between China and the United States reached over the weekend on the sidelines of the G20 meet in Argentina is already proving to be fragile. Chinese telecommunications giant Huawei's chief financial officer Meng Wanzhou was arrested recently by Canadian authorities, acting on an extradition request from the US Ms. Wanzhou is the daughter of the company's founder Ren Zhengfei, a former member of the Chinese military. The arrest happened around the time US President Donald Trump and Chinese President Xi Jinping met in Buenos Aires to defuse trade tensions between their countries, but news of the arrest broke only on Wednesday. Huawei at this moment has been accused of breaching American sanctions against Iran, but US lawmakers have also been concerned about the Chinese government using the company to carry out spying operations on foreign soil. Last year, it is worth noting, Chinese telecom giant ZTE reached a settlement with the US government over charges of exporting banned items to Iran. Markets across the world were negatively affected as trade tensions looked to flare up once again between the world's two largest economies.
It is hard to determine whether the present US action against the Huawei official is based on legitimate concerns about national security or if the US has simply attacked China on yet another front in the ongoing trade war. To be sure, other countries, including Australia and the United Kingdom, have also been quite wary about doing business with Huawei due to the alleged gathering of intelligence by the company. In particular, they fear that Huawei's involvement in building their 5G network could lead to problems linked to cyber-espionage. At the same time, radical anti-Chinese politicians in the US have every reason to exaggerate national security concerns simply in order to justify protectionist sanctions against Chinese companies. Huawei has clearly been seen by many as a serious threat to the global domination exerted by American technology companies. Either way, recent actions are bound to have a negative impact on US-China trade ties as the Chinese will not be too happy about the continuing assault on multinational companies which have their roots in China.
US concerns about national security are also closely related to accusations against Huawei of violating intellectual property rights with the tacit approval of the Chinese government. The arrest might thus suggest that the US may not go soft on its demand for the protection of intellectual property rights during its talks with the Chinese authorities in the next few months. With the rapid escalation in trade tensions over the year, it will take serious efforts to bring a lasting solution that is acceptable to both American and Chinese politicians.