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Huawei founder's daughter arrested on U.S. request, clouding China trade truce

Reuters  |  VANCOUVER/WASHINGTON 

By and Karen Freifeld

VANCOUVER/(Reuters) - The daughter of Chinese Huawei's has been arrested in and is facing extradition to the United States, dealing a blow to hopes of an 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 chief financial officer, raises fresh doubts over a 90-day truce on trade struck between Presidents and on Saturday - the day she was detained.

The arrest is related to violations of U.S. sanctions, a person familiar with the matter said. was unable to determine the precise nature of the violations.

The arrest and any potential sanctions on the world's second biggest maker could have major repercussions on the global Shares in Asian suppliers to Huawei, which also counts and among its major suppliers, tumbled on Thursday.

Meng, one of the vice chairs on the company's board and the daughter of company Ren Zhengfei, was arrested on Dec. 1 at the request of U.S. authorities and a court hearing has been set for Friday, a said. Trump and Xi had dined in on Dec. 1 at the summit.

Sources told 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 and other countries in violation of U.S. export and sanctions laws.

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 said it resolutely opposed the arrest and called for Meng's immediate release.

In April, the sources told the probe was being handled by the U.S. attorney's office in Brooklyn.

The on Wednesday declined to comment. A for the U.S. attorney's office in Brooklyn also declined to comment.

CHINESE MEDIA BACKLASH

The arrest drew a sharp response on Chinese

A user of China's Twitter-like platform said Chinese should made by U.S. and instead buy Huawei products to show support for one of China's national champions.

Jia Wenshan, a at in California, said the arrest was part of a broader geo-political strategy from the to counter and it "runs a huge risk of derailing the U.S.-trade talks".

Mei Xinyu, a 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 might abandon its deal with

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

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

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

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

The probe of Huawei is similar to one that threatened the survival of China's ZTE Corp, which pleaded guilty in 2017 to violating U.S. laws that restrict the sale of American-made technology to

Earlier this year, the 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.

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 Tech Co Ltd, which attempted to sell embargoed 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 and Sabrina, served on the board of between February 2008 and April 2009, according to records filed with Hong Kong's Companies Registry.

Several other past and present Skycom directors appear to have connections to Huawei.

The about the arrest comes the same day Britain's said it was removing Huawei's equipment from the core of its existing 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

U.S. Senator praised the move and said that it was "for breaking U.S. sanctions against " 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 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. fell 2.3 percent, while sank as much as 13 percent.

(Reporting by Makini Brice; Additional reporting by in Vancouver, David Ljunggren in Ottawa, Diane Bartz in Washington, Tony Munroe and Christian Shepherd in Beijing, Josh Horwitz and John Ruwitch in Shanghai and Jessie Pang in Hong Kong; Writing by and Anne Marie Roantree; Editing by and Muralikumar Anantharaman)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, December 06 2018. 13:03 IST
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