China detains former Canadian diplomat as Huawei CFO returns to court

By Julie Gordon and Michael Martina

VANCOUVER/BEIJING (Reuters) - Canada confirmed on Tuesday that one of its citizens was detained in China but said it saw no explicit connection to the arrest in Vancouver of a top executive at Chinese telecoms giant Huawei Technologies Co [HWT.UL].

Confirmation of the detention came soon after the executive, Huawei CFO Meng Wanzhou, returned to a packed Vancouver courtroom for a bail hearing in a case that has angered Beijing.

Canadian analysts had predicted China would retaliate after Meng's arrest last week at the request of U.S. authorities.

Former Canadian diplomat Michael Kovrig, who now works in China for a conflict resolution think tank, was the person detained, two sources said.

Meng, 46, faces U.S. accusations that she misled multinational banks about Huawei's control of a company operating in Iran, putting the banks at risk of violating U.S. sanctions and incurring severe penalties, court documents said. If extradited to the United States, Meng would face charges of conspiracy to defraud multiple financial institutions, the court heard.

Huawei, which makes smartphones and network equipment, and its lawyers have said the company operates in strict compliance with applicable laws.

Public Safety Minister Ralph Goodale said he was "deeply concerned" about the detention of a Canadian, adding that there was "no explicit indication at this moment" that it was linked to the arrest of Huawei's CFO.

But Guy Saint-Jacques, Canada's former ambassador to China, asked by the Canadian Broadcasting Corp whether the Kovrig detention was a coincidence, said: "In China there are no coincidences ... If they want to send you a message they will send you a message."

Concern was also evidenced in Washington where the U.S. State Department is considering a travel advisory for China to caution U.S. citizens, two sources familiar with the matter said.

Meng's arrest has roiled markets over fears it will exacerbate U.S.-China tensions in trade negotiations that both sides have agreed must be concluded by March 1.

The arrest came in connection with a U.S. investigation into an alleged scheme to use the global banking system to evade U.S. sanctions against Iran, according to people familiar with the probe.

China has threatened severe consequences unless Canada releases Meng immediately. Canadian Prime Minister Justin Trudeau said the matter is one for the courts to decide.

Canadian businesses operating in China are starting to feel the chill already, and the signing of one major deal has been postponed, a source said.

China's Foreign Ministry and Ministry of Public Security did not respond immediately to questions regarding Kovrig's detention sent via fax. Kovrig works for the International Crisis Group, an independent conflict resolution think-tank which said it was seeking his prompt and safe release.

Tuesday is the third day of bail hearings in a British Columbia court, where a judge will weigh final issues in determining whether Meng should be freed on bail while awaiting extradition proceedings.

BEIJING WARNS ON 'BULLYING'

Speaking at a Beijing forum on Tuesday, the Chinese government's top diplomat, State Councillor Wang Yi, said the government kept constant watch on the safety of citizens abroad, though he did not specifically mention Meng's case.

"For any bullying that wantonly violates the legitimate rights and interests of Chinese citizens, China will never sit idly by," state television quoted him as saying.

The Canadian provincial court judge on Monday rolled the proceedings over to Tuesday because he wanted to hear more about who would take responsibility for Meng's actions if she were released.

Meng's lawyer David Martin had offered her husband as surety, but the judge and the public prosecutor questioned whether he could perform this duty as he is not a resident of British Columbia.

Huawei is the world's largest supplier of telecommunications network equipment and second-biggest maker of smartphones, with revenue of about $92 billion last year. Unlike other big Chinese technology firms, it does much of its business overseas.

(Reporting by Julie Gordon in Vancouver; writing by Nick Zieminski; additional reporting by Ben Blanchard and Michael Martina in Beijing, John Ruwitch in Shanghai and David Ljunggren in Ottawa; editing by Muralikumar Anantharaman, G Crosse and Cynthia Osterman)