Huawei’s CFO Arrested: What Does It Mean for the Chinese Company?

Huawei’s CFO has been arrested in Canada, and the Chinese government is warning that there could be significant consequences for it. Why are arrests being made for this large Chinese company — and what could the true consequences be regarding the arrest?

The United States is presently seeking extradition from Canada for the Huawei CFO, who is accused of taking the action of dealing with Iran despite economic sanctions against the country. If she is extradited from Canada, she could face up to three decades in prison for the act. Huawei is an incredibly large international company, and has experienced backlash in recent years due to security issues and controversial business practices.

In addition to being accused of avoiding sanctions in Iran, Huawei has also been accused of having backdoors in their systems which could enable unauthorized surveillance. Further, Huawei was forced to pull many of its products form the United States market after multiple questions regarding its security and the ethics of its products.

Clearly, the CFO’s arrest is just the latest in a string of bad PR for the Chinese company.

Huawei employs over 180,000 individuals as a worldwide company. It has research and development departments in dozens of countries and has revenue exceeding $100 billion annually. With all that in mind, these issues could significantly impact the mobile phone industry, mobile technology, and the global market. It hasn’t been a good time for phone manufacturers in general, with Apple recently losing its flag to Microsoft and Samsung repeatedly undergoing questions regarding the safety of its technology.

When it comes to economic sanctions, countries tend to be particularly vigilant and aggressive about enforcing them because they really only have utility when completely enforced. However, these economic sanctions are only being investigated right now; it has not been conclusively proven that Huawei broke these sanctions or that the CFO was complicit.

While Iran is the hot button topic, it isn’t the only country that Huawei is believed to have broken economic sanctions with. Huawei is thought to have sold products in four markets that were being sanctioned, including North Korea and Syria. Further, the arrested CFO is also facing charges of fraud, as it’s believed that she may have misdirected funds during her tenure with Huawei.

Economic sanction charges are quite significant, but the political temperature is as well. There are already increasing tensions between the United States and China, and many of them stem from the commerce that is flowing between the two powers. With the trade war continuing — and having heavy impact for industries within both countries — the extradition and charging of a CFO of a major Chinese company could have a significant impact.

Despite the issue being between China and the United States, Canada has made the arrest and consequently is facing the brunt of the criticism from China. Canada will need to make the decision regarding whether it will release the Huawei CFO or whether it will extradite to the United States. The consequences that China has threatened have not yet been outlined by the country. However, it’s likely that Canada will comply with extradition, as they’ve already taken the moves to make the arrest — and because economic sanctions are toothless if not enforced.

If Canada does extradite the Huawei CFO, it’s possible that they too may become embroiled in the bitter trade war that the United States and China is currently in. That may not altogether be a bad thing for the United States, which would one again find an economic partner across the border. With the ending of the negotiations surrounding NAFTA, many of the tensions between the United States and Canada have died down. Further, Canada has been picking up some of the economic slack for China, selling products to China that are no longer feasible to get from the United States.

Regards,

Ethan Warrick
Editor
Wealth Authority

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