Meng Wanzhou is accused of fraud and violating Iran sanctions

Access Archive

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—Jeremy Goldkorn and team


1. Meng Wanzhou wanted for bank fraud and breaking Iran sanctions

The shocking arrest of Mèng Wǎnzhōu 孟晚舟, CFO of telecom giant Huawei and daughter of the company’s founder, is still the big China story of the day.

Today, the Washington Post reports:

Before a packed courtroom in Vancouver, a Canadian prosecutor disclosed that Meng Wanzhou, chief financial officer of Huawei Technologies, is wanted by the United States for allegedly deceiving financial institutions about the relationship between Huawei and SkyCom, a company that is widely believed to have close links to the tech giant.

They argued that Meng should be kept in custody pending possible extradition to the United States because she is a flight risk.

The case appears to center on sales of U.S.-manufactured technology to Iran by SkyCom, which is based in Hong Kong.

What is SkyCom?

  • The prosecutor in Vancouver argued that it is an unofficial subsidiary of Huawei because “Skycom employees used Huawei email addresses and had badges and letterhead featuring the Huawei logo,” and financial documents indicated it was controlled by Huawei until at least 2014, the New York Times reports (porous paywall).

  • Links between Huawei and a SkyCom deal with Iran were first highlighted by Reuters in 2012, and in 2013, Reuters connected Meng, then a “rising star,” to the story. In a business deal that Huawei did not deny, but said was never completed, “in late 2010, Skycom’s office in Tehran offered to sell at least 1.3 million euros worth of HP gear to Mobile Telecommunication Co of Iran, despite U.S. trade sanctions.”

Earlier today, Reuters reported that bank fraud is also suspected of Meng Wanzhou. The U.S. Justice Department investigation of Huawei, which was first reported in April, has “more recently…included whether the company used HSBC Holdings Plc to conduct illegal transactions involving Iran.” Experts told Reuters: “If the mobile phone and telecoms equipment maker conducted such transactions and then misled HSBC about their true nature, it could be guilty of bank fraud.” The prosecutor in Canada today argued that Meng had “direct involvement” in Huawei’s representations with banks.

Though HSBC is not being investigated, sources clarified, the bank’s “U.S.-listed shares fell as much as 6 percent on Thursday” and “ended down 3.6 percent.”

Now Meng is set for a lengthy extradition process, which could last as long as or longer than the 90-day timeline for U.S.-China trade negotiations, which have already become more complicated as a result of Meng’s arrest.

  • “Any extradition process can take weeks or months,” according to the New York Times; it adds, “The United States Justice Department must now present evidence to the Canadian court that supports its request and has 60 days from the arrest to make a full request for extradition.”

  • But “reaching into another country to apprehend a citizen of a third country on sanctions violations is rare if not unprecedented, which could further complicate the legal proceedings, according to extradition experts and attorneys,” Bloomberg says (porous paywall).

  • It depends on whether she fights extradition: If she does, “her case could go on for years, lawyers said, pointing to examples like Lai Changxing, a Chinese businessman who fled to Canada after he was implicated in a bribery case and fought extradition to China for 12 years. If she chooses not to fight, she could be in the United States within weeks,” the Guardian reports.

More bad news for Huawei

The bad news does not end with Meng Wanzhou’s arrest.

  • The Japanese government will stop buying Huawei and ZTE equipment as early as Monday, December 10, the Yomiuri newspaper first reported, Reuters says.

  • The EU is also raising caution: “Do we have to be worried about Huawei or other Chinese companies? Yes, I think we have to be worried about those companies.” Those are comments from EU tech commissioner Andrus Ansip.

  • In the U.K., Huawei is scrambling to maintain its relationship with the British government, the Financial Times reports (paywall). Recently, it “has caved in to demands by British security agencies to address serious risks the UK believes exist in the Chinese group’s equipment and software, pledging $2bn to overhaul its systems.”

