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Home / Corporate Law News / Huawei founder’s Daughter arrested on US request, puts Trade War truce in doubt

Huawei founder’s Daughter arrested on US request, puts Trade War truce in doubt

December 06, 2018:

The arrest is related to violations of US sanctions.

US China Trade War
US China Trade War

The daughter of Chinese tech giant Huawei’s founder has been arrested in Canada & is facing extradition to the United States, dealing a blow to hopes of any easing of Sino-US trade tensions & rocking global stock markets.

The shock arrest of Meng Wanzhou, who is also Huawei Technologies Co Ltd’s chief financial officer, is riling authorities in Beijing & raises fresh doubts over a 90-day truce on trade struck between Presidents Donald Trump & Xi Jinping on the day she was detained.

The arrest is related to violations of US sanctions, a person familiar with the matter said. Reuters was unable to determine the precise nature of the violations.

The arrest & any potential sanctions on the world’s second biggest smartphone maker could have major repercussions on the global technology supply chain. Shares in Asian suppliers to Huawei, which also counts Qualcomm Inc & Intel among its major suppliers, tumbled on Thursday.

Meng, one of the vice chairs on the company’s board & the daughter of company founder Ren Zhengfei, was arrested on Dec. 1 at the request of US authorities & a court hearing has been set for Friday, a Canadian Justice Department spokesman said. Trump & Xi had dined in Argentina on Dec. 1 at the G20 summit.

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

Huawei confirmed the arrest in a statement & said that it has been provided little information of the charges, adding that it was “not aware of any wrongdoing by Ms. Meng”.

She was detained when she was transferring flights in Canada, it added.

China’s embassy in Canada said it resolutely opposed the arrest & called for Meng’s immediate release.

In April, the sources told Reuters the US Justice Department probe was being run out of the U.S. attorney’s office in Brooklyn.

The US Justice Department on Wednesday declined to comment. A spokesman for the U.S. attorney’s office in Brooklyn also declined to comment.

Chinese Media Backlash

The arrest drew a sharp response from Chinese media & on the mainland’s social media.

“I am shocked. The US can’t beat Huawei in the market. Don’t act like a despicable rogue,” Tweeted Hu Xijin, editor of the Global Times, a nationalistic tabloid run by the ruling Communist Party’s People’s Daily.

Jia Wenshan, a professor at Chapman University in California, said the arrest was part of a broader geo-political strategy from the Trump administration to counter China & it “runs a huge risk of derailing the U.S.-China trade talks”.

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

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

Earlier this year, the United States banned American firms from selling parts & software to ZTE, which then paid $1 billion this summer as part of a deal to get the ban lifted.

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 gone by the English names Cathy & Sabrina, served on the board of Skycom between February 2008 & April 2009, according to Skycom records filed with Hong Kong’s Companies Registry.

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

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

Huawei has said it complies with all applicable export control & sanctions laws & US & other regulations.

Meng’s arrest drew a quick reaction in Washington.

US Senator Ben Sasse praised the move & said that it was “for breaking US sanctions against Iran.” He added: “Sometimes Chinese aggression is explicitly state-sponsored & sometimes it’s laundered through many of Beijing’s so-called ‘private’ sector entities.”

US stock futures & 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.

Shares of Huawei suppliers slumped on Thursday as investors fretted over the arrest. Samsung Electronics fell 2.3 percent, while Chinasoft International Ltd sank as much as 13 percent.
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