Huawei's Strain on the US-China Relationship

The arrest of Huawei’s CFO Meng Wanzhou comes right after the US and China agreed to a ceasefire regarding the ongoing trade war. Meng Wanzhou, daughter of Huawei founder Ren Zhengfei, is largely believed to be the successor of the company — despite claims denying nepotism from Ren Zhengfei. Given her high profile status in one of China’s most successful private companies, her detainment is incredibly controversial and has dominated recent coverage of the friction between the world’s two largest economies.

One of the factors contributing to its controversial nature was that the arrest took place in Canada. Canadian Prime Minister Justin Trudeau claimed that Canadian officials were made aware; however, he claims that the Canadian government did not take part in the arrest. Nonetheless, Trudeau’s statement, while seemingly non-descriptive, reveals Canadian interest in allying itself with the US in the arrest as Meng Wanzhou currently stands in court in Vancouver. Given that the apprehension was a US-requested extradited arrest, the matter has become increasingly complex as to some, the US had questionable legitimacy in pursuing an overseas arrest.

Complicating the issue is that the US did not initially disclose the reasons for the arrest, but later followed up that the arrest was due to Huawei’s alleged involvement in selling technology to Iran via control of Skycom, in violation of sanctions. Indeed, the US’s negative reaction to Huawei selling advanced technologies is part of a greater trend of member countries of Five Eyes; namely, the US, the UK, Canada, Australia, and New Zealand are all part of an intelligence agreement which facilitates the transfer of sensitive information to one another. In countries such as Australia, Huawei has been banned from bidding their 5G technology over security concerns. While there is no clear evidence to support that Huawei intends to infiltrate Five Eyes’ security systems, the US points to the fact that Huawei’s founder was an officer in the People’s Liberation Army of China as an indication of ulterior motive.

It is important to note that Meng Wanzhou’s arrest came with immediate consequences. The Chinese embassy in Canada exclaimed that the arrest was a violation of her human rights, and both Canadian and American ambassadors have been summoned to Beijing in retaliation. Furthermore, the arrest undermined the trade war truce talks, signaling that both sides will not back down and that global markets are not yet stable. In response to the arrest, tech stocks have tumbled as investors fear of further crackdown against Chinese companies through American legal procedures and as American companies conducting business fear retaliation against their expansion in China.

Sources: Financial Times, Financial Times, Financial Times, Financial Times, Financial Times, WSJ