China is furious and global markets are in an uproar as the daughter of one of the country’s richest men languishes in a Canadian jail

  • China is furious, the markets are beside themselves, and after a pretty ordinary performance by her lawyers on the second day of a bail hearing, the daughter of one of China's richest men is waiting in a Canadian jail for what might be a long time. Here's the latest in the arrest of Huawei's Meng "Sabrina" Wanzhou.
  • Meng, detained on December 1, while changing flights on her way to Mexico will have to wait until Tuesday to find out her immediate prospects of freedom.
  • The 46-year-old Meng, rumoured to be called "the Princess'" inside Huawei, has been accused of covering up Huawei's violation of US sanctions against Iran for as many as five years.
  • Since the news of her arrest, global stock markets have fallen, China's state-curated social media has erupted in indignation, and Chinese and US officials have scrambled to understand what it all means for a trade truce that looks more and more unlikely.
  • Huawei has appointed the company's Chairman Liang Hua as acting CFO, to replace Meng.

While a Canadian Supreme Court heard bail arguments for second day, China is maintaining its official outrage at the arrest of Meng "Sabrina" Wanzhou, the daughter of Chinese telecom Huawei's founder Ren Zhengfei.

At the second day of a bail hearing at British Columbia’s Supreme Court, Meng’s lawyers tried hard to secure Meng's release, even arguing her flight was unlikely because it would cause China to lose national face.

"Given her unique profile as the face of a Chinese corporate national champion, if she were to flee or breach your order in any way in these very unique circumstances, my lord, it does not overstate to say she would embarrass China itself," Meng's attorney David Martin told the court, according to the South China Morning Post.

The defense called two security company executives to testify about how they would monitor Meng upon her release, but in cross examination, the Crown — the prosecution under the British legal system — asked one of the executives if his company had ever actually monitored someone on bail before. 

"No," was the answer, according to The Vancouver Star.

Not encouraging for Meng, especially when her own lawyers cannot testify to her husband's immigration status in Canada. That's important because Justice William Ehrcke's wondered aloud on Tuesday just how Meng's husband, Liu Xiaozong, could possibly take responsibility for Meng as her surety, effectively her home jailer, when no one knows where he officially belongs.

The lawyers tried to assure the court that Meng would fork out the costs for her security guards, accept electronic  and physical monitoring, offer up her two Vancouver mansions in the name of her husband and add on a cash payment, making her bail at roughly $14 million in value, by the South China Morning Post's calculations.

The big problem for Meng is that the two North American neighbors have a track record of a long extradition processes. If she isn't granted bail, she might be waiting a very long time before the US secures her extradition — Bloomberg says it could even be years.

The hearing has been adjourned until Tuesday. 

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Impact of trade tensions between US and China
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Impact of trade tensions between US and China

Head chef Liang Xin poses with a piece of beef imported from the U.S. in the kitchen at Wolfgang's, a high-end steak house in East Beijing's Sanlitun district, China, April 6, 2018. Liang said U.S. beef has always been limited in China, so he doesn't know how customers would react if the restaurant has to raise prices.

(REUTERS/Thomas Peter)

Liu Anqi rolls dough in flour made from imported grain at the baking studio she runs with friends, in Beijing, China, April 12, 2018. Liu has just opened a bakery in Beijing with her friend. She also teaches customers how to make cakes with a brand of flour that uses only wheat from the United States and Canada. "Flour is one of the most important ingredients in baking and its quality varies with different brands," Liu said, adding that finding a new brand would be time-consuming and higher taxes on this wheat would force her to raise cake prices and tuition fees, which could turn customers away. 

(REUTERS/Thomas Peter)

A detail of the Harley-Davidson brand name is photographed on the motorcycle of Guo Qingshan in his village outside Beijing, China, April 7, 2018. "I love the sound of the engine and the muscle of the motor. When I ride it, I feel free and proud," Guo said. However, Guo has his limits. If prices rise, Guo said he wouldn't contemplate buying another Harley. 

(REUTERS/Thomas Peter)

Fried vegetables are seen in the kitchen of the restaurant where chef Liu Ming works, in Beijing, China, April 11, 2018. Liu said the oil that his restaurant uses is produced with soybeans imported from the United States, and the business won't change the brand even if prices rise. "We use this oil because it gives the food a bright colour and does not leave a strange smell or taste," he said. "We don't know what will happen to our dishes if we change the oil."

(REUTERS/Thomas Peter)

Xie Guoqiang, who runs the Vin Place wine and liquors store, poses for a photograph inside the shop in Beijing, China, April 10, 2018. Xie said in an interview that the tariffs would have little impact on his business, as the shop mostly imports wine and liquors from France, Chile, Austria and Argentina.

