Canada arrests CFO of Chinese telecoms giant Huawei

Meng Wanzhou, chief financial officer of Chinese telecoms giant Huawei, has been arrested in Canada and faces extradition to the US.

In a statement on Wednesday, Canada’s justice ministry, said Meng was arrested in Vancouver on December 1.

“She is sought for extradition by the United States, and a bail hearing has been set for Friday.”

The ministry added it could not provide further details due to a publication ban that was sought by Meng.

Chinese reaction

Reacting to Meng’s arrest, Huawei said in a statement that it was unaware of any wrongdoing by its executive, adding that it complies with all applicable laws.

“The company has been provided very little information regarding the charges and is not aware of any wrongdoing by Ms. Meng (Wanzhou),” the company said.

China’s embassy in Canada, meanwhile, demanded the immediate release of Meng, who is also deputy chairman of Huawei’s board and the daughter of company founder Ren Zhengfei.

“The Chinese side has lodged stern representations with the US and Canadian side, and urged them to immediately correct the wrongdoing and restore the personal freedom of Ms. Meng Wanzhou,” it said in a statement on its website.

‘Major blow’

The Wall Street Journal reported earlier this year that US authorities are investigating whether Huawei, one of the world’s top makers of telecommunications network equipment, violated sanctions on Iran.

The arrest is related to violations of US sanctions, a person familiar with the matter told the Reuters news agency, though officials have so far stayed mum on her allegations.

“Huawei is one of the largest makers of smartphones. It uses parts from the US, which has sanctions against Iran, and it doesn’t want its parts being used there – so Meng was reportedly arrested in Canada on suspicion of circumventing those trade sanctions,” Al Jazeera’s John Hendren, reporting from Washington, DC, said.

He added thatFriday’s hearing will determine whether Meng will be extradited to the US, noting that the arrest “could be a major blow for Huawei”.

In the worst case scenario, Hendren said, Huawei “could lose access to the US parts it’s using to make its smartphones – that’s what happened last year to ZTE, another Chinese company, which paid $892m for violating US sanctions”. 

Trade war

Huawei has been under tough scrutiny in the US, where government national security officials say that its alleged close links to the Chinese government make it a security risk.

Its US business has been tightly constrained by worries it could undermine US competitors and that its cellphones and networking equipment, used widely in other countries, could provide Beijing with avenues for espionage.

Hendren said that despite the Chinese company’s denials, Washington has already taken a series of “extraordinary measures”, including President Donald Trump signing an order banning the use of Huawei products at nuclear facilities in the US, while Congress had passed a bill also prohibiting the use of the company’s goods by defence contractors.

“This [the arrest] is likely to rile up the Chinese government and exacerbate what is already an intense trade war between the US and China,” added Hendren, referring to a major tit-for-tat dispute between the world’s top two economies.

Meng’s arrest heightened the sense of a major collision between the world’s two largest economic powers – not just over tariffs but also over technological hegemony.

This year, the Trump administration has imposed tariffs on a total of $250bn of Chinese imports. For its part, China has slapped tariffs on $110bn of US imports.

Despite being essentially barred from the critical US market, Huawei surpassed Apple to become the world’s number two smartphone maker in the second quarter of this year and has market leader Samsung in its sights.

Britain’s BT Group, meanwhile, said it was removing Huawei’s equipment from the core of its existing 3G and 4G mobile operations. Australia and New Zealand have also rejected Huawei’s products.

“The US has been telling its allies not to use Huawei products for security reasons and is likely to continue to put pressure on its allies,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

“So while there was a brief moment of optimism after the weekend U.S.-China talks but the reality is, it won’t be that easy,” he added.

Hong Kong-listed shares of Chinasoft International Ltd shed as much as 13 percent in response to news of the arrest. Huawei is a key client of Chinasoft.