In this issue: China and others ban Canadian beef, Hog prices drop as Chinese imports down/cold storage up, Belt and Road and Five-Year Plan Monitor

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CWF Virtual Event | January 21, 2022
Western Canada and China: The Economic and Trade Relationship

Register here for a virtual, armchair discussion between Canada West Foundation CEO Gary G. Mar and H.E. Cong Peiwu, Ambassador of the People’s Republic of China to Canada, on January 21 at 9 a.m. MT. This conversation will be tightly focused on issues in the economic and trade relationship between Western Canada and China, the target audience for this China Brief.

China and others ban Canadian beef

An atypical case of bovine spongiform encephalopathy (BSE) in an Alberta cow has resulted in a ban of Canadian beef in China, and also the Philippines and South Korea. Atypical BSE tends to occur in older cattle and, as Global News reports, poses no health risk to humans and is not transmissible.” Dennis Laycraft, executive vice-president for the Canadian Cattlemen’s Association, told the Calgary Herald that the bans should be temporary. As reported in a previous China Brief, China banned Brazilian beef in September 2021 after two cases of atypical BSE. China reopened to Brazilian beef imports in December 2021 with certain qualifications – animals must be younger than 30 months and boneless according to Beef Central. Observers will want to note whether Canada is subject to similar conditions if China reopens to Canadian beef. 

Hog prices drop as Chinese imports down/storage up

Canadian hog prices dropped 10.5 per cent in November 2021 as China’s imports dropped and cold storage increased, according to Statistics Canada recently released Industrial product and raw materials price indexes, November 2021. The report notes “China’s pork imports were down 50.1% year over year in November, as domestic production increased and the population of hogs recovered from the impact of African swine fever.” Cold storage of pork was “up?3.7% year over year at the beginning of the fourth quarter of?2021; this was?13.1% higher than the level at the beginning of the third quarter.” 

Canada looks to Taiwan and broader Indo-Pacific trade strategy

Taiwan and Canada have agreed to enter “exploratory discussions on a possible foreign investment promotion and protection arrangement (FIPA) between Canada and Taiwan” according to a readout of the call from Global Affairs Canada. The readout also describes Taiwan as a key trade and investment partner: “[i]n 2020, the value of Canadian direct investment in Taiwan reached $557 million; Taiwanese direct investment stock in Canada was $256?million.”  

The move is part of a larger strategy to “shift Canada’s reliance away from China by diversifying trade and investment in Asia, the Pacific Rim and beyond,” as the Globe and Mail said recently. Despite these efforts, “China’s economic growth will continue … and if you are a Canadian business […] there’s no question China will be absolutely a top market” as Asia Pacific Foundation of Canada president and CEO Jeff Nankivell told Business in Vancouver (BIV). China’s trade surplus reached $676.4 billion in 2021. 

China’s supply chains and Omicron

Omicron outbreaks and lockdowns in China’s port city of Tianjin and their spread to Dalian have raised concerns over global supply chain impacts and manufacturing capacity, Bloomberg reports.  

Stephanie Krishnan, a supply chain expert at IDC in Singapore, told Bloomberg “[w]e are starting to see companies mitigating risk, seeing where they can increase capabilities for production of different products in different factories so they can shift that around.” While China has tried to mitigate COVID-19 disruption through COVID-zero policies, outbreaks in other regions have also impacted products coming into China.  

Deborah Elms, executive director of the Singapore-based Asian Trade Centre and past China Brief contributor, also told Bloomberg “[l]ots of products in supply chains come from outside China […] Given challenges elsewhere, even zero Covid doesn’t solve all the issues of disruption.” 

Global reliance on China for trade is evident as China recorded a $676.4 billion trade surplus in 2021. From the Associated Press report, the surplus is “likely the highest ever for any country, as exports jumped 29.9 [per cent] over a year earlier despite semiconductor shortages that disrupted manufacturing.” From the same report, China had a $208.4 billion trade surplus with the EU in 2021, a 57.4 per cent increase from 2020, and $396.6 billion trade surplus with the United States, or a 25.1 per cent increase from the previous year. Canadian trade data will come later in the year. 

