Edition 04: In this edition, Canada says no to the Aecon deal, Air Canada wades into the Taiwan dispute, and we find out China’s top polluters. Plus, have your say in our Aecon poll.
Quote of the week:
“For decades, now, Liberal governments have courted Chinese favour, have sought access to its market of more than a billion people, have welcomed its capital. Canada is typical of Western nations in looking upon China this way. But attitudes are changing. For China is not simply an opportunity; it is also a challenge – it might even be a threat.” – John Ibbitson, The Globe and Mail
One Big Story: $1.5 billion Aecon sale to Chinese company blocked by Canadian government
What happened?
After Canadian construction giants passed on buying Aecon, the company announced last fall that it had accepted an offer from China Communications Construction Company (CCCC). There was almost immediate concern about a Chinese state-owned-enterprise (SOE) owning a major Canadian construction company. Ottawa then launched a national security review. (See Brief 02 for a deep dive into the back story). On May 24, the federal government announced that the sale would be blocked because the review uncovered national security concerns about the takeover. Prime Minister Justin Trudeau didn’t go into details, but he said that the Aecon sale represented a threat to Canadian sovereignty.
China’s reaction:
Largely unimpressed. The Chinese government warned the Canadian government to “abandon prejudices” towards Chinese companies. A spokesperson for the Chinese foreign ministry also delivered a veiled threat in his remarks on the block, saying that “if Chinese interests are undermined, we will take necessary actions to safeguard our rights and interests.”
Canada’s reaction:
Largely positive. Most public commentary (from all political corners) has lauded the federal government for blocking the sale. However, many commentators contend that this could create problems for the Canada-China relationship down the road:
• John Ibbitson argues that Canada made the right move, because “Whatever the opportunities presented by China, the challenges of intellectual-property theft and compromised security are too great.”
• Campbell Clark also agreed with the decision, but argues that the federal government needs to make clearer what the threat is from China is to Canadian business. Jeffrey Jones has a similar argument.
• Andrew Coyne said that, even though the Aecon decision may be the right choice on the whole, the reasons behind it seem to be “less security than pseudo-security,” and that is less defensible.
• Barrie McKenna argues that, while the federal government was correct in blocking the sale, it should have been done through the net benefit test, not a national security review.
• Dan Leger argues that Ottawa made the right call, because “it’s well known that China doesn’t play by the rest of the world’s rules, except when they suit the ruling board of directory in Beijing…We have to keep the friends we’ve made without somehow losing our own way in the process.”
Have your say: What do you think about the blocked Aecon sale?
We’ll share the full results in an upcoming post. Early results show that 70% of respondents completely agree or agree with the government’s decision, while 20% completely disagree and 10% disagree. Opinion is split as to how this will affect Canada’s long-term relationship with China. Meanwhile, 50% believe China will see this as a slight, but not retaliate. Stay tuned for our full report.
What could happen now?
• It’s likely this could harm explorative trade talks with China, at least in the short term. At the same time, this removes a potential irritant with the Americans, given their hardline stance with China.
• There is a possibility for Chinese retaliation, given the statement from the Chinese foreign ministry.
Bottom Line:
It looks like a rough patch is ahead – both for Aecon, and for the Canada-China relationship.
This week on the noise-o-meter…
Surprisingly, Alberta was the province most discussed in the context of China, slightly edging out B.C. and Saskatchewan. Talk across the provinces focused on the blocked Aecon deal, and the China-U.S. trade spat.
Stories from the West
• From the Vancouver Sun, a story on how the blocked Aecon deal cases a “chill” on China trade talks.
• From Canadian Insider: the Canadian Border Services Agency announced that it was investigating whether or not sucker rods from China were being sold at unfairly low prices. This is a result of Alberta company Dover Canada filing a complaint.
• For those of you (like me) who have no idea what a sucker rod is – it’s used in the oil industry to join the surface and downhole components of a piston pump. The more you know.
• From The Star, a story about members of the Taiwanese community in Vancouver who are alarmed at Air Canada listing Taipei as part of China.
Issues that Matter
Trade and Investment
The biggest trade and investment story, by far, is the Aecon block. But in other news:
• An op-ed in The Washington Post that argues China is “bringing down the global trade architecture.”
