The federal government said a B.C. judge’s refusal on Wednesday to end an extradition case against Chinese telecom executive Meng Wanzhou was entirely out of its hands as it braced for economic retaliation from Beijing.

The high profile case has placed Canada in the middle of a global power struggle between the United States and China. It has stranded Ms. Meng, chief financial officer of Huawei Technologies Co. Ltd., in Vancouver for more than 18 months, and led to the retaliatory arrest in China of Canadians Michael Kovrig and Michael Spavor, and punishing sanctions on farm goods from Canada.

China’s embassy in Ottawa expressed “strong dissatisfaction and firm opposition” to the court decision and accused Canada of acting in concert with the U.S., which is pushing its allies to ban Huawei equipment from 5G wireless networks.

“The purpose of the United States is to bring down Huawei and other Chinese high-tech companies, and Canada has been acting in the process as an accomplice of the United States. The whole case is entirely a grave political incident,” the embassy said in a statement.

“We once again urge Canada to take China’s solemn position and concerns seriously, immediately release Ms. Meng Wanzhou to allow her to return safely to China, and not to go further down the wrong path.”

Foreign Affairs Minister François-Philippe Champagne sought to make clear on Wednesday the ruling was a product of Canada’s legal system.

“The Canadian judiciary operates independently, and today’s decision … was an independent decision of the Supreme Court of British Columbia,” Mr. Champagne said in a statement.

“This decision is but one component in a multi-step legal process. The Government of Canada will continue to be transparent about the extradition process for Ms. Meng,” he said. “We will continue to pursue principled engagement with China.”

The U.S. Department of Justice thanked Canada after the ruling for its assistance in the matter.

Associate Chief Justice Heather Holmes of the B.C. Supreme Court ruled that a key legal test to extradite had been met: that the criminal conduct alleged by the United States must also be considered criminal in Canada. The U.S. alleges the Chinese executive lied to HSBC about Huawei’s business in Iran, which put a U.S. subsidiary of the global bank at risk of running afoul of sanctions on Iran.

Ms. Meng’s lawyers had argued that because Canada dropped its own sanctions against Iran in 2016, Ms. Meng’s actions would not be illegal here. But Justice Holmes said “the essence of the alleged wrongful conduct in this case is the making of intentionally false statements,” or fraud, which is a crime in both countries.

The ruling means the extradition case will proceed and Ms. Meng will stay under partial house arrest in her Vancouver mansion, where she has been since shortly after she was detained in December, 2018, at Vancouver’s airport.

Had the decision gone the other way, it could have paved the way for her return to China.

Huawei said it was disappointed, but expressed confidence in Ms. Meng’s innocence.

“We expect that Canada’s judicial system will ultimately prove Ms. Meng’s innocence. Ms. Meng’s lawyers will continue to work tirelessly to see justice is served,” the company said in a statement.

Guy Saint-Jacques, a former Canadian ambassador to China, said he expects President Xi Jinping, who has been increasingly assertive on the world stage, will further punish Canada.

“The timing is bad, because Xi Jinping doesn’t want to look weak,” he said.

The ruling came while the National People’s Congress was meeting – China’s most important annual political event.

“Xi’s leadership has been weakened over the last year. He will want to be seen as remaining strong and kicking Canada,” Mr. Saint-Jacques said.

Sarah Kutulakos, executive director of the Canada China Business Council, said Chinese retaliation has already hit Canadian businesses hard, pointing to a recent survey of its members that showed a 43 per cent decline in bilateral dealings in 2019.

She expressed concern that the Meng case could make it worse.

“We would certainly hope there would be no retaliation for an issue that is not related to companies that are trying to export their products and services to China,” Ms. Kutulakos said.

Canadian Chamber of Commerce president Perrin Beatty said he did not want to discuss the specifics of the Meng case, but expressed concern about China’s aggressive trade tactics, including a recent decision to hit Australia with an 80 per cent tariff on barley after it criticized Beijing over the COVID-19 pandemic.

“They are concerned that tensions particularly between the United States and China are growing and we are seeing international trade increasingly politicized,” he said.

“It is dangerous. The Australians, for example, and other countries including Canada have seen the willingness of China to mix politics and trade policy,” he said.

Wang Huiyao, president of the Center for China and Globalization, a think tank closely affiliated with the Chinese government and its efforts to exert foreign influence, called the ruling “a very bad decision.”

It’s “really not good for business. Not good for traditional long friendship ties. Not good for any further improvement.”

The decision will generate “a lot of unhappiness among the Chinese people,” he said. It is “really very unfortunate to see Canada following the U.S. on these issues. Canada should be a little bit more independent.”

Liu Deliang, a law professor at Beijing Normal University, accused Ottawa of acting as Washington’s hands against the company and Ms. Meng, and questioned the independence of Canada’s legal system.

“It’s obvious that America just hopes to constrain and oppress Huawei,” he said.

Eddie Goldenberg, who was a senior aide to prime minister Jean Chrétien, on Wednesday repeated his call for Canada to negotiate Ms. Meng’s return to China in exchange for Mr. Kovrig and Mr. Spavor.

“Like it or not, the only way to get them home is if Madame Meng goes back to China. It’s a reality.”

Prime Minister Justin Trudeau has responded to China’s requests to release Ms. Meng by emphasizing that the extradition case is for the courts, not politicians, to decide.

Mr. Goldenberg said a provision in the Extradition Act allows Canada’s justice minister to withdraw the authority to proceed.

“The decision Wednesday unfortunately won’t encourage the Chinese to release [Mr. Kovrig and Mr. Spavor], so if you want them home, find a way, according to the rule of law, in the Canadian Extradition Act, to bring them home.”

Wenran Jiang, adjunct professor at the University of British Columbia’s School of Public Policy and Global Affairs, said the court decision was a win for U.S. President Donald Trump.

“Politically speaking, it is a good day for the Trump administration, which has been using all means to attack Huawei under the pretence of national security, but it’s a bad day for Canada-China relations,” he said. “It is also harder to predict what will happen to the two Michaels if Beijing decides to retaliate.”

Mr. Jiang said the good news is that Ottawa has not “followed the Trump hawks in scapegoating China for the spread of the coronavirus” and lauded Mr. Champagne for trying to improve relations with Beijing.

Philip Calvert, former Canadian diplomat in China, senior fellow at the University of Alberta’s China Institute, said China sees the case as part of a U.S. conspiracy to limit Beijing’s rising powers.

“I think the two Michaels are going to be in prison for a long time to come,” he said.

Huawei founder and CEO Ren Zhengfei says the arrest of his daughter and CFO Meng Wanzhou was part of a political attack against the company by the U.S. Zhengfei was interviewed by The Globe’s Nathan VanderKlippe in December 2019. THE GLOBE AND MAIL

The Globe and Mail, May 28, 2020