Shares plunge over Huawei arrest trade war concerns

Randal Sanchez
December 7, 2018

Huawei Technologies chief financial officer Meng Wanzhou, who is also the daughter of the telecommunications company's founder, was detained on Saturday while changing planes in Vancouver.

According to Chinese foreign ministry spokesman Geng Shuang, both the U.S. and Canadian authorities have yet to clarify their reason for a‌rres‌ti‌ng Meng.

Houlden said he expects China will take a wait-and-see approach for the time being, but warns officials may also opt for a "tit-for-tat" response against the U.S.

The Embassy of the People's Republic of China in Canada said that it resolutely opposes Meng's arrest and demands her immediate release.

Meanwhile, the Canadian president Justin Trudeau declined to give more details on the swoop, in light of Meng's bail hearing on Friday, other than to say there was no political involvement.

Cross-border arrests of high-profile business executives don't happen that often, making the arrest of a top Chinese tech executive a significant event that is likely to chill commercial relations between the USA and China, lawyers and trade experts said.

The Wall Street Journal reported in April that American authorities are investigating whether the Chinese tech company violated sanctions on Iran.

"Imagine if Bill Gates' daughter, let's say she played a prominent role at Microsoft, and she was arrested", Houlden said.

Evans argued the arrest is just one small part of a broader, longer-term geopolitical story playing out between the USA and China, and it is concerning for Canada to be caught in the middle.

Meng, 46, is deputy chairwoman of Huawei Technologies, one of China's telecom giants and a family business founded in 1987 by her former military-engineer father Ren Zhengfei.

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Meng's arrest comes as Ottawa and Beijing have been engaged in exploratory talks on a free trade agreement for the past two years, which would be the first deal of its kind between China and a western country. "Huawei has direct ties to the Chinese government and Communist Party, has long posed a serious risk to USA national security".

"The company believes the Canadian and US legal systems will ultimately reach a just conclusion". They agreed to a 90-day truce in an escalating trade war that is threatening world economic growth and has set global investors on edge. Such requests must be made through the U.S. Department of Justice's Office of International Affairs (OIA).

In that case, Su Bin - a Chinese national who had permanent residency in Canada - was eventually extradited to the US where he pleaded guilty in 2016 to a criminal conspiracy, years in the making, to steal USA military secrets.

Meng's arrest has "potentially huge implications" for the trade war and signals the U.S. government is willing to get tough on Chinese companies that do business with Iran, according to Michael Every, head of Asia-Pacific research at investment bank Rabobank.

"The company has been provided very little information regarding the charges and is not aware of any wrongdoing by Ms Meng, " the statement said.

Analysts and traders had hoped that talks between US President Donald Trump and Chinese premier Xi Jinping would cool the trade war between the world's biggest economies.

MSCI's benchmark for global stocks declined 0.61 percent, and USA markets were on track to open lower by 1 percent or more. "Huawei complies with all applicable laws and regulations where it operates, including applicable export control and sanction laws and regulations of the United Nations, U.S. and European Union". Mr Trump was slated to raise additional tariffs on $200bn of Chinese goods from 10 per cent to 25 per cent on 1 January.

David Mulroney, a former Canadian ambassador to China, said United States and Canadian business executives could face reprisals in China. But American officials also worry more broadly about Chinese plans for state-led industry development they worry might erode USA industrial leadership.

The New York Times said the company had been subpoenaed by the US Commerce and Treasury Departments over alleged violations of Iran and North Korea sanctions.

In a statement to The Register, Huawei denied violating America's sanctions on Iran, and vowed to fight any charges against their chief financial officer. ZTE, China's second-largest telecoms equipment maker, agreed to pay $1.4 billion in total fines to the USA after Washington slapped a ban in April on purchases of essential American components for seven years to punish the company for Iran sanctions violations.

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