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Huawei arrest threatens trade truce

China demands release of Meng

A profile of Huawei Technologies Co Ltd's chief financial officer Meng Wanzhou is displayed on a Huawei computer at a Huawei store in Beijing on Thursday. (AP photo)

OTTAWA/VANCOUVER/SAN FRANCISCO: Huawei Technologies Co Ltd's chief financial officer was arrested in Canada over potential violations of US sanctions on Iran, provoking outrage from China and complicating thorny trade negotiations just as they enter a critical juncture.

Meng Wanzhou -- also deputy chairwoman and the daughter of Huawei's founder -- "faces extradition to the US,'' said Ian McLeod, a Canada Justice Department spokesman, declining to elaborate.

She was arrested on Dec 1 after the US Department of Justice in April opened an investigation into whether the leading telecommunications-equipment maker sold gear to Iran despite sanctions on exports to the region.

News of Meng's arrest provoked strong protest from the Chinese embassy in Canada, which called it a violation of its citizens' rights while demanding the US and its neighbour "rectify wrongdoings" and free Meng.

Her arrest is sure to heighten tensions between Washington and Beijing days after the world's two largest economies agreed on a truce in their growing trade conflict.

Meng's father Ren Zhengfei, a former army engineer, has won acclaim at home for toppling Apple Inc in smartphones and turning an electronics reseller into a producer of networking gear with revenue surpassing Boeing Co.

He's regularly named among China's top executives, and was among 100 business leaders honored for their contributions as the country celebrates the 40th anniversary of opening its economy. His stature at home is roughly comparable to Bill Gates or Michael Dell in the US.

The CFO's arrest -- the same day US President Donald Trump and his Chinese counterpart Xi Jinping dined in Buenos Aires -- is likely to be regarded back home as an attack on one of China's foremost corporate champions.

While Alibaba Group Holding Ltd and Tencent Holdings Ltd dominate headlines thanks to flashy growth and high-profile billionaire founders, Ren's company is by far China's most global technology company, with operations spanning Africa, Europe and Asia.

US equity futures and Asian stocks slid as Meng's arrest re-ignited concerns about US-Chinese tensions.

At a regularly scheduled press briefing yesterday, Foreign Ministry spokesman Geng Shuang reiterated that China wanted the US and Canada "to clarify the grounds for the detention, to release the detainee and earnestly safeguard the legitimate rights and interests of the person involved."

Canada's The Globe and Mail newspaper first reported the arrest, about which the US Justice Department declined to comment. A spokeswoman for Canadian Prime Minister Justin Trudeau referred questions to his country's own justice department.

Huawei said the arrest was made on behalf of the US so Meng could be extradited to "face 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," it said in a statement. "The company believes the Canadian and US legal systems will ultimately reach a just conclusion.

"Huawei complies with all applicable laws and regulations where it operates, including applicable export control and sanction laws and regulations of the UN, US and EU."

In targeting Huawei, the US is threatening one of the companies at the heart of Xi's long-term campaign to wrest the lead in future technologies and wean China off a reliance on foreign expertise.

Once a purveyor of unremarkable telecommunications equipment, Huawei's now No. 2 in smartphone shipments and is shooting for the lead in fifth-generation wireless networks while preparing to take on some of America's biggest chipmakers.

Huawei's already by some reckonings the world's largest provider of networking equipment to wireless carriers, outstripping the likes of Ericsson AB with growing sales in Europe. It's declared its intention to surpass Samsung Electronics Co Ltd in phones as well.

The company is targeting record sales of $102.2 billion this year.

Trump's administration this year invoked its name in blocking a Qualcomm Inc-Broadcom Inc merger that would've been the largest deal ever, saying it would hand the lead in 5G to China.

But as far back as 2016, the Commerce Department had sought information regarding whether Huawei was possibly sending US technology to Syria and North Korea as well as Iran.

The US previously banned ZTE Corp, a Huawei competitor, for violating a sanctions settlement over transactions with Iran and North Korea. That moratorium -- since lifted -- drove ZTE to the brink of collapse.

It's unclear whether Meng's arrest could trigger the same sort of sanctions that ZTE incurred. Such a move would be far more significant given Huawei's heft.

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