US technology companies doing business in China will end up paying a heavy price for the arrest of Huawei CFO’s Sabrina Meng who was arrested on Saturday by police in Vancouver, Canada, at the request of the US government on suspicion of violating US sanctions against Iran.
Sabrina is the the daughter of Huawei Founder, Ren Zhengfei. Huawei is the second largest smartphone maker in the world after Samsung,
This is the latest action by US against a Chinese technology company. Previously, due to national security concerns, US banned Chinese technology company ZTE from buying any American components for seven years after it violated US sanctions by selling products to Iran and North Korea.
The US government’s aggressive pursuit of suspected financial violations by the likes of Chinese companies greatly heightens the risks for US companies operating in China where Chinese government will engage in a quid pro quo against US companies’ supply chain that runs through China.
The Huawei arrest took place on the same day that US President Donald Trump and Chinese President Xi Jinping met after the G20 summit in Buenos Aires to negotiate trade issues. Trump’s national security adviser, John Bolton, who was present at the Xi-Trump dinner on Saturday, said in an interview with National Public Radio on Thursday that he had advance knowledge of Meng’s arrest.
The US administration and lawmakers have repeatedly singled out China, fearing its aggressive acquisition of cutting-edge US technologies could pose a security threat.
A US House Intelligence Committee’s 2012 congressional report branded Huawei and ZTE as being among the Chinese “nefarious actors” infiltrating American intelligence and critical infrastructure through IT systems and components.
In November 2018, then-Attorney General Jeff Sessions announced the Justice Department’s “China Initiative”, established to investigate and prosecute Chinese companies for suspected trade secret theft, economic espionage and related violations.
After Meng’s arrest, it is a near-certainty that Chinese government would respond very negatively to this arrest and US technology companies should expect repercussions.