Other stories about Huawei and Meng Wanzhou:

2. Trade war, day 155: 90-day negotiations on ‘separate track’ from Meng Wanzhou arrest

Yesterday, after CNN reported that at least some Trump administration officials wanted to use Meng Wanzhou as “leverage” in the trade talks with China, many China watchers flagged that as a terrible, terrible idea.

Unsurprisingly (because it was a terrible, terrible idea), that line was walked back by the White House today.

  • Trump economic advisor Larry Kudlow appeared on CNBC to say he did not believe the Meng case would “spill over” into trade talks, and that he “thinks it’s a separate track,” referring to U.S. sanctions on Iran and any investigation of alleged violations by Chinese companies or individuals.

  • Beijing is also taking care to separate the issues, the South China Morning Post observes. The Chinese foreign ministry “refused to directly link the arrest of Meng…with the trade negotiations,” while “a spokesman for the Ministry of Commerce…said on Thursday that he had no information at all about Meng’s case,” even as he expressed confidence in trade talks.

  • Trump has not yet said anything about Meng Wanzhou, though he did tweet his confidence in trade negotiations twice in the last 24 hours (1, 2).

  • For more on the impact of Meng’s arrest on trade negotiations and broader U.S.-China tech competition, see this essay by Eurasia Group’s Paul Triolo on SupChina yesterday: The shocking arrest of Huawei CFO Meng Wanzhou in Canada: ZTE redux — or worse?

Other trade-war-related news:

—Lucas Niewenhuis

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Our whole team really appreciates your support as Access members. Please chat with us on our Slack channel or contact me anytime at jeremy@supchina.com.

—Jeremy Goldkorn, Editor-in-Chief


Here are the stories that caught our eye this week (other than Meng Wanzhou):

  • Following the Xi-Trump dinner in Argentina on Saturday, December 1, which resulted in a vague tariff cease-fire, Donald Trump unleashed a series of tweets on Tuesday, sending mixed messages about the future of U.S.-China trade negotiations. The stock market reacted to these tweets with one of the largest drops of 2018. Later, China affirmed that the Xi-Trump meeting had been “very successful,” but did not provide many specifics, likely because China doesn’t think it agreed to many of the specifics of the initial White House statement. Meanwhile, the Mariott hotel group said that some evidence — though the case isn’t entirely clear — indicated a major hack was traceable to China.  

  • New details regarding the alleged Richard Liu rape emerged in a new account compiled by Bloomberg, which reports that the story is based on documents including the alleged victim’s statement to the police, her WeChat messages to a friend, “which were reviewed by Bloomberg,” and a conversation with her lawyer.

  • The Guangzhou Gender and Sexuality Education Center (GSEC), a leading nonprofit organization in China dedicated to combating sexual violence and promoting gender equality, closed operations altogether on December 6, according to a post published on its official WeChat account.

  • Hollywood summer hit Crazy Rich Asians failed to woo audiences in mainland China upon its debut. During its opening weekend, the romantic comedy took in less than $1.2 million at the box office.

  • Scholars and China specialists around the world have signed an open letter about the harassment campaign against China scholar Anne-Marie Brady.


BUSINESS AND TECHNOLOGY:

  • Dim outlook for carbon emissions
    Heavy industry drives growth in China’s emissions / Chinadialogue
    “China’s emissions are projected to grow by around 4.7% this year following a rise of 1.7% in 2017, according to an assessment of global carbon emissions published on Wednesday… The question now is whether emissions will continue to grow in 2019. The government’s fiscal policy is already providing a strong clue… Worryingly, rumours are already swirling that the government is planning to inject enormous stimulus into the economy over the next two years. A recent analysis by ING estimated the package could be around 9 to 10 trillion yuan (US$1.3-1.5 trillion), comparable only to the 2009 package after the global financial crisis.”

  • Space launch on Saturday, December 8
    Chang’e 4 to launch China’s bid to be first on dark side of the moon / SCMP
    “China is making final preparations for the launch of its latest lunar lander and rover spacecraft, Chang’e 4, in the early hours of Saturday, which will be humankind’s first attempt to land on the far side of the moon.”

