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Huawei CFO Arrest Intensifies U.S.-China Trade War Tensions

The daughter of Huawei’s founder, a top executive at the Chinese technology giant, was arrested in Canada and faces extradition to the United States, roiling global stock markets as it threatened to inflame Sino-U.S. trade tensions afresh, Reuters notes.

CFO Meng Wanzhou’s arrest and legal case have worldwide implications. Huawei’s annual revenues were roughly US$92.5 billion in 2017. The company is a giant in multiple technology markets — including mobile, smartphones, computers and data center equipment.

However, Huawei has faced heavy international scrutiny on two fronts:

1. Trade Concerns: Wanzhou’s arrest allegedly involves trade concerns — particularly the company’s apparent dealings with Iran. Details are hard to come by, but Huawei allegedly violated sanctions on Iran, The Wall Street Journal reports. The case may also involve alleged financial fraud that somehow included HSBC, a Reuters report says.

China calls the arrest a potential violation of human rights, according to BBC. The country is demanding Wanzhou’s release and more details about the arrest.

U.S. concerns about China-based technology companies and their dealings in the Middle East and Asia are not new. Another Chinese company, ZTE, faced a $1.2 billion fine in 2017 for allegedly violating sanctions and illegally selling U.S.-made goods into Iran and North Korea.

The Huawei and ZTE cases highlight the complexity and interdependencies of global technology supply chains. Numerous companies could face financial pressure if they are somehow blocked from selling components to Huawei amid this legal case.

2. Cybersecurity Concerns: The other issue, apparently not related to Wanzhou’s arrest, involves cybersecurity. Numerous governments worldwide suspect Huawei’s technology includes security back doors — allegedly designed for the Chinese government’s use. The technology firm has repeatedly rejected the allegations, but service provider giants like BT have backed away from Huawei’s equipment — a dramatic stance just as the world’s top service providers spend billions of dollars to build out 5G wireless networks.

Hauwei Executive Arrest: What’s Next

A court hearing involving Wanzhou’s arrest is scheduled for this Friday, December 7, Reuters reports. The court case emerges the same week that Presidents Trump and Xi Jinping inked a 90-day truce in the so-called trade war.

Investors and the tech sector, in  particular, are concerned that the arrest will strain negotiations between Trump and Jinping. U.S. financial markets are expected to open down on Thursday as the world awaits more details about the arrest.

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