Abu Dhabi, UAEWednesday 21 August 2019

Quicktake: Behind the detention of Huawei's CFO

The company is among China's most important technology players

If she is extradited to the US and convicted, she faces up to 30 years in jail. REUTERS
If she is extradited to the US and convicted, she faces up to 30 years in jail. REUTERS

Canada’s detention of Huawei’s chief financial officer Meng Wanzhou while transiting in Vancouver to catch a flight to Mexico, has outraged China, rattled markets and put the technology giant in the limelight. Here is an overview of the case and what's at stake.

Why was Ms Meng arrested?

Ms Meng was detained on December 1 at the US's request, which had issued an arrest warrant for her. She is accused of concealing and misrepresenting her company’s links to Hong Kong-based Skycom which had a presence in Iran and attempted to sell products to Tehran in violation of US and European sanctions. She is also accused of conspiring to defraud banks that cleared US dollar transactions.

Why is the arrest significant?

Ms Weng is the daughter of Ren Zhengfei the founder of Shenzhen-based Huawei and a former Chinese army officer. Huawei is the world's second-largest smartphone maker and the largest telecoms equipment supplier globally.

The arrest has spooked investors and rattled markets. China’s CSI 300 index of major Shanghai and Shenzhen-listed companies fell more than 2 per cent as news of the arrest went viral. Hong Kong's Hang Seng dropped 0.35 per cent on Friday after shedding 2.5 per cent the previous day. A wave of selling on Friday sent the Dow Jones Industrial Average down more than 550 points, the gauge's third weekly decline in four weeks.

How might this affect the company?

Huawei and other Chinese companies were already under scrutiny over security fears regarding their equipment and allegations of a backdoor in their products that facilitates industrial espionage. Australia and New Zealand banned the Chinese company from providing 5G technology for wireless networks. Japan plans to ban government use of telecoms products made by Huawei and ZTE on concerns they pose a national security risk. Huawei has reportedly agreed to take steps to mollify British concerns regarding security fears related to its equipment to avoid a ban from participating in the UK's 5G mobile network plans.


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Huawei CFO arrest outrages China and rattles markets


What are the implications of the arrest?

Ms Meng's arrest coincided with a G20 summit meeting in Argentina between President Donald Trump and his Chinese counterpart Xi Jinping which culminated in a temporary detente to the trade war between the world's two largest economies. That understanding averted a planned January tariff hike on $200 billion of Chinese goods. Ms Meng’s arrest could scuttle the agreement and escalate the trade war.

China has condemned Ms Meng's detention and denied she violated Chinese or US laws. Beijing summoned Canada’s ambassador to protest the detention and threatened Ottawa with “serious consequences” if the executive is not released. Huawei said it "is not aware of any wrongdoing by Ms Meng."

Ms Weng’s bail hearing on Friday was postponed to December 10. The US has 60 days from the date of arrest to provide Canada with its formal request for extradition and supporting documents, according to an emailed statement from the office of John Gibb-Carsley, the Canadian prosecutor. Ms Meng can appeal the extradition decision.

If she is extradited to the US and convicted, she faces up to 30 years in jail.

Updated: December 9, 2018 08:12 PM