Huawei exec's arrest sends shudders through stock markets

Gladys Abbott
December 6, 2018

US equity futures and Asian stocks slid as Meng's arrest re-ignited concerns about U.S.

David Mulroney, a former Canadian ambassador to China, said USA and Canadian business executives could face reprisals in China.

"The timing and manner of this is shocking", Andrew Gilholm, director of North Asia analysis at Control Risks Group, said by phone.

Right now it's unclear what role Trump played in Meng's arrest, or if he will intervene at some point.

In 2016, the Commerce Department sought information regarding whether Huawei was possibly sending USA technology to Syria and North Korea as well as Iran.

"It looks as though, despite recent heavy selloffs, the bottom is not in sight and the markets have further to fall".

Meng's arrest has "potentially huge implications" for the trade war and signals the U.S. government is willing to get tough on Chinese companies that do business with Iran, according to Michael Every, head of Asia-Pacific research at investment bank Rabobank. The headline says the two leaders agreed not to increase tarrifs. The CFO's arrest could be regarded back home as an attack on one of China's foremost corporate champions.

"Already anxious about the economic effects of trade wars, investors are now concerned that this will move beyond the realms of tariffs and into much broader economic and diplomatic conflict, with dire implications for global economic growth".

Eric Harwit, an Asian studies professor at the University of Hawaii at Manoa who has written extensively on Chinese telecoms, said the arrest was not just about sanctions violations but the bigger picture of the United States worrying about Chinese hi-tech firms becoming rivals to American companies in the future.

"The China-US trade row could become a protracted war".

China is confident they can reach a trade deal during the 90 days that Trump agreed to suspend United States tariff hikes, said a ministry spokesman, Gao Feng. US markets were closed on Wednesday to mark the death of former President George H.W. Bush.

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"While the Commerce Department focused its attention on ZTE, this news highlights that Huawei is also violating U.S. Law", Van Hollen said in a statement.

The United States government is set to indict a top executive from Huawei, the Chinese smartphone maker, in a move that could increase tensions between the two countries.

Meng is now facing extradition to the United States.

Perhaps no company better personifies the perceived trade threat than Huawei. It's shooting for the lead in fifth-generation wireless networks and preparing to take on some of America's biggest chipmakers.

The announcement followed moves made by Australia and New Zealand to curtail the corporation's involvement in 5G infrastructure systems because of concerns about possible Chinese government involvement, an allegation that Huawei has denied.

"If the upcoming data on Friday shows some weakness, markets will face a major challenge", he added. While the company has made advances in developing its own microchips, it still relies on American equipment to make its networking gear and smartphones.

Earlier this year, the U.S. imposed a seven-year ban on the sale of crucial usa components to Chinese smartphone maker ZTE after finding it had failed to take action against staff who were responsible for violating trade sanctions against Iran and North Korea.

The fallout from the decision has rocked mainland markets and threatened the trade war truce between Washington and Beijing. The company has been accused of using its devices to pass on information to the Chinese government, prompting the US Department of Defense to ban their sale on military bases.

Huawei's relationship with the USA just took a turn for the worse.

President Donald Trump spooked investors on Tuesday when he called himself a "Tariff Man" in a tweet.

European stocks began the day well in negative territory but went further in the red after Wall Street opened strongly lower.

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