  • European sportswear
    China’s Anta offers to buy Finland’s Amer for €5.6bn / FT (paywall)
    “A consortium led by China’s Anta Sports, the country’s largest sportswear company, has launched a €5.6bn takeover offer for Finland’s Amer Sports… The deal, if successful, will go down as the largest outbound Chinese transaction into Europe this year.”

  • Bytedance cozies up to state funds and banks for even more money
    China’s ByteDance to raise about US$1.45 billion for its venture fund: Report / Reuters
    “ByteDance, owner of news aggregator Jinri Toutiao, is in talks with investors including major Chinese government-led funds and state-owned investment banks, the website reported.”
    “Reuters reported in August ByteDance aimed to raise about US$3 billion in a funding round, valuing the company as high as US$75 billion,” which made it the world’s largest startup.

  • Medical tech
    China’s WuXi AppTec raises US$1 billion in HK listing – sources / Reuters
    “Chinese medical tech platform WuXi AppTec raised US$1.01 billion in its Hong Kong listing, sources said, valuing the company at US$10.2 billion in a deal that marks one of this year’s last big stock offerings in the Asian financial hub.”

  • Technology innovation board trading in Shanghai
    Briefing: China’s ‘Nasdaq’ to begin listing in June / TechNode
    “Shanghai Stock Exchange’s technology innovation board, China’s answer to the Nasdaq, will begin accepting IPO applications as early as March 2019, with listings planned for June.”

  • Who makes Disney and Fisher-Price dolls?
    Disney doll factory in China accused of underpaying women workers / Reuters
    “An investigation by human rights groups Solidar Suisse and China Labor Watch found that staff at a toy factory in Heyuan, in the southern province of Guangdong, were working illegal overtime, receiving no holiday or sick pay, and often earned less than US$1.30 per hour.”

  • Apple’s App Store cleanup hits JD.com
    JD Finance mobile app pulled from iOS App Store / TechNode
    “JD Finance’s iOS app was removed from China’s Apple App Store this morning (Dec. 7), Chinese media is reporting (in Chinese), the latest in a slew of removals affecting Chinese companies.”

  • “China has the best makeup” — Kim Kardashian
    Keeping up with China: Kim Kardashian woos Chinese market / AFP
    “Reality television star and lifestyle mogul Kim Kardashian has her sights set on the Chinese market with plans to open a pop-up store, state media reported Friday.”

  • Ofo told to tidy up its bikes
    Briefing: ofo may soon require users to park bikes in designated areas / TechNode
    “ofo released a somewhat vague notice on Thursday (Dec. 6) saying it would begin regulating users’ parking habits across China. In response to government requests to reduce the ‘negative impact on society’ of improperly parked bikes, ofo will begin enforcing new rules in select cities beginning Dec. 10.”

POLITICS AND CURRENT AFFAIRS:

  • Xinjiang internment camps and abuse of Uyghurs
    Uighur leaders warn China’s actions could be ‘precursors to genocide’ / Guardian
    “On a visit to Australia, leaders of the Uyghur Human Rights Project (UHRP), based in Washington, said governments, businesses, academics and think tanks all had a responsibility to stop ‘business as usual’ relations with China.”
    Nury Turkel, chair of the board for the UHRP, said: “The Chinese have not publicly shown any sign of gassing Uighurs…[but] we may see mass murder.”
    Louisa Greve, director for external affairs for the UHRP, said: “Academics believe that when you look at the progression of policies that dehumanise ethnic groups, you have to say that mass murder cannot be ruled out. We see many, many of the precursors of cultural and possibly physical genocide.”
    On SupChina: Listen to a Sinica Podcast interview with Nury Turkel.
    Darren Byler on Twitter: “Zhou Xi, a key representative of the Chinese Academy of Sciences face recognition A class project ‘Xinjiang Security Control,’ back in 2017: I have been trying to make the technology practical for many years. From Academic demo to commercial products, there is a long way to pursue. Actually, some of our designed system has been applied in Xinjiang and another regions since 2011. The product is mature.”
    Zhou Xi is the founder of CloudWalk, an artificial intelligence facial recognition firm. Zhou says he “went to Beijing, [spent] a quite [a] lot more time in the Microsoft Asia Institute of speech recognition group,” which is where he learned many of his skills. Byler comments that this is a “powerful demonstration of the way @MicrosoftASIA is connected to the new Chinese economy of mass surveillance/human engineering systems.”

