Huawei’s chief financial officer Meng Wanzhou was arrested in Canada on behalf of the U.S. last weekend and the incident grabbed the global spotlight after the arrest was revealed publicly on Wednesday night. Meng was apprehended for allegedly violating U.S. sanctions against Iran, but we won’t officially hear the charges until her bail hearing later today in Vancouver.
China has demanded that Meng be released immediately, while American businesspeople are being warned about traveling to China. It’s a fast-moving story that has drawn the attention of everyone from bankers on Wall Street to technologists in Silicon Valley. But what happens next? We’ve got a round-up of everything you missed while you were asleep.
American tech executives warned about travel to China
Executives in the tech industry are being warned about traveling to China as some experts speculate that the Chinese government could retaliate over the arrest of Huawei’s Meng. The 46-year-old Meng, who sometimes goes by the name Sabrina or Cathy, isn’t just the CFO of Huawei. She’s also the daughter of founder Ren Zhengfei, who has close ties to the People’s Liberation Army, the name for China’s armed forces.
Shaun Rein of the China Market Research Group told the Sydney Morning Herald today, “If I were a high level exec at Google or Cisco I wouldn’t visit China anytime soon.”
Bill Bishop, author of the Asia-centric newsletter Sinocism, seems to think that China would be dumb to arrest an American exec, but hedges his bet on the potential of an arrest:
I have seen speculation that China may retaliate by arresting a US tech executive. That would certainly be explosive, but I am not sure Beijing would do that without a very clear legal case as it would undermine the massive propaganda campaign the Party has undertaken to portray the PRC as open for foreign business and as the defender of the global trading system. However, if I were a US tech executive I would delay travel to China for a bit or go on a vacation if based there…
I guess the takeaway is that if you’re an American businessperson looking to go to China, you know the risks right now. And it’s probably just not worth it until things settle down.
Actually, it might be about bank fraud
Why was Meng arrested? The reason we keep hearing is that Huawei has violated U.S. sanctions against doing business with Iran. But that might not be what the Americans authorities ultimately use to prosecute Meng. She might very well get charged with bank fraud.
The United States has been looking since at least 2016 into whether Huawei shipped U.S.-origin products to Iran and other countries in violation of U.S. export and sanctions laws, Reuters reported in April.
More recently, the probe has included whether the company used HSBC Holdings Plc to conduct illegal transactions involving Iran, the people said.
Companies are barred from using the U.S. financial system to funnel goods and services to sanctioned entities. If the mobile phone and telecoms equipment maker conducted such transactions and then misled HSBC about their true nature, it could be guilty of bank fraud, experts say.
Huawei, which has appointed Chairman Liang Hua as acting CFO while Meng is in detention, must obey American sanctions against doing business with countries like Iran if it wants to have a lawful presence in the United States. And if they’re using American-based banks to violate sanctions, that becomes a problem for them.
Japan to ban Huawei and ZTE from government contracts
Japan will reportedly ban the purchase of Huawei and ZTE technology (both Chinese companies) for government contracts, a move that is being considered in other U.S.-aligned countries like New Zealand.
CNBC, citing the Japanese-language Yomiuri newspaper, says that the procurement rules could be changed by Japan as early as Monday next week. No official statement has been made by the Japanese government.
Unnamed sources in Japan reportedly cite the same security concerns as other countries like Australia, the U.K., and Canada. Those concerns involve the close ties of Huawei and ZTE to the Chinese government and fears that Chinese electronics could be used to spy on not only Japanese citizens, but Japanese government officials as well.
Did President Trump know the arrest would happen?
Canadian Prime Minister Justin Trudeau says that his government wasn’t involved in the arrest of Meng, but that he was made aware days before. But how much did President Trump know about the arrest as he went into his working dinner meeting with Chinese President Xi Jinping over the weekend? The answer? He didn’t know much.
President Trump reportedly had no idea that the Huawei exec would be arrested. At least that’s what national security advisor John Bolton hinted at to National Public Radio late yesterday.
[NPR]: All right. Did the president know in advance that this arrest was coming?
[John Bolton]: You know, I don’t know the answer to that. I knew in advance, but this is something that’s, that we get from the Justice Department and these kinds of things happen with some frequency. We certainly don’t inform the president on every one of them.
OK. So you knew at that dinner then over the weekend with China’s president that this arrest was taking place?
Well, you know, there are a lot of things that are pending in any given time. You don’t know exactly what’s going to happen in terms of a particular law enforcement action, that depends on a lot of other circumstances.
Trump has yet to tweet directly about the Huawei case, but it’s rather astounding that we have a situation where the president may have been completely in the dark about this situation—an international incident that isn’t going away anytime soon and has major implications for the U.S. stock market and the American technology sector more broadly.
Instead, Trump appears to be very interested in Robert Mueller’s investigation this morning.
And that was all in less than an hour.
Maybe the president can squeeze in a comment about the Meng case and our New Cold War in between rage-tweets about the Russia investigation. But we’re not holding our breath. He seems like he’s got his hands full today.