Meng Wanzhou is sought for extradition by the United States after reports of violating sanctions on Iran.

Meng Wanzhou, chief financial officer of Chinese telecoms giant Huawei, has been arrested in Canada and faces extradition to the United States.

In a statement on Wednesday, Canada‘s justice ministry said Meng was arrested in Vancouver on December 1.

“She is sought for extradition by the United States, and a bail hearing has been set for Friday.”

The ministry added it could not provide further details due to a publication ban that was sought by Meng.

Earlier this year, US media reported that the US was investigating Huawei for violating sanctions on Iran by selling network equipment to the country.

Chinese reaction

China on Thursday urged Canada and the US to “clarify” the reason for Meng’s arrest and demanded her release.

“We have made solemn representations to Canada and the US, demanding that both parties immediately clarify the reasons for the detention, and immediately release the detainee to protect the person’s legal rights,” foreign ministry spokesperson Geng Shuang told reporters.

Reacting to Meng’s arrest, Huawei said in a statement that it was unaware of any wrongdoing by its executive, adding that it complies with all applicable laws.

“The company has been provided very little information regarding the charges and is not aware of any wrongdoing by Ms Meng (Wanzhou),” the company said.

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China‘s embassy in Canada, meanwhile, demanded the immediate release of Meng, who is also deputy chairman of Huawei’s board and the daughter of company founder Ren Zhengfei.

“The Chinese side has lodged stern representations with the US and Canadian side, and urged them to immediately correct the wrongdoing and restore the personal freedom of Ms Meng Wanzhou,” it said in a statement on its website.

According to Al Jazeera’s correspondent Adrian Brown, the statements strike a very different tone.

“A rather mild statement was posted on Huawei’s website, saying she didn’t break any laws, that they hope she will be released soon and portraying someone that is completely innocent,” Brown said from Beijing.

“But the language coming from the Chinese embassy in Ottawa is a lot more hostile, saying that her human rights were being harmed and that an innocent Chinese citizen had been accused of violating laws. They demanded she be released as soon as possible,” he added.

‘Major blow’

The arrest is related to violations of US sanctions, a person familiar with the matter told Reuters news agency, though officials have so far stayed mum on the allegations.

The Wall Street Journal reported earlier this year that US authorities are investigating whether Huawei, one of the world’s top makers of telecommunications network equipment, has violated sanctions on Iran.

“Huawei is one of the largest makers of smartphones. It uses parts from the US, which has sanctions against Iran, and it doesn’t want its parts being used there – so Meng was reportedly arrested in Canada on suspicion of circumventing those trade sanctions,” Al Jazeera’s John Hendren, reporting from Washington, DC, said.

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In the worst case scenario, Hendren said, Huawei “could lose access to the US parts it’s using to make its smartphones – that’s what happened last year to ZTE, another Chinese company, which paid $892m for violating US sanctions”. He added that Friday’s hearing will determine whether Meng will be extradited to the US, noting that the arrest “could be a major blow for Huawei”.

ZTE was given that fine for selling its products to Iran and North Korea.

Trade war

Huawei has been under tough scrutiny in the US, where government national security officials say that its alleged close links to the Chinese government make it a security risk.

Its US business has been tightly constrained by worries it could undermine US competitors and that its mobile phones and networking equipment, used widely in other countries, could provide Beijing with avenues for espionage.

Hendren said that despite the Chinese company’s denials, Washington has already taken a series of “extraordinary measures”, including President Donald Trump signing an order banning the use of Huawei products at nuclear facilities in the US, while Congress has passed a bill prohibiting the use of the company’s goods by defence contractors.

“This [arrest] is likely to rile up the Chinese government and exacerbate what is already an intense trade war between the US and China,” added Hendren, referring to a major tit-for-tat dispute between the world’s top two economies.

Meng’s arrest heightened the sense of a major collision between Washington and Beijing – not just over tariffs but also over technological hegemony.

This year, the Trump administration has imposed tariffs on a total of $250bn of Chinese imports. For its part, China has slapped tariffs on $110bn of US imports.

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Britain’s BT Group on Wednesday said it was removing Huawei’s equipment from the core of its existing 3G and 4G mobile operations. Australia and New Zealand have also rejected Huawei’s products.Despite being essentially barred from the critical US market, Huawei surpassed Apple to become the world’s number two smartphone maker in the second quarter of this year and has market leader Samsung in its sights.

“The US has been telling its allies not to use Huawei products for security reasons and is likely to continue to put pressure on its allies,” said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

“So while there was a brief moment of optimism after the weekend US-China talks but the reality is, it won’t be that easy,” he added.

Hong Kong-listed shares of Chinasoft International Ltd shed as much as 13 percent in response to news of the arrest. Huawei is a key client of Chinasoft.