  • North Korean foreign minister meets with Xi Jinping and Wang Yi
    China urges North Korea to address US concerns on nuclear programme / SCMP
    “Chinese President Xi Jinping told visiting North Korean Foreign Minister Ri Yong-ho on Friday that Washington and Pyongyang should address each others’ concerns and make progress to rid the Korean peninsula of nuclear weapons.”
    In Beijing, North Korean foreign minister reaffirms commitment to denuclearisation / Reuters
    “North Korea’s commitment to denuclearisation and safeguarding peace and stability on the Korean peninsula are unchanged, its Foreign Minister Ri Yong Ho said on Friday (Dec 7) at a meeting in Beijing with the Chinese government’s top diplomat Wáng Yì 王毅.”

  • Global propaganda
    Inside China’s audacious global propaganda campaign / Guardian
    Louisa Lim and Julia Bergin report: “Beijing is buying up media outlets and training scores of foreign journalists to ‘tell China’s story well’ — as part of a worldwide propaganda campaign of astonishing scope and ambition.”

  • China Aid in Zimbabwe
    China leads Zimbabwe cities revamp / Bulawayo24
    “Unlike other projects, which have left the country saddled with debts to Beijing, the construction of the new parliament building — located on a hilltop to give a panoramic view of the surroundings — is being done courtesy of a US$677 million grant from China Aid, a Chinese government-owned global development aid agency.”

  • Large environmental protest in Liaoning
    Chinese town residents clash with riot police in protests over incinerator / SCMP
    “Thousands of residents in a township in northeast China clashed with riot police this week over government plans to build an incinerator.”
    “Although there should be a formal consultation before permission is granted, residents say the authorities have yet to comment publicly on the plans or hold the consultation.”

  • Hong Kong protestors
    Hong Kong lawmakers to be arrested for Legco protest over controversial bill giving mainland Chinese police power of arrest at high-speed rail station / SCMP
    “Andrew Wan Siu-kin and Lam Cheuk-ting were told on Friday to report on Monday to police headquarters in Wan Chai, where they will be formally arrested.”
    “The two Democratic Party members said they were accused of breaching section 19(b) of the Legislative Council (Powers and Privileges) Ordinance by obstructing security guards in the legislature. Wan said he was also accused of common assault.”

  • German president talks Marxism in China
    Frank-Walter Steinmeier criticizes Karl Marx at Sichuan University in China / Devdiscourse
    “German President Frank-Walter Steinmeier told Chinese students on Friday that ‘havoc’ was wrought in the name of Karl Marx in Germany and eastern Europe, but that Marx also stood for things like freedom of the press.”
    “Steinmeier did make any specific criticisms of China, where attention most recently has focused on widespread concern in Western capitals about re-education camps for ethnic Uighurs and other Muslim peoples in China’s Xinjiang region.”

  • Belt and Road
    Opinion: One Belt, One Road, one big mistake / Foreign Policy (porous paywall)
    Tanner Greer points to a number of Belt and Road projects that have been renegotiated or canceled this year, and to the lack of investor confidence in projects, and concludes, “Far from being a strategic masterstroke, the BRI is a sign of strategic dysfunction. There is no evidence that it has reshaped Asia’s geopolitical realities.”
    Darwin port’s sale is a blueprint for China’s future economic expansion / The Conversation
    “Darwin already has no less than six ‘sister city’ arrangements, including with the Chinese city of Haikou. But attention has been drawn to Darwin’s newly minted ‘friendship’ deal with Yuexiu District, in Guangzhou, due to Chinese media describing it as part of President Xi Jinping’s signature Belt and Road Initiative. This suggests Chinese authorities regard Darwin as having strategic significance.”

