China Arrests Two Canadians Following Detention Of Huawei CFO

China confirmed it has arrested two Canadian men, an entrepreneur and a former diplomat, amidst international tension over the arrest of Huawei’s chief financial officer in Canada.

Michael Spavor, an entrepreneur with ties to North Korea, and former diplomat Michael Kovrig were taken into custody on Monday, China’s foreign ministry said.

The ministry said the two men were held on suspicion of “endangering national security”.  Canada has been informed of the arrests, the ministry said.

Spavor has long-standing ties to China ally North Korea via his company, Paektu Cultural Exchange.

Tit for tat?

The two detentions are the latest twist in an increasingly bitter trade conflict between the US and China.

Australia and New Zealand have banned Huawei from participating in building their 5G moble networks on national security grounds, while Germany, Japan and the UK have faced increased US pressure to take actions of their own against the company.

On 1 December, Canadian authorities arrested Huawei chief financial officer Meng Wanzhou in Canada at the US’ request.

Meng, the daughter of Huawei founder Ren Zhengfei, is accused of using a Hong Kong company called Skycom to access the Iranian market in ways that violated US sanctions.

She was granted bail last week while awaiting possible extradition to the US.

Meanwhile, US president Trump said last week he would be willing to intervene directly in Meng’s case if necessary to avoid derailing a trade deal with China.

Trade deal at risk

The Chinese government is also looking to keep Meng’s arrest from standing in the way of a negotiated settlement of the trade war between the world’s two largest economies, analysts in Beijing told The Washington Post on Friday.

Huawei equipment runs much of the UK’s telecoms infrastructure, and the company has worked with UK authorities over the years to assuage any potential security fears, including setting up a centre in Banbury where its gear is tested by UK intelligence officials.

But the company has acknowleded that conditions have changed in the face of increased US pressure, which comes ahead of critical 5G spectrum auctions early next year.

Last week the company agreed to spend $2 billion (£1.6bn) to overhaul its systems in the UK.

And on Monday Huawei’s president in western Europe, Vincent Peng, told The Financial Times the company would be willing to do “anything” needed to reassure western governments about the company and its supply chain.