US, China Look to Limit Impact of
Tech Head's Arrest
December 10, 2018
With many questions still unanswered,
governments in both the United States and China appear to be working to
limit the fallout from the arrest of a top Chinese technology executive
and its possible impact on trade negotiations.
News of the detention in Canada of Meng Wanzhou, tech giant Huawei's
chief financial officer, rocked markets across the globe. Many were
quick to voice concern that the move could derail trade talks, and it
came as both sides were hailing last weekend's meeting between U.S.
President Donald Trump and China's Xi Jinping as a "big success."
So far, Trump and his administration have been strangely quiet on the
topic, analysts said.
Christopher Balding, a China scholar at Fulbright University Vietnam,
said that from China's perspective, Meng's arrest was a political
escalation and the Trump administration seemed to understand that.
"I think it is going to be very important that they say that these are
the relevant laws, that they try to remove politics from this as much as
possible, whatever the exact specifics of the case are," Balding said.
"Even if this was completely and entirely divorced from anybody in the
Trump administration, Beijing is going to receive it as a significant
political escalation," he said.
Ming Xia, a professor of political science and global affairs at City
University of New York, said Meng's arrest was another example of how
members of Trump's trade team know how to use very sharp, pinpoint moves
to teach China a lesson.
"This is one of the U.S.'s many tactics and tools used in its trade war
with China to maximize its gains. The arrest of Meng Wanzhou, I believe,
should be seen in the context of the Sino-U.S. trade war," Xia said.
For now, both sides have expressed their confidence that the agreement
reached last week was a good one and their hope that it will be a
success. How Meng's case will play out remains to be seen.
China has demanded the chief financial officer's release and labeled her
detention a "gross violation of human rights." Huawei has said "the
company has been provided with little information regarding the charges
and itís not aware of any wrongdoing by Ms. Meng."
At a hearing Friday in Vancouver, a Canadian prosecutor argued that Meng
ó who has spent most of the past week at a women's detention facility in
a suburb of Vancouver ó should be denied bail pending possible
extradition to the United States because she was a flight risk.
A prosecutor disclosed that Meng was wanted by the United States for
allegedly deceiving financial institutions about the relationship
between Huawei and another tech company, SkyCom, based in Hong Kong,
that is alleged to have sold U.S.-manufactured technology to Iran, in
violation of U.S. trade sanctions.
A judge is to rule on the bail request Monday.
Reports from Reuters have previously suggested that over the past
decade, Huawei has struck deals to resell embargoed technologies, owned
by U.S. companies including Hewlett-Packard, to sanctioned telecom
operators in Iran.
Chinese state media have argued that the United States was abusing the
law to hurt Huawei's international reputation. However, concerns about
Huawei have been growing for quite some time. Many view Huawei as a
national security and privacy threat due to its close links to the
On Friday, there were reports that Tokyo appeared to be the latest
country that plans to ban the purchase of Huawei products.
Earlier this week, Britain's BT Group announced that it was removing
Huawei Technologies equipment from 3G and 4G networks as well as banning
it from core parts of the coming 5G network. Australia and New Zealand
also have similar bans in place regarding fifth-generation networks.
On Thursday, The Wall Street Journal reported that a federally appointed
monitor at HSBC Holdings flagged suspicious transactions in Huawei
accounts. That information was passed on to federal prosecutors in the
Eastern District of New York, the Journal report said.
Regardless of what violations might have occurred, it makes sense to go
after Meng, CUNY'S Xia said.
"As the company's vice president and chief financial officer, Meng
Wanzhou would have been the one who signed off on all documents," Xia
'Moral support' for Huawei
China might do in response remains unclear. State media have suggested
that society should offer Huawei some "moral support," such as buying
the company's products.
Some have noted that U.S. tech executives would be wise to avoid
traveling to China over the next two weeks, out of concern that they
might get caught up in the tug of war over Huawei.
Fulbright University Vietnam's Balding said the concerns make sense but
added that China has also been getting very savvy at how it responds,
finding more discreet ways to get even.
"Maybe they will just hack an American tech firm and take their IP
[intellectual property] or something like that," Balding said.
"To bring a trumped-up charge [against a U.S. tech executive], I think,
would be very embarrassing for China internationally and really just
reveal its true colors more."