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How The Huawei CFO's Arrest Could Have Lasting Impacts On The Global Economy

Dec 13, 2018

 

  • The arrest of Huawei Chief Financial Officer (CFO) Meng Wanzhou on December 1st, 2018 in Vancouver, Canada has dominated headlines for nearly two weeks amid trade negations between the US and China, the outcome of which will prove pivotal to the future outlook of the global economy.
     
  • The S&P 500 Index is up 1.79% since December 1st while the Nasdaq Composite Index is up 0.34% and the Russell 2000 is up 1.45% in the same period.
     
  • Huawei is a private company headquartered in China that is the world’s largest supplier of telecommunications network equipment, the world’s second largest smartphone manufacturer, and one of the largest Chinese tech firms.
     
  • US intelligence agencies previously warned American citizens against using Huawei phones while US government agencies are banned from buying Huawei equipment due to security risks. The challenge to any avoidance of Huawei hardware is the fact that Huawei is a leader in the development of 5G technology -- a focal point of the Chinese government’s strategy to dominate the upcoming wave of ultra-high-speed wireless networks. 
     
  • Wanzhou was arrested on December 1st by Candian officials at the request of US authorities for allegedly helping Huawei cover up violations of sanctions on Iran. The timing of Wanzhou’s arrest coincided with a highly anticipated meeting between US President Donald Trump and China President Xi Jinping at the G20 Summit in Buenos Aires. Argentina. While US officials have issued a statement that the arrests are purely a legal matter, Chinese officials appear to be interpreting the arrest as part of the ongoing trade negotiations between the US and China.
     
  • Canadian and US officials are investigating allegations that Wanzhou helped Iran cover up sanction violations by telling financial institutions that a Huawei subsidiary was a separate company. The US has since requested Canada to extradite Wanzhou to the US.
     
  • Since Wanzhou’s arrest, US President Donald Trump has gone on record several times to say that he would intervene in Wanzhou’s case, as long as it furthers trade negations with China.
     
  • Additionally, two notable Canadian citizens have been detained by Chinese officials since the arrest of Wanzhou; Michael Spavor, who resides in the Chinese city of Dandong and has frequently facilitate meeting between North Korean leader Kim Jong Un and notable foreigners; and Michael Kovrig, a former Canadian diplomate who reportedly ran in a similar circle as Spavor. Both of these individuals are, “suspected of engaging in activities endangering national security,” according to Beijing officials.

 

Sources: 

https://asia.nikkei.com/Business/Companies/Huawei-CFO-arrested-in-blow-to-US-China-trade-truce
https://beta.scmp.com/business/china-business/article/2176621/huawei-suppliers-hammered-after-china-smartphone-makers-cfo
https://www.bloombergquint.com/global-economics/huawei-cfo-arrested-in-canada-as-u-s-seeks-her-extradition#gs.QW9=iNk
https://www.scmp.com/news/china/article/2176790/us-was-probing-huawei-alleged-global-banking-scheme-evade-us-sanctions
https://www.scmp.com/news/world/united-states-canada/article/2176787/dow-jones-industrial-average-plunges-wall-street
https://www.scmp.com/tech/article/2176655/detained-huawei-cfo-sabrina-meng-wanzhou-told-staff-one-may-accept-risk