Chief financial officer Meng Wanzhou of Chinese telecommunications giant Huawei was arrested in Canada on Dec. 1 as she changed flights. The United States has demanded her extradition on charges that she had used a Huawei subsidiary to export equipment to Iran in contravention of U.S. sanctions imposed against the Middle Eastern power.
The arrest happened on the same day that U.S. President Donald Trump met with his Chinese counterpart Xi Jinping during the G20 Summit in Argentina. U.S. officials say that Trump had no prior knowledge that Meng was to be arrested.
News of Meng’s arrest, and Chinese government protests to it, first appeared on Dec. 6. Meng has been set free on bail, but is being monitored until her second hearing to be held in February.
Huawei in crisis
Along with ZTE, Huawei is one of China’s flagship tech companies. Founded In the 1980s, it rose to enjoy massive commercial success. More controversial, however, is its major role in the Chinese Communist Party’s (CCP) surveillance and censorship. It helped build Beijing’s Great Firewall (GFW) and is, via its developing 5G cellular networks both in China and abroad, proliferating the Chinese model of cybersecurity.
According to an analysis article by Epoch Times reporters Joshua Phillip and Annie Wu, the “debate about Huawei’s alleged ties to the CCP and whether it shares data with Chinese authorities often misses a key point… Under CCP law, there are no true private industries, and any company dealing with data is required to allow access by the CCP.”
The U.S. government has warned that Huawei could be involved in the theft of foreign intellectual property. The Epoch Times report noted that in October, a former Huawei employee living in California filed a lawsuit against his old employer, saying that he had been fired when he refused to pose as a staff member of a fake company in order to gain access credentials for a tech conference hosted by Facebook.
The Epoch Times received a U.S. intelligence document indicating that Huawei played a key role in transferring U.S. military technology to Iran in the second half of 2009.
Based on the charges against her, Meng Wanzhou faces a maximum sentence of 30 years in prison. Additionally, Huawei itself could be subject to crippling sanctions by the Trump administration, as many of its key suppliers are U.S. companies.
At the beginning of this year, another large Chinese tech company, ZTE, was found to be violating UN sanctions against Iran and North Korea by selling U.S.-made equipment to them. The U.S. government initially imposed a 7-year ban on selling American goods to ZTE, but this was later reduced to a large fine.
According to New York-based consultancy group SinoInsider, arresting Meng gives the Trump administration more leverage over Beijing in trade negotiations. Also, the heightened sense of crisis in the Chinese government will afford Xi Jinping more opportunity to push through economic reforms that would be necessary to hold up his end of any lasting U.S.-China deal.
SinoInsider noted in an analysis posted to Twitter that crippling Huawei’s ability to do business severely affect the supply of electronic and communications equipment to the Chinese People’s Liberation Army (PLA). In this event, the PLA would “immediately fall behind technological developments and modernization.”
Trump, according to a Dec. 11 report by Reuters, said he would be open to dropping charges against Meng and Huawei if it would help him reach an agreement with China.
“If I think it’s good for the country, if I think it’s good for what will be certainly the largest trade deal ever made — which is a very important thing, what’s good for national security — I would certainly intervene if I thought it was necessary,” Trump said in a wide-ranging interview with Reuters in the Oval Office.
Huawei’s ties to the Chinese government
While officially privately owned, looking at Huawei’s top personnel suggests that the company has close informal relationships with Chinese security forces, the military, and factional interests in the Chinese Communist Party (CCP).
Meng Wanzhou, 46, is CFO and vice chairwoman of Huawei, as well as the daughter of its founder, Ren Zhengfei, who is a former officer in the PLA. Her surname comes from her mother, Ren’s first wife Meng Jun, whose father Meng Dongbo was a high-ranking political officer in the communist forces during China’s civil war.
According to The Epoch Times, Sun Yafang, Huawei’s chairwoman since 1999, holds more power over the company than Ren Zhengfei due to her background with the Ministry of State Security, China’s main intelligence agency. The Epoch Times believes that this put Huawei in the orbit of CCP officials allied to Jiang Zemin.
Jiang was officially the leader of China from 1989 to 2003, but wielded influence over the Party for many years afterward through allies and cronies, many of whom carved out political fiefs in various sectors of the Chinese state.
In addition to happening on the day of the Xi-Trump meeting, Meng’s arrest was also joined by the apparent suicide of Zhang Shoucheng, a famous Chinese-American physicist, in San Francisco on Dec. 1. Zhang had connections to Huawei via his investment company Danhua Capital.
Zhang’s family confirmed his suicide following a battle with depression on Dec. 6, the same day that the media broke the story about Meng’s arrest.