BEIJING _ The arrest of a top executive at one of the most successful Chinese global companies threatens to upend a delicate detente between the U.S. and China in its monthslong trade war.
Meng Wanzhou, deputy chairwoman and chief financial officer of telecommunications giant Huawei, was arrested Saturday during a transit stop at an airport in Vancouver, Canada, and could face possible extradition to the U.S. and an appearance in federal court in New York.
A U.S. law enforcement official, who was not authorized to discuss the case by name, said the case against Meng involves violations of U.S. sanctions against Iran. Another U.S. official described the violations as serious. Neither official provided specifics.
The arrest comes at a sensitive time as Washington and Beijing aim to strike a trade deal before March 1. Now any agreement has to overcome what will undoubtedly be viewed as a provocation in the eyes of China's leadership given Huawei's importance.
"Huawei embodies the existential angst of China hard-liners in the U.S. concerned about China's ostensible grand plan for global domination of new high-tech industries," said Eswar Prasad, a professor of trade policy at Cornell University. "Meanwhile, such actions by U.S. and other governments crystallize fears among Chinese leaders that the real intention is to hold back China's economic progress and transformation."
China demanded the immediate release of Meng, who is among the cream of China's corporate elite. She is the daughter of tech billionaire Ren Zhengfei, Huawei's founder and CEO and a former engineer in the People's Liberation Army.
Chinese officials said she had not broken any laws, accused the United States and Canada of violating her rights and demanded an explanation as to why she was arrested.
Huawei said in a statement it was unaware of any wrongdoing by Meng.
The arrest "wasn't a shot across the bow, but a shot into the heart of the ship" because Meng was basically considered an official of the Chinese government, a former U.S. official involved in national security matters said on the condition of anonymity.
Other experts said the arrest was merely consistent with U.S. policy.
"If the arrest had been made on the grounds of IP theft, I'd agree that it was aggressive," said Derek Scissors, China analyst at American Enterprise Institute. "As it is, this is far from a new American policy and I don't see how the timing could have been intentional.
"What would signal a confrontational U.S. stance is if we deny various clemency requests from the Chinese," Scissors added.
U.S. officials have not officially confirmed the reasons for Meng's arrest.
President Donald Trump and Chinese President Xi Jinping agreed Saturday to suspend planned tariff hikes for 90 days to allow negotiations on a deal to end the trade conflict.
Meng's arrest complicates the coming negotiations to resolve the trade conflict, already on a tight timeline because of holidays in the United States and China. She was arrested in Canada on the day that the leaders met.
But in a sign that China wanted to push for a deal despite anger over her arrest, officials said Thursday that trade talks would go ahead.
Commerce ministry spokesman Gao Feng confirmed for the first time Thursday that China would implement the "preliminary consensus" reached between the two leaders on agricultural products, automobiles and energy, without offering further details.
Meng's arrest, significant because of her elite connections and prominent corporate position, triggered shock in China. The arrest is doubly sensitive because it threatens the rise of one of China's top cutting-edge brands, now the world's second-largest smartphone company, surpassing Apple in sales this year.
The state-owned Global Times reflected Chinese outrage over her arrest in an editorial accusing Washington of "resorting to a despicable rogue approach" in a bid to hurt the company. The paper also tweeted Thursday that China should be ready for an escalation of the trade war, warning that Meng's arrest was vivid evidence that Washington would not soften its stance against Beijing.
A Global Times editorial called on Chinese citizens to offer "moral support" to Huawei, a statement that raises the specter of a possible Chinese boycott of American cellphones should the pressure on the company continue.
"It is clear that Washington is maliciously finding fault with Huawei and trying to put the company in jeopardy with U.S. laws," the editorial said.
Trump and Xi said they reached agreement on a truce at a dinner on the sidelines of the G-20 summit in Argentina. According to the White House, Xi agreed to drop 40 percent tariffs on American automobiles and to immediately resume imports of U.S. products. Thursday's commerce ministry comments were the closest China had come to confirming the arrangement.
