In this issue: China in the Canadian election, Lessons from Australia on diversification, CWF’s Belt and Road Monitor
The China Brief team is back, and ready for a busy fall tracking developments on the China and Western Canada front. As noted in the previous edition, there are some changes in store for the China Brief. We will move to a once-a-month publishing schedule with a more focused look at the issues. Also, we’re excited to introduce a new feature, the Belt and Road Monitor, which will be included in each edition. We look forward to your feedback as we continue to fine tune the monitor in upcoming editions.
China in the Canadian election
In advance of the September 20 federal election, the China Brief reviewed each of the major federal party platforms for references to China. In terms of direct mentions of China in their published platforms, the Green Party of Canada platform had no mentions, the Liberal Party of Canada platform had one, the New Democratic Party of Canada (NDP) platform had four, and the Conservative Party of Canada platform had 31.
There were some points directly related to China trade and investment but nothing specifically related to Western Canadian interests. Any direct or indirect commitment on China will also face geopolitical challenges. The South China Morning Post has summed up the thoughts of Canadian political observers in regards to the two frontrunner parties: “there would be little room for either the Tories or the ruling Liberal Party to chart their own course on China, whichever wins the September 20 election. Ottawa would remain beholden to how the broader China-US relationship played out.”
Lessons from Australia on diversification
The Australia China Relations Institute at the University of Technology Sydney released a report entitled Australia’s export exposure to China: Assessing the costs of disruption. For those looking at whether to diversify Canada’s supply chains from China, there are some key points of interest.
- “[M]any business owners were able to secure premium prices in the PRC for an extended period, and when this opportunity closed, they quickly and successfully pivoted to alternative markets.”
- “[M]arket access is revealed to be a weak coercive tool for Beijing. This means what the PRC may hope to achieve by disrupting trade is not the same as what it is likely to achieve.”
- “There is a case for government to invest in ‘collective action’ pushback against Beijing’s economic coercion but if the point is to get the PRC to ‘play by the rules’ and to expand the range of activities covered by these rules, narrow coalitions offer little positive return compared with multilateral institutions like the World Trade Organization (WTO) that have broad legitimacy.”
The report also notes that “[I]n the medium and long-term, there is the prospect of costs increasing” as borders reopen post-COVID or China finds “alternative suppliers for big-ticket items like iron ore.”
China’s pork market problems
As both domestic prices and demand fell, Chinese pork imports decreased 9 per cent in August. NBC reports that the fall has caused havoc for domestic producers, causing the government to open reserves to stabilize and ask the public consume more pork. Chinese fish prices may also push the public to make the switch to pork. A Reuters article, in the Financial Post, says the prices could “prop up the pork market and cool fish’s momentum.”
Meanwhile, a Shanghai-based start-up working on lab-grown pork invited investors to sample dishes of one of the prototypes produced in its lab. CellX aims to enter the Chinese market in 2025 with the goal “to produce the more environmentally friendly meat at competitive prices for the world’s top meat-eating nation by 2025,” according to this Reuters story.
A recent talk from the Australian Grains Industry Conference 2021 sheds some light on the short-term outlook for the Chinese pork industry and what this outlook means for feed imports. Joe Lardy, CHS Global Research analyst, shared his views on how China’s pork industry should stabilize in 2022, how African Swine Fever (ASF) has changed the industry from rural farms to industrialized pork hotels, and what these changes will mean for feed imports. Read the full summary here.
Brazil, China, Canada and beef
Reuters reports that China has halted beef imports from Brazil after two cases of atypical Bovine Spongiform Encephalopathy (BSE) were reported at two separate facilities. Trade is expected to resume shortly according to another Reuters report and so it is unclear how much shortfall other exporters, such as Canada, can expect to make up. Given how rapidly Brazil and China have been able to resolve ag disputes in the past, there is positive news for Canadian beef exporters to Singapore as the country has approved all Canadian beef exports “including offal, with no age restrictions.”
Shipping concerns continue
The Burnaby Board of Trade asked Transport Canada to investigate the rapid increase in Chinese shipping container costs. According to a CBC article, container costs were $4,000 in January, $12,500 in August and now up to $18,000. In response to CBC News, Transport Canada said “[t]he COVID-19 pandemic has had a notable impact on global supply chains. The combination of very high demand and capacity constraints have, accordingly, impacted freight rates.”
A previous China Brief included a story that said by Christmas the pressures should ease. However, front line industry experts now say the impacts will last “well into 2022” according to a Bloomberg News article. China’s busiest port in Shanghai as well as two ports in Zhejiang province were closed this week due to Typhoon Chanthu. The closures are expected to compound the pressures already felt in global supply chains.