• A story on how Chinese investment in African countries could create “entire economies entirely dependent on China”
• A recent report on Chinese “debt-book diplomacy” is also renewing fears of economic dependency on China for developing countries around the world.
• Alberta has announced new plans for the Canada-China year of tourism, which includes strategic plans to target Chinese markets.
• While China’s lowering of auto tariffs was lauded by auto-producing countries, it’s arguably not as good as it sounds.
Agriculture
• Minister MacAulay wrapped up his trade mission to China, which included a boon for canola – China approved three new genetically modified canola traits, which is estimated to increase Canadian exports of canola to China by $400 million.
• The sorghum probe that China launched a few weeks ago against the United States has been dropped, in a conciliatory gesture. The probe could have done immense damage to American sorghum farmers (see Brief 02 for more information)
• Total arable land in China has fallen for the fourth straight year, putting a strain on the populous country.
• Something to (gin)sing about (h/t Carlo Dade for the pun): China imposed a 15 per cent tariff on American ginseng on April 1. This provides an opening for Canadian ginseng, which, along with the U.S., is a top producer of ginseng globally. Another example of how Canadian producers can profit from the trade missteps by the U.S. administration.
Clean Energy & Natural Resources
• Beijing has released the top sources of pollution in China – by far the worst? Vehicles (including cars, boats, and planes) at 45 per cent of total. Distant second is road/construction dust, at 16 per cent.
• Maybe this is why China wants to (and seems to be) leading the world in electric car production?
• A Vancouver company is testing the niche LNG market in China – by using intermodal containers.
China-Canada Relations
• On the heels of the Aecon block, Prime Minister Trudeau is now being urged to investigate Chinese telecom giant Huawai’s role in Canada by a former CSIS officer.
• A Globe and Mail investigation published this weekend describing how Huawei has developed a vast network of relationships with universities in Canada, which supplies them with the intellectual property Huawei is using in its 5G devices. Huawei has spent nearly a quarter of its R&D budget in Canada.
• Air Canada recently changed its website entry for Taipei, labelling it as a Chinese country, not a Taiwanese country, as a result of Chinese pressure for companies around the world to align with their territorial claims. Taiwan has asked for a “speedy correction” and Air Canada has faced widespread condemnation from across Canada. (Also here and here.) Canada has so far managed to largely duck getting sucked into the battles and conflicts arising from China’s more aggressive stand vis-a-vis Taiwan. How much longer that avoidance can continue is an open question.
• A Chinese investor who is in a legal dispute over Prince Rupert’s former Skeena Cellulose pulp mill has blasted city officials who decided to expropriate the land.
• A study was released recently on Canadian media coverage of China. The study found, paradoxically, that despite mainly positive coverage of China, this has not correlated into positive public opinion on China.
• A man accused of spying for China is allowed to remain in Canada, the immigration board ruled.
• Canada will soon start trading tax info with China.
By the Numbers
Source: CANSIM 427-0003.
*Projected number – this data provided by “China Market Highlights,” Destination Canada.
Tourism from China to Canada has skyrocketed in the last several years, making China one of Canada’s most lucrative tourism markets.
Interesting Tidbits
• How the west should judge a rising China (May 15) Financial Times
• Trump’s sanctions on Iran may be creating an oil trading boom – in China (May 15) CNBC
• Why many rich Chinese don’t live in China (May 17) The Economist
• Not paying attention in class? China’s “smart eye” will snitch (May 18) Futurism
• How China acquires ‘the crown jewels’ of US technology (May 22) Politico
• China detaining hundreds of thousands of Uyghurs in prison-like centres: report (May 15) Globe and Mail
That’s all for today! Questions, comments? Send them my way! – Sarah Pittman, policy analyst
The China Brief is a compilation of stories and links related to China and its relationship with Canada’s West. The opinions expressed in the links are those of the articles’ authors and don’t necessarily reflect the views of the Canada West Foundation and our affiliates.
[i] Media measurement is provided by a third-party, independent media monitoring service. To be included in the noise-o-meter, “China” must be in the title, and one of the four western provinces somewhere in the article. While not a perfect system, this gives us an idea of how much China and the West are being discussed together.