Chinese state media has torn into the “despicable” United States after the chief financial officer of one of its largest companies, Huawei, was arrested on Saturday.
China has demanded the release of Meng Wanzhou who was detained in Canada at the request of US authorities.
She now faces extradition in a case that increases tensions between Bejing and Washington – and could threaten the world economy.
So why is this a big deal? First things first...
How Do You Pronounce Huawei?
It’s pronounced “Wah-Way”.
What Is It?
Huawei is a Chinese telecoms equipment company founded in 1987. In fact, it’s the biggest company of its kind on the planet, with a revenue of $92.55bn (£72.48bn) in 2017.
It was founded by Ren Zhengfei, a former officer and engineer in the Chinese army.
Huawei is a private company but in the murky world of Chinese politics, the line between business and affairs of the state is blurred and often crossed.
Why Have I Never Heard Of Them Before Now?
The majority of Huawei’s business is in Asia, but it has made inroads into the UK market in recent years with its highly-praised mobile phones.
Although on these shores it still lags far behind Apple and Samsung in terms of brand recognition, globally it is the second largest smartphone maker in the world (Samsung is top, with Apple in third).
What Else Do They Do?
Huawei produces all sorts of technology, and as you’d expect from a global company, its products – from cloud data centres to internet routers – are found all over the world.
The company is particularly focused on the next generation of mobile broadband networks, 5G.
Once up and running, 5G will be 100 times faster than the current 4G and companies like O2, Vodafone and TalkTalk have all worked with Huawei to bring the technology to consumers.
So Why Does The US Not Like Them?
This is where it all gets a bit... cloak and dagger.
China is still a highly authoritarian state and invests heavily in its security services to monitor potential enemies both at home and abroad.
A law passed just this year means the Chinese government can now compel Chinese companies to assist it in intelligence gathering.
So in a nutshell, a company already embedded in the world’s telecommunication system, handling all sorts of data – including yours – could be enlisted by the Chinese government to spy for them.
The real worry is that Huawei products contain “backdoors”, mechanisms that allow normal security systems to be bypassed, and are essentially just waiting to be turned into listening devices.
What Has The US Done About It?
The US has long been suspicious of the company, particularly after it became the leading supplier of telecoms equipment to Iran.
In April, the US Federal Communications Commission (which regulates the country’s telecommunications), barred companies from spending government loans on Huawei technology.
In the same month the company announced it would largely pull out of the US market.
What About The UK?
This week BT confirmed it is removing Huawei equipment from key areas of its 4G network.
Governments in the US, New Zealand and Australia have already moved to block the use of Huawei’s equipment as part of the future roll-out of 5G networks.
Earlier this week, the head of MI6 also suggested the UK needed to decide if it was “comfortable” with Chinese ownership of the technology being used.
Who’s Been Arrested?
Huawei’s chief financial officer, Meng Wanzhou, 46, who is also the daughter of the company founder, was arrested on 1 December in Canada at the request of the United States.
She is accused of an alleged scheme to use the global banking system to evade US sanctions against Iran.
Meng is set to appear in a Vancouver court on Friday for a bail hearing as she awaits possible extradition to the US.
UPDATE: There was no bail decision by the judge on Friday so Meng will spend the weekend in jail and the hearing will resume on Monday.
What Has China Said?
Huawei itself has said it complies with all applicable export control and sanctions laws and other regulations.
Chinese media, heavily controlled by the Chinese government and a good indicator of its feelings, has said:
“[The US is resorting to] resorting to despicable hooliganism. Obviously Washington is resorting to a despicable rogue’s approach as it cannot stop Huawei’s 5G advance in the market.”
- Global Times
And...
“One thing that is undoubtedly true and proven is the US is trying to do whatever it can to contain Huawei’s expansion in the world simply because the company is the point man for China’s competitive technology companies.”
- China Daily
Why Is It Bad News For Trump?
It’s bad news for Donald Trump for two reasons – trade and the stock market.
The US President is currently engaged in a trade dispute with China and, according to him, held productive talks with President Xi Jinping at the G20 summit last week.
Trump did not know about the arrest in advance, two US officials said on Thursday, in an apparent attempt to stop the incident from impeding talks to resolve the trade dispute.
But the arrest of Meng threatens to throw a spanner in the works of any progress and a full-blown trade war between the two countries would be disastrous for the global economy.
In July, the International Monetary Fund (IMF) warned the knock-on effects could cause huge financial losses worldwide, with estimates indicating the global economy could be $430bn down by 2020 – which is pretty huge.
All of which will massively affect the one thing Trump has consistently – and incorrectly – trumpeted as his greatest success: the stock market.
Trump inherited a very strong economy from former president Barack Obama and has made great efforts to claim record stock market performances as his own.
Until recently...
The stock market has been a bit all over the place in recent weeks and the last time Trump tweeted about it was an attempt to blame Democrats for the stall.
The arrest of Meng has sent markets tumbling.
So What Happens Next?
Hard to say, but deteriorating relations between the US and China are likely to hurt the global economy.
Zhu Feng, an international relations expert at Nanjing University, said: “The United States is stepping up containment of China in all respects”, referring to the country's increasing dominance in world affairs that inevitably brings it into closer competition with the US.
He said targeting Huawei, one of the most successful Chinese companies, “will trigger anti-US sentiment in China”.
“The incident could turn out to be a breaking point,” Zhu said.