Despite the concerns, Chinese trade was up from July to August 2021 in terms of both imports (+25.6 per cent) and exports (+33.1%).
In other news:
- To mark 1000 days since Michael Kovrig and Michael Spavor were detained and held hostage in China, their families organized a protest march in Ottawa. Spavor was recently sentenced to 11 years in prison by a Chinese court.
- Chinese tech companies Alibaba, Ten Cent and others have committed to provide funds for President Xi’s common prosperity initiative. Xi has described the initiative as a way “to reduce the social inequality and wealth gap in the country.” Australia Broadcasting Corporation (ABC) takes a closer look at the initiative in this article.
- The Chinese government has restricted the amount of time those under 18 can spend playing video games – only an hour each on Friday, Saturday, and Sunday. As part of the restrictions, the government has asked streaming companies to discuss restrictions for minors and has also slowed approval of online games.
- The Indonesian Palm Oil Association (GAPKI) has approached the International Energy Agency (IEA) and International Renewable Energy Agency (IRENA) to have palm oil recognized as biofuel; the EU has so far refused to approve palm oil due to concerns over sustainability and deforestation. GAPKI has recently seen increased palm oil exports to China due to a China-US palm oil trade war and the pandemic.
- China has fined Canadian company Canada Goose over advertising claims as the company says that the goose down comes from Hutterite colonies. However, the Chinese government contends that the down comes from other sources.
CWF’s Belt and Road Monitor
China’s multibillion dollar Belt and Road Initiative (BRI), the state-backed global infrastructure development strategy, has the potential to enormously shift global trade through new levels of infrastructure and supply chain integration, in the Asia-Pacific region as well as globally. These shifts has the potential to alter global markets for Western Canadian-produced commodities. As part of Canada West Foundation’s efforts to track the Belt and Road Initiative and what it means for Western Canada, the China Brief will now include a section with relevant BRI developments. We welcome feedback as we continue to develop this new feature.
Of general interest on how the BRI is developing: At the sixth annual Belt and Road Initiative Conference, officials announced that China would support Hong Kong in its efforts to join the Regional Comprehensive Economic Partnership (RCEP). Officials also announced that Hong Kong and Chinese officials have signed a Memorandum of Understanding related to the Belt and Road Initiative’s Economic and Trade Co-operation Zones (ETCZs). Under the MOU, both sides will do work to promote ETCZs overseas and help develop them. The summit also highlighted steps to support the Guangdong-Hong Kong-Macao Greater Bay Area under the Greater Bay Area Outline Development Plan. “The Greater Bay Area’s combined economic output stood at US$1.67 trillion at the end of December last year, which would have made it the world’s ninth largest economy if it was a stand-alone entity ahead of Canada and South Korea and just behind of Italy”, according to this South China Morning Post article.
On a topic that is dominating the headlines: A previous China brief looked at BRI plans for Afghanistan. Since that brief, the United States has left Afghanistan and the Taliban has formed its government. Now there is speculation on whether the Taliban and China can move forward. The Diplomat recently assessed the hard BRI projects, such as the Port of Gwadar development, and the soft goals of BRI, such as the inclusion of women and treatment of minorities, and what Chinese and Taliban alignment or disagreement on either would mean for the future of the BRI in the country. Writers from the Council of Foreign Relations also provided their perspective, “Why Major Belt and Road Investments Are Not Coming to Afghanistan,” in a recent blog post. There is speculation that China may take over the former U.S. air base in Bagram, which the Chinese government has denied.
BRI by the numbers
A good overview of current status: New numbers from China’s National Development and Reform Commission show the BRI’s economic impact. January to June year on year trade grew 37.9 per cent to a total of US $824.55 billion. Projects completed over the same period rose 10.6 per cent year on year to US $39.35 billion. Over the first seven months of the year, Hunan province reported 18.3 per cent year on year growth in trade with BRI countries, an increase of 89.78 billion yuan or US $13.8 billion. China’s overseas infrastructure investments as part of the BRI were about US$47 billion alone in 2020.
West lacks coordination
And yes, even Estonia is watching the BRI and has an important reminder: While the BRI continues to bring economic gain to China, western nations still lack an effective, coordinated counter to the initiative. In a recent interview with Politico, Estonia’s Prime Minister Kaja Kallas points to overlapping Western-led projects. “We need to connect them all…This is what I feel is lacking” the Prime Minister said.
– Stephany Laverty, 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.