Chinese executive appears in court

VANCOUVER, British Columbia -- A Canadian prosecutor urged a Vancouver court to deny bail to a Chinese executive at the heart of a case shaking up U.S.-China relations and worrying global financial markets.

Meng Wanzhou, the chief financial officer of telecommunications giant Huawei and daughter of its founder, was detained at the request of the U.S. during a layover at the Vancouver airport Dec. 1 -- the same day President Donald Trump and Xi Jinping of China agreed over dinner to a 90-day ceasefire in a trade dispute threatening to disrupt global commerce.

The U.S. alleges Huawei used a Hong Kong shell company to sell equipment in Iran in violation of U.S. sanctions. It also contends Meng and Huawei misled American banks about its business dealings in Iran.

The surprise arrest, already denounced by Beijing, raises doubts about whether the trade truce will hold and whether the world's two biggest economies can resolve the complicated issues dividing them.

"I think it will have a distinctively negative effect on the U.S.-China talks," said Philip Levy, senior fellow at the Chicago Council on Global Affairs and an economic adviser in President George W. Bush's White House. "There's the humiliating way this happened right before the dinner, with Xi unaware. Very hard to save face on this one. And we may see (Chinese retaliation), which will embitter relations."

Canadian prosecutor John Gibb-Carsley said in a court hearing Friday a warrant had been issued for Meng's arrest in New York in August. He said Meng, arrested en route to Mexico from Hong Kong, was aware of the investigation and had been avoiding the United States for months, even though her teenage son goes to school in Boston.

Gibb-Carsley alleged Huawei had done business in Iran through a Hong Kong company called Skycom. Meng, he said, had misled U.S. banks into thinking Huawei and Skycom were separate when, in fact, "Skycom was Huawei." Meng has contended Huawei sold Skycom in 2009.

In urging the court to reject Meng's bail request, Gibb-Carsley said the Huawei executive had vast resources and a strong incentive to bolt: She's facing fraud charges in the United States potentially putting her in prison for 30 years.

Meng's lawyer, David Martin, argued it would be unfair to deny her bail just because she "has worked hard and has extraordinary resources."