Daily Management Review

Arrest of Huawei’s top manager endangers US-China trade truce


12/07/2018


Detention of Chief Financial Officer of Huawei Meng Wanzhou in Canada at the request of the United States instantly led to a drop in stock exchanges on both sides of the ocean. Investors and analysts are confident that the arrest of a top manager of this level will not be overlooked by the Chinese authorities and may further complicate the already tense relations between the PRC and the US.



CDC
CDC
Financial director of one of the world's largest telecommunications companies, China Huawei, Meng Wanzhou was arrested In Canada. Mrs. It happened in Vancouver on December 1 at the request of the United States, where the top manager was suspected of violating US sanctions against Iran. This news caused a real shock in the markets: after closing of stock exchanges, the key US indices fell by more than 3%. Asian stock exchanges followed them next morning: the Chinese Shanghai Composite and Hang Seng dropped 1.7% and 2.5%, respectively. Japanese Nikkei fell by 1.9%.

Huawei itself is a non-public company, and its shares are not traded on the stock exchange. However, shares of other Asian telecommunications companies have reacted sharply to what is happening: ZTE quotations fell by 6%, HTC - by 8.5%, Xiaomi - by 2.5%. Shares of suppliers Huawei AAC Technologies and Sunny Optical also fell.

Analysts explained the market’s reaction by the fact that the arrest of a top manager of one of the largest Chinese companies could lead to an increase in tension in the already uneasy Chinese-American relationship. “The arrest and extradition at the request of the US government is a new escalation of the process during which the US is trying to bring Chinese companies to justice for violating American laws,” the CNBC television company quoted a statement by the American analyst firm Eurasia Group, which assesses political risks. “Huawei high-ranking employee can say that the battle began and the American law enforcement agencies received the green light from senior management to attack private individuals, for which the United States did not hunt in earlier, calmer times.”

Huawei has released a statement saying that so far the companies have provided too little information about exactly what its top manager is accused of. At the same time, the company assured that it complies with all laws and regulations, including those related to the sanctions regime imposed by the UN, the USA and the EU.

The Chinese Embassy in Canada issued a sharp statement in which it emphasized that the arrested citizen of the People's Republic of China did not violate any Canadian or American laws. "China strongly opposes such actions, which are a serious violation of human rights... We urge the Canadian and American authorities to return freedom to Mrs. Meng and intend to monitor the situation very closely." A spokesman for the Chinese Foreign Ministry also demanded the immediate release of Meng Wanzhou.

The arrest of the top manager of Huawei took place against the backdrop of a fragile trade truce, which the US and PRC leaders agreed at the recent G20 summit. However, after a few days, Donald Trump cooled investors' optimism, saying that he would impose high duties on Chinese goods if countries fail to come to a “real deal”. 

source: reuters.com






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