China Slams Huawei CFO's Arrest, Huawei 'Not Aware of Any Wrongdoing'

Chinese authorities have slammed the arrest in Canada of Huawei's chief financial officer, Meng Wanzhou, while the equipment vendor has denied knowledge of any wrongdoing by one of its most senior executives. She was reportedly arrested on US charges of breaching sanctions against Iran. (See Canada Arrests Huawei CFO – Report.)

Chinese officials have accused the US government of violating the Huawei executive's human rights and demanded her immediate release.

In a statement provided to Light Reading on Thursday, a spokesperson for Huawei Technologies Co. Ltd. said: "Recently, our corporate CFO, Ms. Meng Wanzhou, was provisionally detained by the Canadian authorities on behalf of the USA, which seeks the extradition of Ms. Meng Wanzhou to face unspecified charges in the Eastern District of New York, when she was transferring flights in Canada.

"The company has been provided very little information regarding the charges and is not aware of any wrongdoing by Ms. Meng. The company believes the Canadian and US legal systems will ultimately reach a just conclusion," he added. "Huawei complies with all applicable laws and regulations where it operates, including applicable export control and sanctions laws and regulations of the UN, US and EU."

Meng Wanzhou, who is also the daughter of Huawei founder Ren Zhengfei, was first reported to have been arrested by The Wall Street Journal as part of an investigation into an alleged breach of sanctions against Iran. While few details about the case have yet emerged, it seems to bear similarities to the recent US legal moves against ZTE Corp. (Shenzhen: 000063; Hong Kong: 0763), a smaller Chinese equipment maker.

ZTE was banned from acquiring US components for part of the year after it was charged with selling them to organizations in Iran and North Korea. Heavily reliant on those components, ZTE nearly went out of business as a result of that ban, but it was able to resume trading after it agreed to pay fines, replace its senior management team and be subject to more intense US scrutiny. (See Amid the rubble of L'Aquila, ZTE tries to rebuild.)

Although Huawei manufactures a larger proportion of its components, it does use equipment from US companies in some of its products. The US Department of Justice was said in April to be investigating whether Huawei had breached sanctions against Iran. (See US Ban on Huawei Would Trigger Turmoil in Telecom Industry and US Investigating Huawei for Sanctions Violations – Report.)

The arrest of a senior executive at one of China's biggest companies marks a huge escalation of the US campaign against Chinese equipment makers and comes against the backdrop of a simmering trade dispute between the two countries. (See Europe's Telcos Fret as Walls Close In On Huawei.)

It has quickly met with a sharp rebuke from Chinese authorities, which said the arrest of Meng Wanzhou had "seriously harmed the human rights of the victim."

"The Chinese side has lodged stern representations with the US and Canadian side, and urged them to immediately correct the wrongdoing and restore the personal freedom of Ms. Meng Wanzhou," said a spokesperson for the Chinese Embassy in Canada in a statement. "We will closely follow the development of the issue and take all measures to resolutely protect the legitimate rights and interests of Chinese citizens."

Telecom operators in the US market have been warned off using either Huawei or ZTE since 2012 when a US government report described both companies as a security risk because of their perceived links to the Chinese state. This year, however, the US is thought to have leaned on allies in the Asia-Pacific, Europe and North America to impose similar restrictions. (See Huawei, ZTE Charm Offensive Just Got Harder.)

Both Australia and New Zealand have in recent months excluded the Chinese vendors from any contracts to build next-generation 5G networks, while Canada has reportedly been under US pressure to shut them out. (See Australia Excludes Huawei, ZTE From 5G Rollouts and New Zealand blocks Huawei from 5G deal with Spark.)

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In the UK, Alex Younger, the head of intelligence agency MI6, was this week said to have voiced concern about Huawei during a rare public appearance. Telecom incumbent BT Group plc (NYSE: BT; London: BTA), meanwhile, has indicated that it will not use Huawei as a provider of 5G core network gear and is stripping Huawei equipment out of its 3G and 4G core networks as well as its optical DWDM network. BT told Light Reading that it took a decision not to use Huawei equipment in its main intelligent network core back in 2006. It started the process to remove Huawei from mobile core networks in 2016 after buying EE, a mobile operator that uses Huawei gear, said BT's spokesperson. (See Huawei Cut Out of BT's Mobile Core, Optical & Edge Plans.)

In October, US hardliners were said to have urged Canada to sever connections with Huawei during the rollout of 5G technology. In a letter sent to Canadian Prime Minister Justin Trudeau, US Senators Marco Rubio and Mark Warner said the use of Huawei equipment risked compromising intelligence sharing between Canada and the US, according to press reports. (See US Senators Urge Canada to Ban Huawei – Report.)

They went on to warn Trudeau that Huawei's equipment could threaten the so-called "Five Eyes" partnership under which the US, the UK, Canada, Australia and New Zealand agree to share confidential and sensitive information to thwart espionage.

Meng Wanzhou may have been detained while on a business trip to visit one of Huawei's Canadian customers. Her arrest could trigger a backlash from Chinese authorities and unsettle Western companies that do business in China. One executive with a Western equipment provider told Light Reading he would be nervous about traveling to China in the current climate.

While security has been the focus of the recent campaign against Huawei, opponents of the Chinese vendors have long questioned their business practices and accused them of intellectual property violations.

Citing those violations, hardliners in the US administration had expressed disappointment with the last-minute deal that allowed ZTE to resume trading and have continued to push for a clampdown on the Chinese vendors.

— Iain Morris, International Editor, Light Reading

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