China/ US Relations: Huawei CFO Meng Wanzhou, arrested in Canada on US extradition request.

On 1 December Meng Wanzhou, the vice-chairwoman and chief financial officer of Huawei, was arrested in Vancouver, Canada at the request of the United States authorities. The detainment occurred as Presidents’ Trump and Xi were formally meeting at the G20 Summit in Argentina.

Analysis

Huawei has long been seen by the United States as a national security threat due to its perceived close ties to the Chinese Communist Party. Meng’s arrest has been reportedly linked to allegations of sanctions violations, in shipping restricted hardware to Iran, Cuba, and Syria, all countries under US economic sanctions. The detainment of Meng comes at a pivotal moment in the on-going trade war between Washington and Beijing. At the G20 Summit in Buenos Aires the two leaders pledged a freeze on trade-war escalation and placed a 90-day window to negotiate a trade deal.

Beijing has responded with fury over the arrest and spoke of “serious consequences” for Ottawa. In the days and weeks following Meng’s arrest authorities in China detained three separate Canadian expatriates. Comments by President Trump – that he would intervene in the case if he deemed it necessary to sign a trade deal with China – have led to speculation that the arrest may be politically motivated. This is indeed the narrative which is being promulgated in China by its official and semi-official media. There has been a more muted response to Washington as it appears President Xi’s main concern is finding a solution to the trade war. Much of Beijing’s ire has been directed at Ottawa who stands accused of doing Washington’s bidding.

This story will continue to unfold over the coming two months as Meng’s court date is set for late February 2019. No doubt she will vigorously fight the extradition. And with US and Chinese trade representatives due to meet in early January, President Trump’s comments may attract further scrutiny. Huawei is seen as a national champion and carries with it an immense amount of pride. With an increasingly overt technology race – particularly in 5G and artificial intelligence – Meng’s arrest is seen in China as a US ploy to stifle the company by potentially imprisoning its natural successor. Should the extradition case be successful for US authorities, we might expect presidential pressure by Trump if trade negotiations are progressing well. On the other hand, if trade negotiations are at an impasse, the extradition of Meng to face serious charges in the US could turn into a major diplomatic concern complete with attendant commercial considerations.