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Top Huawei executive arrested on U.S. request, clouding China trade truce

Reuters  |  VANCOUVER/BEIJING 

By and Christian Shepherd

VANCOUVER/(Reuters) - The daughter of Huawei's founder, a top at the Chinese technology giant, was arrested in and faces extradition to the United States, stirring up fears it could reignite a Sino-U.S. trade row and roiling global stock markets.

The arrest of Meng Wanzhou, 46, who is Technologies Co Ltd's chief financial officer, threatens to drive a wedge between the and just days after they agreed a 90-day trade war truce in on Saturday - the day she was detained.

Meng's arrest, revealed late on Wednesday by Canadian authorities, is related to U.S. sanctions, a person familiar with the matter said. was unable to determine the precise nature of the possible violations.

People familiar with the matter told in April that U.S. authorities have been investigating 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.

The arrest and any potential sanctions on the world's no. 2 maker could have major repercussions on the global

U.S. and Asian shares tumbled as of the arrest heightened anxiety over prospects of a collision between the world's two largest economic powers, not just over tariffs but also over technological hegemony.

is not listed, but China's second-largest telecom equipment maker, Corp, sank nearly 6 percent in Hong Kong while most of the nearby national bourses lost at least 2 percent.

U.S. stocks also started lower, with the Dow Jones Industrial Average down 1.16 percent, the S&P 500 down 1.35 percent and the Nasdaq Composite down almost 2 percent at the opening bell.

Investors rushed to the safety of government debt, pushing the yield on the U.S. 10-year Treasury note back below 2.9 percent to its lowest level in three months.

is already under intense scrutiny from and other western governments over its ties to the Chinese government, driven by concerns it could be used by for spying. It has been locked out of the U.S. and some other markets for telecom gear. Huawei has repeatedly insisted has no influence over it.

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.

Huawei, which generated $93 billion in revenue last year, confirmed the arrest. "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.

She was detained while transferring flights in Canada, it added.

Chinese foreign ministry told a daily briefing on Thursday that had asked and the for an explanation of Meng's arrest, but they have "not provided any clarification".

The has been providing her assistance, he added, declining further comment. On Wednesday, China's embassy in said it resolutely opposed the arrest and called for her 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.

'EXTREMELY SHOCKING'

Lu Xiang, an expert on China-U.S. relations at the of Social Sciences, called Meng's arrest "extremely shocking."

"If someone from the is hoping to use threats to an individual's personal safety in order to add weight in the talks, then they have most certainly miscalculated," he said.

Arthur Kroeber, of Dragonomics, said Beijing was unlikely to retaliate against the U.S. community in because its interests have partly overlapped with China's in the trade war, giving Beijing some leverage.

Jia Wenshan, a at in California, said the arrest "runs a huge risk of derailing the U.S.-China trade talks."

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

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

Earlier this year, the United States banned U.S. firms from selling parts and software to ZTE, which eventually paid $1 billion as part of a deal to get the ban lifted.

Huawei has said it complies with all applicable export control and sanctions laws and other regulations.

of the arrest came 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.

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 used the English names and Sabrina, served on the board of between February 2008 and April 2009, according to records and several other past and present Skycom directors appear to have connections to Huawei.

Meng's arrest drew a quick reaction in

U.S. Senator praised the move and said that it was "for breaking U.S. " He added: "Sometimes Chinese aggression is explicitly state-sponsored and sometimes it's laundered through many of Beijing's so-called 'private' sector entities."

(Reporting by and Karen Freifeld; Additional reporting by in Vancouver, David Ljunggren in Ottawa, Diane Bartz in Washington, Tony Munroe and in Beijing, Josh Horwitz and John Ruwitch in Shanghai and Jessie Pang in Hong Kong; Writing by and Tomasz Janowski; Editing by Sonya Hepinstall, and Susan Thomas)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Thu, December 06 2018. 21:50 IST
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