(REUTERS/Damir Sagolj)

A bottle of Jack Daniel's Tennessee whiskey is seen on a shelf at the Vin Place wine and liquors store in Beijing, China April 10, 2018. Xie Guoqiang, who runs Vin Place, said in an interview that the tariffs would have little impact on his business, as the shop mostly imports wine and liquors from France, Chile, Austria and Argentina.

(REUTERS/Damir Sagolj)

Liu Ming, a chef at a Sichuan restaurant in Beijing, poses for a picture at the back door of the kitchen where he works in Beijing, China, April 11, 2018. Liu said the oil that his restaurant uses is produced with soybeans imported from the United States, and the business won't change the brand even if prices rise. "We use this oil because it gives the food a bright colour and does not leave a strange smell or taste," he said. "We don't know what will happen to our dishes if we change the oil." 

(REUTERS/Thomas Peter)

Liu Anqi uses flour made from imported grain at the baking studio she runs with friends, in Beijing, China, April 12, 2018. Liu has just opened a bakery in Beijing with her friend. She also teaches customers how to make cakes with a brand of flour that uses only wheat from the United States and Canada. "Flour is one of the most important ingredients in baking and its quality varies with different brands," Liu said, adding that finding a new brand would be time-consuming and higher taxes on this wheat would force her to raise cake prices and tuition fees, which could turn customers away. 

(REUTERS/Thomas Peter)

A bottle of oil is seen in the kitchen of the restaurant where chef Liu Ming works, in Beijing, China, April 11, 2018. Liu said the oil that his restaurant uses is produced with soybeans imported from the United States, and the business won't change the brand even if prices rise. "We use this oil because it gives the food a bright colour and does not leave a strange smell or taste," he said. "We don't know what will happen to our dishes if we change the oil." 

(REUTERS/Thomas Peter)

Zang Yi poses for a picture as her Tesla car is charging at a charging point in Beijing, China, April 13, 2018. Zang said if the trade tensions resulted in pricier U.S. imports, she wouldn't consider American brands when the time comes to buy a new car. "With the tariff, I would have to pay tax of 100,000 yuan to 200,000 yuan if I were to buy a new Tesla," she said. 

(REUTERS/Thomas Peter)

Zang Yi charges her Tesla car at a charging point in Beijing, China, April 13, 2018. Zang said if the trade tensions resulted in pricier U.S. imports, she wouldn't consider American brands when the time comes to buy a new car. "With the tariff, I would have to pay tax of 100,000 yuan to 200,000 yuan if I were to buy a new Tesla," she said. 

(REUTERS/Thomas Peter)

A Chinese woman tastes wine during a wine seminar in Beijing, China, April 14, 2018.

(REUTERS/Thomas Peter)

Shan Yuliang, salesperson at a cigarette and wine shop, poses with a carton of Marlboro cigarettes in Beijing, China, April 8, 2018. "The moment I saw the news about the trade war on the internet, I felt something big was coming. Previously I would not think about what brand to buy. Now I will give it a second thought and avoid buying American products to defend my country," Shan said. 

(REUTERS/Thomas Peter)

Wine tasting teacher Li Yangang poses for a picture during a wine seminar in Beijing, China, April 14, 2018. Li said in an interview that reduced sales of American wine in China would not hurt the local market because of its relatively small market share. "Australian wine and French wine would have a bigger impact," he said. 

(REUTERS/Thomas Peter)

Cartons of Marlboro cigarettes are seen stacked up on a shelf between Chinese cigarettes at a cigarette and wine shop in Beijing, China, April 8, 2018. 

(REUTERS/Thomas Peter)

Student He Bingzhang lights a Marlboro cigarette in Beijing, China, April 8, 2018. "I don't think the trade war would change my behaviour. I don't smoke a lot, probably one pack a month. Even if it costs 100 yuan, I would still buy Marlboro because it is affordable," He said. 

(REUTERS/Thomas Peter)

Student He Bingzhang poses for a picture as he smokes a Marlboro cigarette in Beijing, China, April 8, 2018. "I don't think the trade war would change my behaviour. I don't smoke a lot, probably one pack a month. Even if it costs 100 yuan, I would still buy Marlboro because it is affordable," He said. 

(REUTERS/Thomas Peter)

Guo Qingshan poses on his Harley-Davidson motorcycle in his village outside Beijing, China, April 7, 2018. "I love the sound of the engine and the muscle of the motor. When I ride it, I feel free and proud," Guo said. However, Guo has his limits. If prices rise, Guo said he wouldn't contemplate buying another Harley. 

(REUTERS/Thomas Peter)

Beef imported from the U.S. is seen at Wolfgang's, a high-end steak house in East Beijing's Sanlitun district, China, April 6, 2018. A 15-kg whole cut of beef from the United States is around 20 percent more expensive than its Australian counterpart, said Daniel Sui, deputy general manager at Wolfgang's. "Customers like U.S. beef because it tastes juicy and tender, but Wolfgang's only sells around seven to eight pieces of U.S. imported beef steak each day," Sui said. "The limited supply is because the Chinese government bans feed additives and only 5 percent of U.S. beef is qualified for export." 

