Huawei Technologies CFO Wanzhou Meng spent this weekend in a Canadian jail which, I imagine, wasn’t really all that unpleasant an experience, although admittedly, I’ve never been arrested in Canada (that I can remember).
To say the U.S. might have made a mistake in deciding to compel Canada to (quite literally) capture Meng as she tried to catch a connecting flight to Mexico earlier this month would be an understatement. As noted here briefly last week and as every American news outlet has subsequently outlined in exhaustive detail, Meng is a “somebody” – and that’s putting it mildly.
The fact that John Bolton knew the arrest was unfolding as he sat across the table and grinned at Xi Jinping in Buenos Aires makes this situation especially flagrant from Beijing’s perspective.
Meng’s bail hearing in Vancouver on Friday was inconclusive. Obviously, she’s a flight risk, which is precisely what the Canadian government argued. Meng’s lawyer, David Martin, absurdly contended that she wouldn’t skip bail because it would shame her father and also China. Martin also said she’d submit to electronic monitoring. The bail hearing will continue on Monday.
It sounds like Meng is probably “guilty”, although whether you believe she deserves to be locked up for three decades (which is the time she faces if she’s convicted in the U.S.) depends on your own subjective assessment of the relative merits of the laws she contravened. Long story short, she’s accused of facilitating bank transactions for what amounted to a Huawei subsidiary that did business with Iran in contravention of U.S. sanctions. So, in other words, banks thought they were dealing with Huawei, but in fact they were dealing with Skycom, a now defunct Hong Kong entity that tried to sell U.S. telecom equipment to Iran. Or something. It really doesn’t matter unless you’re a lawyer. The bottom line is that Huawei and Skycom were/are the same thing, and banks ended up clearing money they “shouldn’t” have because Meng obscured the relationship.
China let this slide for about 72 hours, but now, Beijing is starting to get irritated.
On Saturday, Vice Foreign Minister Le Yucheng told Xinhua that he went ahead and summoned Canadian Ambassador John McCallum. Canada, Le says, is dangerously close to suffering “consequences” for what he described as the “unreasonable, unconscionable, and vile” detainment of Meng. He didn’t specify what those “consequences” would be, but suffice to say Canada is in no position (economically or otherwise) to square off against China (with apologies to my Canadian readers of which there are a handful).
Fast forward to Sunday morning and Le has now summoned U.S. Ambassador Terry Branstad. The U.S., Le says, has violated the “legitimate rights and interests of Chinese citizens”.
Beijing is effectively demanding that the U.S. withdraw its arrest warrant for Meng and says “further measures” will depend on what the U.S. does next.
That’s not great news. Markets were not pleased with this situation when it came to light (at the worst possible time, just hours ahead of the reopen of U.S. equity futures after the national day of mourning for President Bush) and the fact that Beijing is stepping up the diplomatic pressure suggests this situation could well end up denting the prospects for an amicable resolution to the trade negotiations.
It is by no means certain that Meng will ultimately be handed over to the U.S., and even if she is, it will likely take a long, long time. In the interim, you can be absolutely sure that Canada will be carefully considering whether it is a good idea to undermine their relationship with Beijing at the behest of Donald Trump’s trade war which, by the way, has never been particularly popular with America’s northern neighbor. Trump’s at times rocky relationship with Justin Trudeau will likely make Canada even more hesitant to press this issue.
On Sunday, the People’s Daily promised that Beijing won’t “cause trouble,” but the Party mouthpiece also made it clear that China doesn’t “fear trouble” either.
We’ll leave you with an excerpt from the “editorial” (scare quotes there for obvious reasons):
Only if the Canadian side corrects its mistake and immediately stops infringing upon the lawful, legitimate rights of a Chinese citizen and gives a proper accounting to the Chinese people can it avoid paying a heavy price for this.