Huawei’s CFO Arrested at U.S. Request, Sparking Outrage in China

Huawei Technologies Co.’s chief financial officer was arrested in Canada over potential violations of U.S. sanctions on Iran, provoking outrage from China and complicating thorny trade negotiations just as they enter a critical juncture.

China’s embassy in Canada demanded the U.S. and its neighbor “rectify wrongdoings” and free Wanzhou Meng, who is also deputy chairwoman and the daughter of Huawei founder Ren Zhengfei. U.S. equity futures and Asian stocks slid as the episode reignited concerns about U.S.-Chinese tensions.

Meng’s arrest is likely to be regarded back home as an attack on one of China’s foremost corporate champions. While Alibaba Group Holding Ltd. and Tencent Holdings Ltd.dominate headlines thanks to flashy growth and high-profile billionaire founders, Ren’s company is by far China’s most global technology company, with operations spanning Africa, Europe and Asia.

China wants the U.S. and Canada “to clarify the grounds for the detention, to release the detainee and earnestly safeguard the legitimate rights and interests of the person involved,” Foreign Ministry spokesman Geng Shuang said Thursday at a press briefing.

Meng faces extradition to the U.S., said Ian McLeod, a Canada Justice Department spokesman, declining to elaborate. She was arrested Dec. 1 after the U.S. Department of Justice in April opened an investigation into whether the leading telecommunications-equipment maker sold gear to Iran despite sanctions on exports to the region.

The U.S. Department of Justice didn’t immediately respond to a request for comment Thursday.

Meng’s arrest came on the day that Donald Trump and Xi Jinping dined in Buenos Aires, setting in motion a truce in the rising U.S.-China trade tensions. But Huawei itself already had been a flashpoint between Washington and Beijing.

Huawei’s ambitions span artificial intelligence and chipmaking to fifth-generation wireless. That last effort, a massive push into the future of mobile and internet communications, has raised hackles in the U.S. and become a focal point for American attempts to contain China’s ascendancy. Shares in several of its suppliers, from Sunny Optical Technology Group Co. and Largan Precision Co. to MediaTek Inc., fell.

Ren Zhengfei, a former army engineer, has won acclaim at home for toppling Apple Inc. in smartphones and turning an electronics reseller into a producer of networking gear with revenue surpassing Boeing Co. He is regularly named among China’s top executives, and was among 100 business leaders honored for their contributions as the country celebrates the 40th anniversary of opening its economy. His stature at home is roughly comparable to Bill Gates or Michael Dell in the U.S.

“Tencent and Alibaba may be domestic champions and huge platforms in of their own rights, but Huawei has become a global powerhouse,” said Neil Campling, an analyst at Mirabaud Securities Ltd. It is “5G standards that are at the heart of the wider IP debate and why the U.S. and her allies are now doing everything they can to cut to the heart of the Chinese technology IP revolution.”

Canada’s Globe and Mail newspaper first reported the arrest, about which the U.S. Justice Department declined to comment. A spokeswoman for Canadian Prime Minister Justin Trudeau referred questions to his country’s own justice department. Huawei said the arrest was made on behalf of the U.S. so Meng could be extradited to “face unspecified charges” in the Eastern District of New York.

“The company has been provided very little information regarding the charges and is not aware of any wrongdoing by Ms. Meng,” it said in a statement. “The company believes the Canadian and U.S. legal systems will ultimately reach a just conclusion. Huawei complies with all applicable laws and regulations where it operates, including applicable export control and sanction laws and regulations of the UN, U.S. and EU.”

U.S. Senator John Kennedy, a Republican from Louisiana, said those who cheat on sanctions have to “face consequences.”

“We ought to prosecute to the full extent of the law,” Kennedy said in a Bloomberg Television interview Thursday.