(REUTERS/Thomas Peter)

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'Extremely odious'

huawei we love youJASON REDMOND/AFP/Getty Images

While reports Tuesday suggest that China's media have been officially told to steer clear of reporting on the case, the Communist Party mouthpiece The People's Daily pulled out its preferred emergency op-ed pen name "Zhong Shen" (钟声) literally "Voice of China," which is only dusted off for special commentary on issues that require central coordination. 

"The use of all kinds of dirty tricks to suppress Huawei has exposed some truly dark intentions toward China and its leading technology firms, but those who harbor such intentions are destined to shoot themselves in the foot," the Voice of China warned.

Canada's Ambassador to China John McCallum and the US Ambassador Terry Bransta were "urgently summoned" on Sunday for a dressing down from China's Ministry of Foreign Affairs.

According to a statement by Chinese Vice Foreign Minister Le Yucheng, reported by China's Global Times, China told the ambassadors both countries must take immediate measures to correct the "extremely odious," decision and reverse the arrest order.

Le also warned that Canada specifically will "face grave consequences" and be held accountable if Meng is not immediately released.

Also known as Sabrina, Meng is the daughter of the Chinese tech giant's president and founder Ren Zhengfei. She also serves as his company's CFO. 

She was unexpectedly arrested by Canadian authorities on Saturday, December 1, while boarding an outbound flight in Vancouver shortly after China's president Xi Jinping was meeting with US president Donald Trump to discuss a trade war ceasefire.

Meng's sudden and surprising detention has left left many Sino-US experts gobsmacked. It has sparked a global stock market aneurysm, an eruption of indignation on state-curated Chinese social media, and left Chinese and US officials scrambling to understand what it all means for a trade truce.

So what is she accused of?

Trump Iran deal tehran nuclear deal sanctionsChip Somodevilla/Getty

US authorities allege that Meng, also known as Cathy, tried to cover up her and Huawei's involvement in an effort to sell equipment to Iran in defiance of US sanctions against that country.

A full picture of the charges against Meng has not yet emerged, although according to the BBC, Meng allegedly circumvented US sanctions against Iran for five years, between 2009 and 2014 via a Huawei subsidiary called Skycom and allegedly defrauded US banks by lying about the connection.

The court has heard that Meng publicly misrepresented Skycom as separate from Huawei in her dealings with Iran.

That's a no-no when it comes to both dealing with Iran and dealing with the bank that lends you money for it.

The BBC cited a Canadian government lawyer telling the court that Meng was accused of "conspiracy to defraud multiple financial institutions." 

Meng faces up to 30 years in prison in the US per violation if found guilty of the charges, the BBC said the court was told.

In terms of her potential as a flight risk, there is the matter of her seven passports.

The South China Morning Post cited a letter from the US Department of Justice, which suggested that in the past 11 years, Meng has been issued "no fewer than seven different passports" from both China and Hong Kong. 

Wall Street has spluttered since the news, the S&P 500 is heading towards its worst December since 2002, European shares even nudged a two-year low, and indexes across Asia doubled-over in anxiety, where they are likely to remain until certainty can be re-established. 

And meanwhile Caixin has reported that NeoPhotonics Corp. a US manufacturer of semiconductor products, fell off a cliff following Meng's arrest, shedding 16%.

According to Bloomberg, almost half of NeoPhotonics entire revenue comes out of Huawei.

Japan could be next 

huawei japanGetty Images

The nosedive may reflect a new and bleaker reality for Huawei's partners now that the US and its "Five Eyes" allies have come down hard on the Chinese telecom business, blocking its access to national 5G infrastructure networks and in some cases banning it from essential infrastructure.

Ciuting security concerns on Monday, Japan's triumvirate of major mobile carriers, NTT Docomo, SoftBank and KDDI, have all made the decision to shun Chinese-originated tech and equipment from their 5G networks, The Washington Post reports.

That comes with an effective halt on ministries and armed forces connecting or transacting in any way with Chinese telecoms. The ban takes effect in April. 

Reuters cites unnamed sources saying that Japan is now seeking "to beef up its defenses against intelligence leaks and cyber attacks."  

Chairman Liang Hua steps up

huaweiHuawei

On Friday, Reuters reported that long time Chairman Liang Hua was appointed as acting chief financial officer to replace Meng, citing an internal memo sent to Huawei staff.

Born in 1964, Liang, also called Howard, graduated with a doctorate out of Wuhan University of Technology, before joining Huawei in 1995, serving as President of Supply Chain, CFO, and eventually as Chairman of the Supervisory Board. 

SEE ALSO: China has threatened the US with 'further action' if Huawei's CFO isn't freed

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