The arrest of a top Huawei executive has sent stock markets plunging around the world and threatens to derail the tenuous trade truce between the United States and China.
Meng Wanzhou, chief financial officer of the Chinese tech giant Huawei Technologies, was apprehended in Vancouver on December 1 at the request of US authorities.
A judge accepted Meng’s request to bar both police and prosecutors from releasing information about the case, so additional information about why she was arrested is limited. But the consequences were immediate.
US lawmakers are condemning Huawei, which they say poses a national security threat to the United States. Chinese officials have called for Meng’s release.
An op-ed in the Chinese tabloid Global Times said the United States is just trying to stifle Huawei because it is a business competitor.
Here’s what you need to know:
What is Huawei?
Huawei is a Chinese tech company based in Shenzhen that sells smartphones and telecommunications equipment around the world. Earlier this year, it became the world’s second-largest smartphone maker, behind Samsung, according to IDC. It sells more phones than Apple (AAPL).
As one of China’s top champions in the tech sector, Huawei plays a key role in the country’s ambitions to become a global tech superpower. The company has been racing to develop 5G technology and is central to China’s plans to dominate the rollout of super-fast wireless networks.
Ahead of the rollout of that faster internet technology, several countries have warned against using Chinese hardware because of security concerns, which stem from the Chinese government’s use of Huawei’s products to spy on people around the world.
Huawei’s expansion from its Chinese roots into the rest of the world has sparked concerns among Western governments over the company’s close ties to the Chinese authorities, as well as its willingness to export technologies to countries that are under sanction.
Over the past couple of years, Huawei has reportedly circumvented sanctions imposed on North Korea and Iran, providing the countries with telecom equipment that can be used for extensive spying on populations, so-called dual use technologies.
Concerns that Huawei devices pose national security risks have seriously hurt its ability to grow abroad. Intelligence agencies in the United States have said American citizens shouldn’t use Huawei phones, and US government agencies are banned from buying the company’s equipment.
Security concerns have caused problems in the United Kingdom. New Zealand and Australia have barred Huawei equipment from its 5G mobile networks. Huawei has denied all allegations that it might be involved in the collection of intelligence for the Chinese government.
The company says its equipment is trusted by customers in 170 countries. And it still performs well, reporting $47.4 billion in revenue for the first half of 2018. That’s an increase of 15% compared to the same period last year.
Who is Meng Wanzhou?
Meng, who is also known as Sabrina Meng and Cathy Meng, is Huawei’s chief financial officer and serves as the deputy chairwoman of Huawei’s board. Notably, she’s the daughter of Huawei’s elusive founder, Ren Zhengfei.
Aside from a brief stint at China Construction Bank, the 46-year-old executive has spent her entire career at Huawei. Her brother, Meng Ping, also known as Ren Ping, works at a Huawei subsidiary, and there was speculation that they were being groomed for succession.
The Huawei founder reportedly shot that down in a letter to employees in 2013, saying his children lacked the vision, character and ambition to lead the company. Under Ren’s leadership, Huawei has become one of the biggest telecommunications companies in the world and has established itself as a leading smartphone manufacturer.
What do we know about her arrest?
A spokesperson for Canada’s Justice Department said only that the United States wants to extradite Meng, and a bail hearing is set for Friday. According to a law enforcement official, the US Justice Department sought the arrest as part of ongoing investigation.
Huawei said in a statement that Meng was detained by Canadian authorities on behalf of US officials when she was transferring flights in Canada. The company said she faces unspecified charges in the Eastern District of New York.
“The company has been provided very little information regarding the charges and is not aware of any wrongdoing by Ms. Meng,” a Huawei spokesperson said.
The Wall Street Journal reported in April that the US Justice Department was investigating whether Huawei violated US sanctions on Iran. The agency declined to comment Wednesday.
How has China responded?
Meng’s arrest has struck a nerve in China. The country’s Ministry of Foreign Affairs on Thursday called for Meng to be released and for the United States and Canada to explain why she’d been detained.
The city government of Shenzhen, where Huawei is based, put out a similar statement. It said it’s watching the matter closely and calling for Meng to be released “immediately.”
The Global Times said in an editorial that the arrest shows Washington is “resorting to a despicable rogue’s approach as it cannot stop Huawei’s 5G advance in the market.”
It said the move “obviously goes against the consensus” reached by US President Donald Trump and Chinese President Xi Jinping on trade, who met over the weekend in Argentina.
What does this mean for the trade war?
The arrest could jeopardise an already precarious ceasefire in the conflict between the United States and China over trade and technology.
“This type of action will affect the atmosphere around the negotiations — making them less likely to bring a sustainable settlement,” Eurasia Group political risk analysts said in a note to clients.
China’s Commerce Ministry said Thursday it was confident a trade agreement with the United States could still be reached in time to hit a 90-day deadline set by Trump. But the Chinese government is clearly angry about Meng’s arrest. A lot hinges on what Beijing and Washington do next.
A Trump administration official says there is a plan for the United States to seek Meng’s extradition. The view among some officials is that she could be used as leverage with China in trade talks.
Four countries have officially said they will not allow Huawei to take part in the 5G trials.
The US, China’s biggest competitor both in terms of economy, as well as global intelligence gathering, is afraid that China would have access to sensitive user information, such as location data, and that Chinese technologies could pose a possible threat to critical American infrastructure.
To prevent the Chinese telecom company from gaining too much traction in the US, lawmakers have urged wireless carrier AT&T to reconsider potential deals with Huawei.