Home Market Arrest of Huawei CFO a dangerous precedent and threat to global trade
Arrest of Huawei CFO a dangerous precedent and threat to global trade Featured

COMMENT: The arrest of the CFO of Huawei Technologies Meng Wanzhou in Canada for the alleged violation of the company trading with Iran in contravention of US sanctions on that country has heightened already shaky trade relations between China and the US. It also threatens relations between China and the wider West.

Meng Wanzhou is not just a high-profile senior executive of China’s and one of the world’s largest telecommunications equipment manufacturers.

She is the daughter of the company’s founder and a member of the inner elite circle in that country – akin to royalty.

China has expressed extreme displeasure at the detainment of Meng Wanzhou and demanded her immediate release.

The fact that the arrest took place in Canada at the behest of the US authorities and not on US soil also has implications for relations between China and US allies, particularly those in the five eyes group – Canada, UK, Australia and New Zealand.

On the trade front, analysts have been quick to point out the detrimental effect this latest development concerning Huawei and China could have on technology businesses throughout the world.

At the behest of the US, Huawei has already largely been excluded from participating in government 5G contracts in most of the five eyes countries. The giant Chinese telco has also had its handset business in the US severely curtailed with carriers AT&T and Verizon cutting off sales through their post-paid plans.

Huawei phones use components from US chip makers Broadcom, Qualcomm and Micron, as well as a number of optical component suppliers.

If Huawei is totally excluded from US markets, as a result of this latest development, the chances are extremely high that China will retaliate in kind, excluding major US tech companies from its markets. That could include finished product companies such as Apple and Cisco, as well as component suppliers.

Since news of the arrest came to light earlier this week, already shaky US markets have been in a tailspin. Wall Street has been down sharply over the past two days of trading, with the Dow losing more than 1200 points.

The market is watching nervously to see how this incident plays out. Whatever the outcome, however, relations between the world’s two largest economic powers may well have been irreparably damaged for the foreseeable future.

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Stan Beer

 

Stan Beer co-founded iTWire in 2005. With 30 plus years of experience working in IT and Australian technology media, Beer has published articles in most of the IT publications that have mattered, including the AFR, The Australian, SMH, The Age, as well as a multitude of trade publications.

 

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