Huawei founder's daughter arrested on U.S. request, puts trade war truce in doubt (updated)

Chinasoft International

05/12/2018 22:33

* Huawei executive faces extradition to United States
    * Arrest throws 90-day trade war truce in doubt
    * China calls for Meng's immediate release
    * Arrest sparks backlash in China social media
    * Shares of Asian suppliers of Huawei tumble

 (Adds stock market reaction and Chinese social media backlash)
    By Julie Gordon and Karen Freifeld
    VANCOUVER/WASHINGTON, Dec 5 (Reuters) - 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 any easing of Sino-U.S. trade tensions and rocking
global stock markets.     
    The shock arrest of Meng Wanzhou, who is also Huawei
Technologies Co Ltd's  HWT.UL  chief financial officer, is
riling authorities in Beijing and raises fresh doubts over a
90-day truce on trade struck between Presidents Donald Trump and
Xi Jinping on the day she was detained.  urn:newsml:reuters.com:*:nL2N1Y604A 
    The arrest is related to violations of U.S. 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 also counts Qualcomm Inc  QCOM.O  and Intel
 INTC.O  among its major suppliers, tumbled on Thursday.
    Meng, one of the vice chairs on the company's board and the
daughter of company founder Ren Zhengfei, was arrested on Dec. 1
at the request of U.S. authorities and a court hearing has been
set for Friday, a Canadian Justice Department spokesman said.
Trump and Xi had dined in Argentina on Dec. 1 at the G20 summit.
    Sources told Reuters in April that U.S. authorities have
been probing Huawei, the world's largest telecoms equipment
maker, since at least 2016 for allegedly shipping U.S.-origin
products to Iran and other countries in violation of U.S. export
and sanctions laws.  urn:newsml:reuters.com:*:nL3N1S256N
    Huawei confirmed the arrest in a statement and 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 and called for Meng's immediate release.  urn:newsml:reuters.com:*:nB9N1NF01R
    In April, the sources told Reuters the U.S. Justice
Department probe was being run out of the U.S. attorney's office
in Brooklyn.
    The U.S. 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 and on
the mainland's social media.
    "I am shocked. The U.S. 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 and 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
 AAPL.O  and 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  0763.HK   000063.SZ , which 
pleaded guilty in 2017 to violating U.S. 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 this summer as part of a deal to get the ban lifted.
 urn:newsml:reuters.com:*:nL2N1T71OZ
    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 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  BT.L  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 U.S. and other regulations.
    Meng's arrest drew a quick reaction in Washington.
    U.S. Senator Ben Sasse praised the move and said that it was
"for breaking U.S. 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."
    U.S. 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 on Thursday as investors
fretted over the arrest. Samsung Electronics  005930.KS  fell
2.3 percent, while Chinasoft International Ltd  0354.HK  sank as
much as 13 percent.  urn:newsml:reuters.com:*:nL4N1YB1CH    

 (Reporting by Makini Brice; Additional reporting by Julie
Gordon in Vancouver, David Ljunggren in Ottawa, Diane Bartz in
Washington, Tony Munroe and Christian Shepherd in Beijing, Josh
Horwitz in Shanghai and Jessie Pang in Hong Kong; Writing by
Chris Sanders and Anne Marie Roantree; Editing by Sonya
Hepinstall and Muralikumar Anantharaman)
 ((M.Brice@thomsonreuters.com; +1-202-310-5675; ;))