Canada has arrested Huawei’s chief financial officer following a US extradition request, reigniting tensions between Washington and Beijing just days after Donald Trump and Xi Jinping tried to resolve their trade conflict at the G20 summit.
Canadian officials on Wednesday said they had detained Meng Wanzhou, the daughter of Ren Zhengfei, founder and chief executive of the Chinese telecoms group, on Saturday in Vancouver. Ms Meng, who became one of Huawei’s four deputy chairpersons this year, will face a bail hearing on Friday.
Her arrest, which comes after recent moves by western governments to curtail Huawei on security grounds, added to investor concerns over heightened trade tensions between Washington and Beijing.
In China, the benchmark CSI 300 index of stocks dropped 2.2 per cent while in Europe key market indices opened about 1 per cent lower. Futures market trading indicated that Wall Street was expected to open about 1 per cent down.
Some US media reported that the extradition request was related to Iran sanctions, but the US justice department declined to comment.
Huawei has been in the sights of US security officials, and the latest move comes as the Trump administration takes an aggressive stance towards China. In a speech in October, Mike Pence, the US vice-president, put China on notice that Mr Trump was prepared to take a harder stance against Beijing than his predecessors.
The Shenzhen-based group has long been a lightning rod for concern about corporate espionage and cyber security. Western intelligence officials worry that reliance on Huawei by other countries could allow China to penetrate foreign telecom networks.
Huawei has repeatedly denied having any connection to the Chinese security services or military, insisting it is a privately owned company. But it has struggled to erase doubts because Mr Ren is a former People’s Liberation Army officer.
US telecoms networks are banned from using Huawei equipment. Australia and New Zealand — members of the Five Eyes intelligence sharing network with the US, UK and Canada — have blocked Huawei and other Chinese suppliers on security grounds.
Western security chiefs have been unusually vocal in recent days to highlight concerns over Chinese technology groups. David Vigneault, head of the Canadian Security Intelligence Service, warned that his agency had seen a “trend of state-sponsored espionage” targeting Canada’s advanced technology, including 5G networks.
His remarks came a day after Alex Younger, head of MI6, the British intelligence service, said the UK faced a tough decision over whether to allow Huawei to supply technology for its 5G network.
Huawei said Ms Meng — also known as Sabrina Meng — was detained by Canadian authorities on behalf of the US, which sought her extradition over “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, adding that it “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 2017, ZTE, a rival Chinese telecoms equipment supplier, was fined $1.2bn for violating sanctions on Iran and North Korea. It was almost forced out of business this year when Washington banned US companies from selling hardware and software to the group for seven years. That ban was later lifted.
When ZTE was first charged with busting sanctions, it fingered another culprit dubbed “F7”, which ZTE said was a reference to Huawei. A ZTE document said: “F7 found a big IT company serving as its agent to sign contracts for projects in embargoed countries.”
Huawei did not comment on ZTE’s allegation at the time.
China urged the US and Canada to release Ms Meng. The Chinese embassy in Ottawa said that China “firmly opposes and strongly protests over such kind of actions which seriously harmed the human rights of the victim”.
Last month the US obtained the extradition from Belgium of an alleged Chinese spy who was accused of helping Beijing steal technology trade secrets related to aircraft. The case was the first instance of an alleged Chinese spy being extradited to the US.
Ms Meng’s arrest is the latest in a series of blows for Huawei. The Financial Times reported this week that BT, the UK telecoms group, planned to remove Huawei equipment from its core 4G network and exclude the company from bidding for contracts to supply its core 5G network.
Shares in ZTE and other Chinese telecoms and electronics suppliers fell on the news of Ms Meng’s arrest. ZTE’s stock was down 6.1 per cent in Hong Kong and 5.2 per cent in Shenzhen on Thursday. AAC Technologies fell 6.4 per cent against a 2 per cent fall for Hong Kong’s benchmark Hang Seng index.
Additional reporting by Nic Fildes in London, Kathrin Hille in Taipei and Kiran Stacey in Washington