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Huawei founder's daughter arrested on US request

Huawei founder's daughter arrested on US request

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

The shock arrest of Meng Wanzhou, who is also Huawei Technologies' chief financial officer, raises fresh doubts over a 90-day truce on trade struck between presidents Donald Trump and Xi Jinping on Saturday, 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 and 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 counts Qualcomm and Intel among its major suppliers, tumbled today.

Meng, one of the vice-chairs on the company's board and the daughter of company founder Ren Zhengfei, was arrested on 1 December at the request of US authorities and a court hearing has been set for Friday, a Canadian Justice Department spokesman said. Trump and Xi had dined in Argentina on 1 December 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 and other countries in violation of US export and sanctions laws.

Huawei confirmed the arrest in a statement and said 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 and called for Meng's immediate release.

In April, the sources told Reuters the US Justice Department probe was being handled by the US attorney's office in Brooklyn.

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 and it "runs a huge risk of derailing the US-China trade talks".

Mei Xinyu, a researcher at a think tank run by the Ministry of Commerce, wrote in an article on the official People's Daily Overseas Edition's WeChat account that the arrest was a warning that the Trump administration might abandon its deal with China.

"We can be sure that in the near future a bumpy road of fights followed by talks will be the norm of China-US relations," Mei wrote. "China must become accustomed to this new environment of struggle and treat all of the US government's promises with caution."

While Meng's arrest comes at a delicate time in US-China relations, it was not clear if the timing was coincidental.

Arthur Kroeber, founder of Gavekal Dragonomics, said it was unlikely Beijing would retaliate in kind against the local US business community, whose interests have partly overlapped with China's in the trade war and been a source of leverage for Beijing.

"You can play hardball with a small country but you can't do it with the US," he said. "Actually, it hurts them to make life difficult" for US companies.

The probe of Huawei is similar to one that threatened the survival of China's ZTE, 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 and software to ZTE, which then paid $1 billion as part of a deal to get the ban lifted.

It was not immediately clear how Huawei's business operations might be affected by the arrest.

Hong Kong connection

In January 2013, Reuters reported that Hong Kong-based Skycom Tech, 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 and Sabrina, served on the board of Skycom between February 2008 and April 2009, according to Skycom records filed with Hong Kong's Companies Registry.

Several other past and 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 and 4G mobile operations and would not use the Chinese company in central parts of the next network.

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

Meng's arrest drew a quick reaction in Washington.

US senator Ben Sasse praised the move and said it was "for breaking US sanctions against Iran". He added: "Sometimes Chinese aggression is explicitly state-sponsored and sometimes it's laundered through many of Beijing's so-called 'private' sector entities."

US stock futures and 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 as investors fretted over the arrest. Samsung Electronics fell 2.3%, while Chinasoft International sank as much as 13%.

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