In other news

CWF’s Belt and Road and Five-Year Plan 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. China’s most recent five-year plan (FYP) sets the country’s priorities for 2021 to 2025 as well as the vision for 2035. These shifts have the potential to alter both the Chinese and global markets for Western Canadian-produced commodities. The China Brief now includes a section with relevant BRI and FYP developments. We welcome feedback as we continue to develop this new feature.

China digital economy plans, technologies to overtake U.S.

China recently announced that “[b]y 2025, the digital economy should be in full expansion mode, with the added value of core industries in the digital economy accounting for 10 percent of GDP.” The plan includes “accelerat[ion of] the construction of the information network infrastructure, and a national-level integrated big data center system coordinating computing power, algorithms, data, and application resources.” The move comes even as others were already highlighting China’s technological gains.  

A December report from the Harvard Kennedy School’s Belfer Centre for Science and International Affairs, The Great Tech Rivalry: China vs. the U.S. says “[b]eyond becoming a manufacturing powerhouse, China has become a serious competitor in the foundational technologies of the 21st century […] In some races, it has already become No. 1. In others, on current trajectories, it will overtake the U.S. within the next decade.” As the South China Morning Post reports, the United States is working to challenge this rise with the US Innovation and Competition Act, which “includes many clauses targeting Chinese technologies and businesses.”  

Where is Canada on the playing field? Science and Business recently asked the question Can Canada keep up in the race for R&D leadership?  David Moorman, senior policy adviser to the U15 Group of Canadian Research Universities, told Science and Business “[t]here are many questions, and not a lot of answers at this point” and most are waiting to see what the next federal budget holds. 

Race for rare earth elements (REEs) heats up

Such technological development cannot happen without the necessary raw materials, rare earth elements (REEs). China maintains control over a significant portion of the world’s REE supply and recently merged separate, government-owned, rare-earth companies into the China Rare Earths Group which will accelerate mining in south China. The New York Times recently looked at China Molybdenum’s purchase of land in Kisanfu, in the Democratic Republic of the Congo, “which holds one of the largest and purest untapped reserves of cobalt.”  

China Molybdenum now controls “two of the country’s largest cobalt deposits.” Forbes reports “Chinese banks make up about one-fifth of all lending to Africa – concentrated in strategic or resource-rich countries, including Angola, Djibouti, Ethiopia, Kenya, and Zambia” through the Belt and Road Initiative. China has also reached mining deals in Latin America and Eurasia, from the same Forbes report.  

The Times, citing a national security official with knowledge of the matter, says that the “United States is pressing for access to cobalt supplies from allies, including Australia and Canada” as it seeks to level the playing field. Now, the U.S. Senate has introduced bipartisan legislation which “would force defense contractors to stop buying rare earths from China by 2026 and use the Pentagon to create a permanent stockpile of the strategic minerals.” Such limits could be difficult to enforce however as China was responsible for 80 per cent of U.S. imports of rare earth compounds and metals between 2016 and 2019, according to the U.S. Geological Survey.  

According to the Diplomat, Canadian company Neo Materials “possesses the only rare earth processing plant in Europe” and has partnered with Energy Fuels Inc. to build a U.S.-European strategy which would not rely on China.  

Canada is a significant source of rare earth elements (REEs) with Natural Resources Canada estimating “over 15 million tonnes of rare earth oxides.” The Minister of Innovation, Science, and Industry François-Philippe Champagne was “directed to modernize the Investment Canada Act to protect the rare-earth mining sector and enact stronger measures to ‘mitigate economic security threats from foreign investment’” in the most recent mandate letter, according to the Globe and Mail. Only time will tell if these measures are successful or if they are in fact too little, too late.

– 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.