  • Forced marriages
    After fleeing violence at home, Myanmese women face forced marriage, childbirth in China / SCMP
    “More than 7,500 women from Myanmar were in forced marriages with Chinese men in the past five years, according to a new study.”

  • Australia influence controversies
    WA Labor MP Pierre Yang served aboard suspected China spy ship / The Australian (paywall)
    Jieh-Yung Lo 羅介雍 on Twitter: “To question Pierre Yang’s service and role in supporting the Australian Army Reserve in its search for MH370 just to provide more evidence of his links to pro-China groups is astonishing. This is a new low, even for The Australian. #auspol #WApol”
    Pierre Yang brings 500 members to the WA Labor Party / The Australian (paywall)
    “Controversial West Australian Labor MP Pierre Yang has recruited a record 500 party members — almost all of them from his local ethnic Chinese community — since being elected to parliament 18 months ago.”

  • Explainer on “grid management” for social control
    China under the grid / China Media Project

  • Animal abuse
    Chinese animal lovers rescue 375 cats from illegal slaughterhouse / SCMP
    “Hundreds of cats were saved from slaughter this week after a group of animal lovers stumbled upon an illegal slaughterhouse in northeast China, according to local media reports.”

SOCIETY AND CULTURE:


VIDEO ON SUPCHINA

Viral on Weibo: Spectacular! An inverted rainbow and a sun dog in the sky in Inner Mongolia

A huge halo around the sun, known as a sun dog, appeared in the sky in Yakeshi, Inner Mongolia, on December 6, along with an inverted rainbow on top. The extremely rare sighting attracted crowds.

We also published the following videos this week:


FEATURED ON SUPCHINA

Cheaters exposed in Chinese snooker, Shenzhen half-marathon

It hasn’t been a good few days for cheating in the Chinese sports world. Chinese snooker is in turmoil after two of the country’s best players, Yu Delu 于德陆 and Cao Yupeng 曹宇鹏, have been banned for 10 and six years, respectively, after both admitted to fixing multiple matches over a two-year period. And a staggering 258 runners in last month’s Shenzhen half-marathon were caught cheating, with the vast majority sneaking through bushes to shave two kilometers off their race distance.

The shocking arrest of Huawei CFO Meng Wanzhou in Canada: ZTE redux — or worse?

Paul Triolo writes: The timing of the arrest and extradition request is rich. While the law enforcement action against Huawei has been in the works for some time, that Huawei’s CFO and company founder offspring Mèng Wǎnzhōu 孟晚舟 would choose to travel to Canada on the day President Donald Trump and Chinese leader Xí Jìnpíng 习近平 were meeting in Buenos Aires at the G20 may go down as one of the most ironic chance occurrences in U.S.-China relations ever.

Starving and subdued in Xinjiang detention centers: One woman’s story

When Chinese state authorities prepared to release Gulbahar Jelil, an ethnic Uyghur woman born and raised in Kazakhstan, they told her that she was forbidden to tell anyone about what she had experienced over the 15 months in which she was detained. She didn’t listen: In an 82-minute interview with Turkey-based channel Pidaiylar Biz, Jelil recounts her ordeal, including the inhumane conditions of her cell, the starvation diet the detainees were given, and the political and Chinese-language “reeducation” forced upon them. Article by Darren Byler.

‘An American-made Asian movie’: Chinese moviegoers on ‘Crazy Rich Asians’

Crazy Rich Asians, with its majority-Asian cast, was both a critical and commercial success in the U.S. upon its release over the summer. But its reception in mainland China has been decidedly muted, as it brought home a meager $1.2 million over the weekend after its November 30 debut. But what did those who saw it think?

When passengers attack: The harsh reality of being a bus driver in China

Driving is a risky activity. But imagine how demanding and distressing it would be to drive for people who have no respect for your services and wouldn’t mind putting others at risk if angered by minor issues that often have nothing to do with you. Such is the harsh reality that Chinese bus drivers experience at their jobs.

