Published: Fri, December 07, 2018
Markets | By Erika Turner

China and HK shares slump, tech leads losses after Huawei CFO arrest

China and HK shares slump, tech leads losses after Huawei CFO arrest

The massive fall in stocks was preceded by a major scandal involving the arrest of Huawei Technologies' chief financial officer, Wanzhou Meng in Vancouver at the request of the United States government, threatening to undermine the recently reached understanding between Beijing and Washington on their ongoing trade war. He declined to give further details, given that Meng faces a bail hearing on Friday.

'As there is a publication ban in effect, we can not provide any further detail at this time.

Huawei, in a statement, 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 NY.

Wang Heng, a China business law professor at the University of New South Wales in Australia, said the USA could use Meng's case to exert pressure on China during the trade negotiations.

"The company believes the Canadian and USA legal systems will ultimately reach a just conclusion". On Wednesday, China's embassy in Canada said it resolutely opposed the arrest and called for her immediate release.

"We have made solemn representations to Canada and the USA, demanding that both parties immediately clarify the reasons for the detention, and immediately release the detainee to protect the person's legal rights".

The Wall Street Journal reported earlier this year that US authorities are investigating whether Chinese tech giant Huawei violated sanctions on Iran. The U.S. has been looking into Huawei's alleged shipping of products to Iran since 2016, as these actions violate the country's export and sanctions laws. "Huawei complies with all applicable laws and regulations where it operates, including applicable export control and sanction laws". David Mulroney, a former Canadian ambassador to China, said USA and Canadian business executives could face reprisals in China.

The arrest comes at a delicate time in US-China relations. The U.S. has reportedly requested Meng be extradited to NY, where she would reportedly face federal charges of violating Iran sanctions.

Ms Meng is the company's chief financial officer and the founder's daughter.

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Richard Kurland, a Vancouver-based immigration lawyer, said there was little chance Meng would be released from detention.

This is not the first time a Chinese technology company has found itself in hot water with the US.

The arrest came days after US President Donald Trump met with Chinese President Xi Jinping to discuss the two nation's escalating trade dispute. Under Trump and his predecessor, former President Barack Obama, Washington has pressured European countries and other allies to limit their business with Huawei, alleging the company's technology aids China's spy operations. Investors stampeded for the safety of government debt, pushing the yield on the USA 10-year Treasury note back below 2.9 percent to its lowest level in three months.

A source familiar with Justice Department procedures said it is unlikely the USA attorneys would have acted without consulting other agencies in pursuing the worldwide arrest.

The Wall Street Journal reported last month that U.S. officials had briefed counterparts in countries including Germany, Japan and Italy on potential security risks from Huawei equipment.

Washington had previously moved to constrain Huawei's business dealings in the U.S. The government cited concerns over Huawei's close ties to the Chinese government, arguing this made it a security risk.

Skycom tried to evade USA sanctions against Iran and sell Hewlett-Packard computers to the country's largest mobile phone operator in 2010. US equity futures and Asian stocks slid as Meng's arrest re-ignited concerns about U.S.

Reacting to the arrest, US Senator Ben Sasse told Associated Press that China was aggressively engaged in undermining US national security interests, often "using private sector entities".

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