Gao, the commerce ministry spokesman, said the Buenos Aires agreement was "a big success" that achieved "important consensus on the trade issue" and expressed confidence in reaching a deal within 90 days.
"In the next step consultation on trade issues in the field of agricultural products, energy, industrial manufactured goods and services will continue," he said.
"Then, in the next 90 days, we will follow a clear timetable and road map to negotiate on issues such as intellectual property right protection, tech cooperation, market access and trade balance."
Washington is demanding sweeping changes to China's industrial policy, in particular its state support for key high-tech industrial firms, forced transfers of technology by American companies doing business in China, and tolerance or tacit encouragement of intellectual property theft.
Saturday's meeting came with a bruising trade war that threatened global growth as tit-for-tat tariffs mounted in recent months.
This week, as uncertainties over a trade deal continued and news of the arrest surfaced, the U.S. stock market has been hit by sharp declines. Apple, a company that relies heavily on China for sales, saw its shares nosedive in early trading Thursday.
At the heart of the trade conflict is global rivalry between the world's largest and second-largest economies, with the United States alarmed by China's plans to be a world leader in key high-tech industries by 2025.
While the U.S. accuses China of getting hold of high-tech American intellectual property either by bullying companies wanting to trade in China or by stealing trade secrets, China is convinced that Washington's true objective is to contain its rise as a leading global power.
It remains unclear whether Meng's arrest relates to her position at Huawei or another company with close Huawei links that she was previously involved in, Skycom Tech of Hong Kong, which attempted to sell Hewlett-Packard equipment to Iran in 2010 in violation of U.S. sanctions, according to a 2013 Reuters report.
Huawei faces mounting barriers globally as the U.S. and allies including Australia, New Zealand and Britain have blocked it from participating in next-generation 5G cellular networks for reasons of national security. The concern is that the company would act as a proxy for the Chinese military and government. Britain has announced it is also removing Huawei equipment from 3G and 4G networks. The United States has banned government agencies from using Huawei products, citing national security concerns.
As the U.S. presses its allies to pick sides in a strategic fight for global dominance that could unfold over decades, Canada is also considering whether to bar Huawei from 5G networks.
Meng's arrest could also complicate Huawei's access to the U.S. components it relies on. The company sources smartphone chips and network equipment from American firms such as Qualcomm, Intel and Xilinx.
"American components permeate across their products," said Mark Hung, an analyst for Gartner.
Though Huawei generates little revenue in North America, it has found large markets in Europe, Africa and Southeast Asia. Global markets accounted for about half of the $92.5 billion it made in revenue in 2017, the company said.
Though by no means a brand name like Apple, its influence is on par with the iPhone-maker, Hung said. Its high-end P series handsets boast many of the same features as the iPhone X or Samsung Galaxy Note9.
Huawei is a more diversified company than Apple, earning half its revenue from running mobile networks, 40 percent from its phones and the remaining 10 percent from supplying corporate clients with services such as cloud computing. "Huawei doesn't have the consumer reach Apple has," Hung said, "but Apple doesn't have the enterprise or telecom reach Huawei has."
Another prominent Chinese company, ZTE Corp., faced peril after a punitive U.S. ban on its use of American components in its cellphones _ parts on which it was heavily reliant _ for violating U.S. sanctions against North Korea and Iran. The company's collapse was narrowly averted when it paid a fine of around $1 billion after Trump intervened earlier this year to save the firm at Xi's request. White House adviser Peter Navarro said in June that Trump had given ZTE one last chance as a "personal favor" to Xi.
The ZTE case highlights the vulnerabilities Huawei could face if the company ever was hit with similar U.S. action. Some analysts say the American action against ZTE has only spurred China's determination to develop its own high-tech components to free itself from any dependence on American inputs.
The Hong Kong-based South China Morning Post reported Thursday that Meng told employees during an internal talk in October that there were occasions when the company could weigh the costs of breaking the law and decide the risk was acceptable.
