China ups pressure as bail hearing resumes for top tech exec

China raised the pressure on the United States and Canada as a bail hearing resumed Monday for a top Chinese technology executive in a case that has fuelled US-China trade tensions and roiled financial markets.

Meng Wanzhou, the chief financial officer of Chinese telecommunications giant Huawei and daughter of its founder, was detained at the request of the U.S. during a layover at the Vancouver airport on December 1 the same day that Presidents Donald Trump and Xi Jinping of China agreed to a 90-day cease-fire in a trade dispute that threatens to disrupt global commerce.

The US has accused Huawei of using a Hong Kong shell company to sell equipment in Iran in violation of US sanctions. It also says that Meng and Huawei misled banks about the company’s business dealings in Iran.

Her arrest has fuelled US-China trade tensions at a time when the two countries are seeking to resolve a dispute over Beijing’s technology and industrial strategy. Both sides have sought to keep the issues separate, at least so far, but the arrest has roiled markets, with stock markets worldwide down again Monday.

China formally protested to the ambassadors of both Canada and the United States over the weekend. In urging the court to reject Meng’s bail request, a prosecutor said Friday the Huawei executive had vast resources and a strong incentive to bolt. She’s facing fraud charges in the United States that could put her in prison for 30 years.

On Monday, David Martin, Meng’s lawyer, reiterated that Meng was willing to pay for a surveillance company to monitor her and wear an ankle monitor. Called by the defense, Scott Filer of Lions Gate Risk Management group said his company would make a citizen’s arrest if she breaches bail conditions.

Under the defense proposal, Meng’s travels would be restricted to Vancouver and surrounding municipalities. Martin said Meng’s husband would put up both of their Vancouver homes plus USD 1 million Canadian ($750,000) for a total value of USD 15 million Canadian (USD 11.2 million) as collateral.

The hearing has sparked widespread interest, and the courtroom was packed again Monday with media and spectators, including some who came to support Meng. One man in the courtroom gallery brought binoculars to have a closer look at Meng, her lawyers and the prosecution team. Outside court a man and woman held a sign that read “Free Ms. Meng.”

Over the weekend, China’s Vice Foreign Minister Le Yucheng summoned Canadian Ambassador John McCallum and US Ambassador Terry Branstad. Le warned both countries that Beijing would take steps based on their response. Asked Monday what those steps might be, Chinese Foreign Ministry spokesman Lu Kang said only that “it totally depends on the Canadian side itself.”

The Canadian province of British Columbia has already cancelled a trade mission to China amid fears China could detain Canadians in retaliation for Meng’s detention. Stocks around the world fell Monday over investor concerns about the continuing US-China trade dispute, as well as the cloud hanging over Brexit negotiations after Britain’s prime minister postponed a vote on her deal for Britain to exit the European Union.

In the US, stocks were volatile, tumbling in the morning and then recovering ground in the afternoon. The Huawei case complicates efforts to resolve a US-China trade dispute. The United States has slapped tariffs on USD 250 billion in Chinese imports, charging that China steals American technology and forces US companies to turn over trade secrets.

Tariffs on USD 200 billion of those imports were scheduled to rise from 10 per cent to 25 per cent on January 1. But over dinner December 1 with Xi in Buenos Aires, Argentina, Trump agreed to delay the tariff increase for 90 days, buying time for more negotiations. Bill Perry, a trade lawyer with Harris Bricken in Seattle, said China’s decelerating economy is putting pressure on Xi to make concessions before US tariffs go up.

“They need a trade deal. They don’t want the tariffs to go up to 25” percent, said Perry, who publishes the “US China Trade War” blog. “This is Damocles’ sword hanging over the Chinese government.” Huawei, the biggest global supplier of network gear for phone and internet companies, has become the target of US security concerns because of its ties to the Chinese government.

The US has pressured other countries to limit use of its technology, warning they could be opening themselves up to surveillance and theft of information. Lu, the Foreign Ministry spokesman, accused unnamed countries of hyping the “so-called” threat.

“I must tell you that not a single piece of evidence have they ever presented to back their allegation,” he said. “To create obstacles for companies’ normal operations based on speculation is quite absurd.” Canadian officials have declined to comment on Chinese threats of retaliation, instead emphasising the independence of Canada’s judiciary and the importance of Ottawa’s relationship with Beijing.