Following Wednesday’s news of the arrest of Huawei Technologies CFO Meng Wanzhou, Hong Kong’s Hang Seng Index plunged nearly 2.5%, with tech stocks taking the brunt of the selling frenzy.
Canadian authorities arrested Meng on Saturday for allegedly violating US trade controls, under charges that Huawei continued to ship products to Iran despite US sanctions for its nuclear program.
What the Huawei is going on?!
The Shenzhen-based Huawei (pronounced: wah-way) is the world’s #2 largest phone seller, trailing only Samsung.
In 2012, US lawmakers grew wary of the company’s close ties with the Chinese government and worked to prevent American wireless carriers from buying equipment from both Huawei and fellow manufacturer, ZTE.
(Turns out, the fears had some merit: ZTE was later found guilty of spying activities and was ordered to pay $2B in fines.)
And Huawei?
Investigators have suspected Huawei knowingly sabotaged its products to allow Chinese surveillance since 2016, and the allegations have inspired many nations — not just the US — to bar the firm’s equipment from use in telecom projects (as of a few hours ago, Japan also joined the ban party).
According to Reuters, the US was in the process of looking into whether Huawei broke American trade controls on Iran in April; now, those suspicions seem to have been on point.
The trade war may be taking its first hostage
Meng faces extradition to the US, which some officials view as an opportunity to gain leverage with China in further trade talks.
According to James Lewis, director of technology policy at the Center for Strategic and International Studies, if that happens, it could have massive implications on global technology sales, with the fear that China will retaliate.
Just when we were kinda starting to make progress…