By Clay Chandler and Eamon Barrett
December 8, 2018

It has been a week since Canadian authorities arrested Huawei CFO Meng Wanzhou in Vancouver on fraud charges. Shockwaves from the case continue to reverberate through Washington, Beijing, and global financial markets. There has been a cacophony of commentary in the press and social media on both sides of the Pacific. If anything, it’s getting harder to separate signal from the noise.

We know only a little about the charges that have been brought against Meng. Much of the press coverage to date has focused on the political symbolism. Did Trump know about the arrest going into his dinner meeting in Argentina with Xi Jinping? Will Meng’s arrest derail the 90 day U.S.-China trade truce? Will Xi Jinping retaliate by detaining U.S. tech executives in China?

There’s been an inordinate amount of hand-wringing about how the case has, as the New York Times put it, “unleashed a combustible torrent of outrage and alarm among affluent and influential Chinese.” Huawei is one of China’s most highly valued companies. Numerous analyses in the Western press have reminded readers that its technological achievements are a source of tremendous pride among China’s leaders and people, and that Meng, who is the daughter of Huawei founder Ren Zhengfei, is Chinese “corporate royalty.” The Times frets that arresting Meng was the equivalent of China arresting Sheryl Sandberg—”if Ms. Sandberg were also the daughter of…Steve Jobs.” (Notably, though, Ren has explicitly stated that his children don’t have what it takes to become Huawei CEO.)

Much of this is speculative blather. What we do know about the Meng case is that she has been charged with being part of a conspiracy “perpetuated at Huawei’s highest levels” to defraud banks—and if convicted faces up to 30 years in prison. We also know Meng’s arrest is part of a long-running Justice Department investigation, not something that was cooked up overnight for extra bargaining leverage in Buenos Aires.

At an extradition hearing in Vancouver Friday, Crown attorney John Gibb-Carsley laid out the case against Meng on behalf of the U.S. government. He alleged Huawei used a Hong Kong-based company called Skycom Tech to do business in Iran for Iranian telecom companies, breaching U.S. and European sanctions, and that Meng led U.S. financial institutions to believe it had no ties to Skycom when, in fact, the company was a thinly disguised subsidiary. Skycom employees, he alleged, were controlled by Huawei and some even used Huawei e-mail addresses.

Meng served on Skycom’s board from February 2008 to April 2009. David Martin, the attorney representing Meng at the hearing, acknowledged Skycom had been a Huawei subsidiary but said it was sold in 2009. Martin said that, while Huawei had remained a shareholder of the company, there is “no evidence” it was a Huawei subsidiary in 2013 and 2014, the period under investigation. In a statement Saturday morning China time, Huawei said it has “every confidence that the Canadian and U.S. legal systems will reach the right conclusion” in Meng’s case. But the extradition process could drag on for months.

The furor over Meng’s detention has obscured the larger push by the U.S. to bar Huawei from 5G networks outside of China, especially in countries that are members of the “Five Eyes” alliance (the U.S., Canada, United Kingdom, Australia, and New Zealand). Over the last few weeks, the other four have joined the U.S. in excluding Huawei from their telecommunications networks, eliciting expressions of “grave concern” from Beijing.

More China news below.

Clay Chandler
@claychandler
clay.chandler@timeinc.com

SPONSORED FINANCIAL CONTENT

You May Like