Chinese Corner: TikTok does no good for the Chinese music industry

In this installment of Jiayun Feng’s weekly review of interesting nonfiction on the Chinese internet, she looks at TikTok’s impacts on the Chinese music industry, the fall of China’s bike rental business, women in tech, and a lead poisoning lawsuit.

Kuora: Breaking the Great Firewall

Let’s talk internet censorship. Why does the Chinese government believe it’s necessary? How do people within China feel about it? Can “heroes” rally together to break the Great Firewall, thus “freeing” those trapped within? Kaiser Kuo discusses these questions in this week’s Kuora, and introduces his famous “aluminum foil” analogy.

Sponsored: China launches the first potato-based skincare line — Pototaly

Sponsored content: If China has potato royalty, Yiwen Hao is it. She is the founder of Pototaly, the world’s first potato-based organic skincare brand. It’s no accident that she’s launching a product made from the earth bean (土豆 tǔdòu): Her family business is Landun Xumei Foods, an enormous farm-to-factory and farm-to-restaurant producer of potatoes, which does everything from processing to delivery.


SINICA PODCAST NETWORK

Sinica Podcast: The Nature Conservancy in China

This week on Sinica, Kaiser speaks with Charles Bedford, who has been the managing director since 2012 of The Nature Conservancy (TNC)’s Asia-Pacific region, which encompasses Asia, the Pacific Islands, Indonesia, and Australia. Kaiser and Charles discuss the formation of the national parks system in China beginning nearly two decades ago (in which Charles and TNC played an instrumental role); the promising Chinese ecotourism industry; hydropower in China; and “sponge cities,” “green bonds,” and more.

TechBuzz China: Alibaba and the Little Red Book (Xiaohongshu): Powering Ecommerce With Content

In episode 31 of TechBuzz China, co-hosts Ying-Ying Lu and Rui Ma talk about Xiaohongshu, also known as RED, which had received a $300 million investment from Alibaba. Xiaohongshu’s tagline is “The world’s best lifestyle at your fingertips,” and people often refer to the site as “Instagram and Pinterest sprinkled with a dose of Taobao.”

Ta for Ta: Tiffany Ap

In this week’s episode of Ta for Ta, Juliana sits down with Tiffany Ap, the China bureau chief for Women’s Wear Daily. In her reporting, Tiffany covers how the worlds of fashion, beauty, and business interact. On Ta for Ta today, we explore retail and fashion in China, and answer questions such as: Why are Chinese consumers flying to Turkey to buy handbags? Why doesn’t China have a big luxury house yet? Why is the daigou (代购 dàigòu) shopping phenomenon still relevant? We also get her expert advice on what works — and doesn’t — for Western brands that have expanded to China.

ChinaEconTalk: Daniel Kurtz-Phelan on George Marshall’s China Mission

George Marshall, World War II hero and creator of the Marshall Plan, spent 1945-47 drinking baijiu with Mao and playing croquet with Chiang Kai-shek, fighting to stave off a civil war. Was the “loss of China” to the CCP inevitable? Did Marshall, with his strategy of forcing reconciliation on the Nationalists and Communists, in any way contribute to it? And what can we learn from Marshall’s expedition to China about the limits of American influence abroad? Daniel Kurtz-Phelan, the executive editor of Foreign Affairs, discusses these questions on the latest ChinaEconTalk.

The Caixin-Sinica Business Brief, episode 71

This week on the Caixin-Sinica Business Brief: the Trump-Xi meeting in Argentina, Google’s internal opposition to its China search engine project, an artificial rainfall project in western China’s Qinghai Province, Doug Young on China’s recent upgrade of its train network, and more.


PHOTO OF THE DAY

Tending to the flowers

A worker waters the flowers and plants in front of the local government building in Qingdao, Shandong Province, on National Day on October 1. In the background, the Chinese propaganda characters can be translated as “[Xi Jinping] Thought on Socialism With Chinese Characteristics for a New Era” and “Striving for the Great Rejuvenation of the Chinese Dream.” Photo taken by Daniel Hinks.