A Canadian court granted bail to a top Chinese executive arrested at the United States' request in a case that has set off a diplomatic furore among the three countries and complicated high-stakes US-China trade talks.
Hours before the bail hearing in Vancouver, China detained a former Canadian diplomat in Beijing in apparent retaliation for the December 1 arrest of Meng Wanzhou, chief financial officer of Chinese telecommunications giant Huawei and daughter of the company's founder.
After three days of hearings, a British Columbia justice granted bail of C$10 million (NZ$10.9 million) to Meng, but required her to wear an ankle bracelet, surrender her passports, stay in Vancouver and its suburbs and confine herself to one of her two Vancouver homes from 11pm to 6am.
The decision was met with applause in the packed courtroom, where members of Vancouver's Chinese community had turned out to show support for Meng.
Canadian authorities detained Meng on December 1 during a stopover at the Vancouver airport. The US accuses Huawei of violating American economic sanctions against Iran.
The Huawei case has threatened to complicate US-China efforts to resolve a bitter trade dispute - though the two countries signalled on Tuesday they are preparing to resume talks.
Heightening tension between China and Canada, Canadian Public Safety Minister Ralph Goodale confirmed that a former Canadian diplomat had been detained in Beijing. The detention came after China warned Canada of consequences for Meng's arrest.
"We're deeply concerned," Goodale said. "A Canadian is obviously in difficulty in China. ... We are sparing no effort to do everything we possibly can to look after his safety."
Michael Kovrig, who previously worked as a diplomat in Beijing, Hong Kong and the United Nations, was taken into custody on Monday night during one of his regular visits to Beijing, according to a spokesman for International Crisis Group, where Kovrig now works as North East Asia adviser based in Hong Kong.
Canada had been bracing for retaliation for Meng' arrest. The Canadian province of British Columbia cancelled a trade mission to China amid fears China could detain Canadians to put pressure on Ottawa over Meng's detention.
"In China there is no coincidence," Guy Saint-Jacques, a former Canadian ambassador to China, said of Kovrig's detention. "Unfortunately Canada is caught in the middle of this dispute between the US and China. Because China cannot kick the US they turn to the next target."
Earlier in the day, China vowed to "spare no effort" to protect against "any bullying that infringes the legitimate rights and interests of Chinese citizens".
Chinese Foreign Minister Wang Yi didn't mention Meng by name. But ministry spokesman Lu Kang said Wang was referring to cases of all Chinese abroad, including Meng's.
Washington accuses Huawei of using a Hong Kong shell company to sell equipment to Iran in violation of US sanctions. It says Meng and Huawei misled banks about the company's business dealings in Iran.
On Tuesday, US State Department spokesman Robert Palladino told reporters in Washington "the charges against Meng pertain to alleged lies to United States financial institutions" about Huawei's business dealings in Iran.
"It is clear from the filings that were unsealed in Canada, Meng and others are alleged to have put financial institutions at risk of criminal and civil liability in the United States by deceiving those institutions as to the nature and extent of Huawei's business in Iran," Palladino said.
Huawei, the biggest global supplier of network gear for phone and internet companies, is the target of US security concerns. Washington has pressured other countries to limit use of its technology, warning they could be opening themselves up to surveillance and theft of information.
The US and China have tried to keep Meng's case separate from their wider trade dispute and suggested that talks to resolve their differences may resume.
But US President Donald Trump undercut efforts to distinguish between trade talks and the Huawei case. In an interview with Reuters, he said that he would consider intervening in the Justice Department's case against Meng if it would be in the interest of US national security or help forge a trade deal with Beijing.
The Chinese government said that its economy czar had discussed plans with US Treasury Secretary Steven Mnuchin and Trade Representative Robert Lighthizer for talks aimed at settling the two countries' differences. Lighthizer's office confirmed that he had spoken by phone with Chinese Vice Premier Liu He.
The news that trade negotiations may resume lifted stock markets around the world.
The United States has slapped tariffs on US$250 billion in Chinese imports in response to complaints Beijing steals American technology and forces US companies to turn over trade secrets.
Tariffs on US$200b of those imports were scheduled to rise from 10 per cent to 25 per cent on January 1. But Trump agreed to postpone those by 90 days while the two sides negotiate.