Shares plunge over Huawei arrest trade war concerns

Trouble

Huawei's global chief financial officer arrested in Vancouver

Security concerns have hampered Huawei's business in the U.S.as acquisitions were rejected and companies warned not to source network equipment from Huawei or ZTE.

Meng Wanzhou's detention comes after American authorities reportedly launched an investigation into suspected Iran sanctions by Huawei, which was already under scrutiny by USA intelligence officials, who deemed the company a national security threat.

News of Meng's arrest provoked an immediate protest from the Chinese embassy in Canada, demanding the US and its neighbor "rectify wrongdoings" and free Meng.

According to the Globe and Mail, Meng was arrested in Vancouver on December 1 and has a bail hearing on December 7.

The Global TImes also reported, in a news story, that Chinese experts view the arrest as an intentional effort to "heat up the ongoing trade war".

The Globe and Mail reported earlier Wednesday that she was arrested on suspicion of violating US trade sanctions on Iran.

"Investors may fear this will stir up tensions between China and the United States", says Russ Mould, investment director at AJ Bell, referring to the arrest.

"The company believes the Canadian and USA legal systems will ultimately reach a just conclusion".

A Huawei spokesperson said Meng faces unspecified charges in the Eastern District of NY.

Meng is a prominent member of China's business world as deputy chairman of Huawei's board and the daughter of its founder Ren Zhengfei, a former Chinese military engineer.

Meng Wanzhouf, who is the daughter of the Chinese technology giant's founder Ren Zhengfei, was arrested on suspicion of violating United States trade sanctions against Iran, Canada's The Globe and Mail newspaper reported.

Founded in China more than 30 years ago, Huawei's revenue in 2018 exceeded $100billion for the first time in its history, according to CNBC.

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Chinese officials are loudly calling for Meng's release and want Canada to reveal the reason for her arrest.

The company said it wasn't aware of any wrongdoing by the CFO and that authorities in both countries will "ultimately reach a just conclusion".

The fallout from the decision has rocked mainland markets and threatened the trade war truce between Washington and Beijing.

The Wall Street Journal reported last month that United States officials had briefed counterparts in countries including Germany, Japan and Italy on potential security risks from Huawei equipment.

"At the request of the USA side, the Canadian side arrested a Chinese citizen not violating any American or Canadian law".

However, according to a recent report by The South China Morning Post, on October 29, Meng had told Huawei employees in an internal talk on compliance that there are scenarios where the company can weigh the costs and accept the risks of not meeting the requirements of the law. In the past week, New Zealand has banned Huawei components from its forthcoming 5G infrastructure, whilst in the UK, BT has confirmed that it, for one, will not use the parts either and will retroactively strip them from existing core infrastructure.

China urged Canada and the USA to "clarify" the reason for Meng's arrest and demanded her release. Huawei is one of the world's largest makers of smartphones and telecommunications network equipment.

Stocks of most major chip manufacturers fell after news of the arrest broke, with chipmaker stocks usually serving as a bellwether for investor confidence in U.S. The US later replaced the ban with a fine and governance changes.

Lenovo has also come under attack in the U.S. for allegedly selling compromised computers that expose users to spying.

Huawei is regarded as far stronger commercially than ZTE. It's overtaken Apple Inc.in smartphone shipments and aims to surpass Samsung Electronics Co. while targeting record sales of US$102.2 billion this year - more than Boeing Co.

U.S. Senator Ben Sasse praised the move and said that it was "for breaking U.S. sanctions against Iran". China has said it will continue to do business with Iran despite the possible threat of U.S. penalties.

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