This is a high profile political matter for both sides, and highly consequential for the U.S./China trade battle. Huawei is the second largest seller of phones in the world, and is increasingly being blocked from business in NATO countries because of suspicion that Huawei phones allow China to spy on their users. Meng Wanzhou is the daughter of the company’s founder, making the affront to China even greater.
Much of the press coverage of the arrest notes the risk to U.S./China trade talks resulting from this arrest. That may be true, but there is much more to consider. The crux of the Meng case is central to the U.S./China trade dispute—technology transfer and the imposition of U.S.-designed rules on China’s behavior.
The timing of the arrest strongly suggests the U.S., or elements in the U.S. government, are ratcheting up tension around the issue of technology trade to test China’s willingness to comply with U.S trade demands. China can easily make pledges in order to prevent the imposition of additional sanctions, with no serious intention of changing behavior; U.S. trade hawks have long accused China of doing just that. Meng’s arrest could be a test of China’s willingness to actually change its behavior.
Certainly, the arrest looks like an announcement of how the U.S. intends to deal with China on technology trade and transfer, on trade with Iran and on trade rules in general. If China is unwilling to bend, odds of trade-war escalation rise considerably.