Double blow for Huawei as senior executive arrested
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Double blow for Huawei as senior executive arrested

Beijing: Controversial Chinese telco Huawei has been hit with a double blow after its chief financial officer – the company founder's daughter – was arrested on United States criminal charges and a major UK telco vowed to rip its equipment out of its telephone networks.

Huawei chief financial officer Meng Wanzhou, the daughter of founder Ren Zhengfei, was arrested in transit at Vancouver airport on Saturday, at the request of the United States, allegedly because the company had violated US sanctions against Iran.

A New York eastern district court has set a bail hearing for December 7.

The arrest came on the same day US President Donald Trump and Chinese President Xi Jinping met at the G20 summit and agreed to a 90-day cease-fire on new tariffs.

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The arrest in Canada was soon prominently reported in China, where it is being taken as a sign that the trade war will be prolonged, and the US will not back down from its aggressive campaign against Chinese technology companies seeking global market dominance.

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Chinese foreign ministry spokesman Geng Shuang said Beijing still had not been told the reason for Meng’s detention.

“Detention without giving any reason violates the human rights of the person detained,” he said.

China had made solemn representations to the US and Canada “and asked them to explain the reason for detention” and to release Meng. China opposed "unilateral sanctions outside the [UN] Security Council."

The Chinese embassy in Canada said it had strongly protested against Meng's arrest, which it said "seriously harmed the human rights of the victim", to both the US and Canadian governments. The embassy had "urged them to immediately correct the wrongdoing and restore the personal freedom of Ms Meng Wanzhou."

The nationalist Global Times newspaper said Huawei has become a "hostage" in the China-US trade war, quoting analysts who believed the trade tensions would only escalate after the incident involving such a well-known Chinese family.

Meanwhile, in the UK, major telco BT Group announced it would rip out Huawei kit from the core of its existing 3G and 4G networks.

Canada and Britain are the two remaining nations from intelligence sharing alliance “Five Eyes” not to have banned Huawei’s involvement in building the next generation of mobile technology.

The ultra-fast mobile networks are expected to become central to critical infrastructure, such as water supply, and have attracted intense scrutiny from global governments over fears of foreign interference, security and espionage.

John Lord, Chairman of Huawei Technologies Australia.

John Lord, Chairman of Huawei Technologies Australia.Credit:Alex Ellinghausen

Huawei Technologies Australia chairman John Lord said BT's decision was expected and would have “no effect on Australia”.

He said the change in provider was standard business practice to ensure a variety of vendors were used for different parts of the network. BT acquired telco EE in 2016, and is understood to have been planning the change for some time.

“I would like Australia to follow the UK and have a more pragmatic approach,” he said.

Mr Lord declined to comment on Ms Meng’s arrest.

Australian telcos Vodafone and Optus both use Huawei kit in their existing 4G networks, which has caused some confusion about whether they would need to remove this equipment as 5G is expected to build on existing technology in early stages. Neither mobile provider would comment about the issue directly, though sources say all major local telcos are keeping a close eye on the global changes.

Meng Wanzhou, daughter of Huawei's founder Ren Zhenfei.

Meng Wanzhou, daughter of Huawei's founder Ren Zhenfei.

Telstra has opted to partner with Swedish provider Ericsson for its 5G rollout, and an Optus spokeswoman said the company “complies with guidance set out by the Australian Government in respect of managing any risks to national security”.

In August, the Australian government moved to ban Huawei, and other Chinese-based companies such as ZTE, from participating in 5G. Telco sources have questioned how much of the decision was technical, with disagreement about whether there is a risk involving Chinese vendors for equipment like antennas, or political, due to a trade war between the US and China.

The US has a similar restriction and, last week, New Zealand became the third Five Eyes member to do the same. Sources close to Huawei had previously considered Canada, New Zealand and the UK as unlikely to impose a ban.

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But US senators have actively encouraged Canadian prime minister Justin Trudeau to ban Huawei, describing the company as a "threat" to the network of allies.

British secret service MI6 chief Alex Younger recently expressed concerns about using Chinese companies' equipment for 5G networks and pointed out that “allies have taken a quite definite position”. The UK has a cybersecurity testing centre used to check for security threats from Huawei.

A Huawei spokesman said the company has “never had a cyber security-related incident”.

“Cyber security should not be politicised, and equipment vendors should not be treated differently based on country of origin,” he said.

Huawei's rotating chairman, Guo Ping, confirmed Ms Meng had been "temporarily detained by the Canadian authorities on behalf of the US government."

Mr Guo said Huawei had been provided with "very little information about the specific allegations ... Huawei does not know that Ms Meng has any misconduct. The company believes that the legal systems of Canada and the United States will eventually give a fair conclusion."

Mr Guo insisted Huawei complied with international sanctions laws and export controls "applicable to the United Nations, the United States and the European Union."

After the arrest was announced, Chinese media reported details about Huawei founder Ren Zhengfei's family, including that Meng had adopted her mother's surname instead at the age of 16.

Ms Meng began working at Huawei as a 21-year-old, on the switchboard. She returned to university to gain a master's degree in accounting and rejoined Huawei in the finance department, where she worked her way up through the ranks.

She has previously held positions as president of Huawei's sales finance and fund management, chief financial officer of Huawei Hong Kong, and director of international accounting.

Huawei, the world's largest mobile telecommunications infrastructure company, is privately owned but was barred in Australia from the 5G network because of the potential under Chinese laws for any Chinese company to be directed to assist security agencies.

The Wall Street Journal reported in April that the US Justice Department had begun investigating Huawei's dealings in Iran.

US lawyer Julian Ku, dean of New York's Hoftra University law school, said US law prohibited the export of certain US technology to certain countries and "when Huawei pays to licence certain US technology it promises not to export to certain countries like Iran".

A leaked US National Security Council memo earlier this year warned that China was poised to take the technological lead on the global deployment of 5G, and outlined a plan to disrupt Huawei's growth by shifting telecommunications manufacturing back to the United States.

Kirsty Needham is China Correspondent for The Sydney Morning Herald and The Age

Jennifer Duke writes about media and telecommunications.

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