In this issue: Chinese ambassador talks trade, Domestic canola use to rise, Belt and Road and Five-Year Plan Monitor
Chinese ambassador talks trade
For readers who missed CWF’s virtual armchair discussion with China’s Ambassador to Canada Cong Peiwu on January 10th, watch the webinar here. Ed White of the Western Producer noted in his write-up of the conversation that “[j]oining hands [with China] is probably a long way off, but fists seem to be unclenching, which is a good start.”
Domestic canola use to rise
Federated Co-operatives Limited (FCL) has announced its Integrated Agriculture Complex in Regina which would include a renewable diesel fuel plant and crush facility. The project, expected to be completed in 2027 along with other new crushing facilities, will boost Canada’s domestic canola seed usage. The Regina Lead-Post reports, “Western Canada produces about 20 million tonnes of canola each year and […] current crushers use about nine to 10 million tonnes. These new crushers will likely require an additional 6.8 million tonnes […] which means there is still enough supply.”
What does this mean for countries like China which import canola? From the same report, Dale Leftwich, policy manager with SaskCanola, says “‘They (other countries) can source from other places […] It’s the companies that have both crushers and export markets that will have to decide where they will be shipping to.’”
China’s plant protein sector grows
China’s Ministry of Agriculture and Rural Affairs has released its latest five-year plan for agriculture. Read the Chinese language version here. For the first time, the plan includes plant-based and lab-produced proteins as targets for research and development, Time Magazine reports. Josh Tetrick, the CEO of Eat Just Inc. which makes plant-based JUST Egg, told Time that “this is one of—if not the most—important policy actions in the history of alternative proteins.” Chinese-based, plant-protein start-up Starfield Food Science & Technology recently raised $100 million in a Series B funding round. AgFunder data estimates that the investment is “China’s largest recorded funding round for an alt-protein startup to date.”
For Canadian-based pulse producers and exporters looking to cash in, container shipping constraints are a significant concern. As Greg Northey, Director of Industry Relations with Pulse Canada, said in a recent interview “about 45 per cent of Canadian pulses are exported in containers.” President and CEO of Pulse Canada, Greg Cherewyk, told Shaun Haney on RealAg Radio, “We [at Pulse Canada] have been calling for this national dialogue around this concept of resiliency” and “Canadian consumers, Canadian importers, and Canadian exporters are all feeling the very real impact of a containerized freight supply chain that is not working today.” Cherewyk’s comments came ahead of Canada’s first ever National Supply Chain Summit, held on January 31.
China’s pork prices should increase soon
Chinese pork prices should start to rise again, says John Stork, editor of Whole Hog. The increase, according to Stork, is due to the boost in pork demand as many celebrate the Lunar New Year, a drop in herd numbers after the sow cull (covered in a previous China Brief), and European and American factors. However, Stork cautions “[p]roducers and investors in pig and pork production are in a [riskier] business environment at the moment and they need to act more cautiously.”
BNNBloomberg reports that the rise in pork prices “is set to lift the lid on [Chinese] consumer inflation, complicating the central bank’s efforts to stimulate the economy.” The report notes, “[w]ithout the 37% drop in pork prices in December, consumer prices would have risen 2.3%.”
In other news
- Xinhua reports that “Chinese customs will trial part of the rules of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) in some of China’s pilot free trade zones.” A customs supervision framework will also be rolled out in the zones.
- The U.S. says China did not meet the purchase commitments associated with the two countries’ Phase One trade agreement, according to Reuters. Deputy U.S. Trade Representative Sarah Bianchi said, “To be super-candid, the conversations are not easy. They’re very difficult. But you know, from my perspective, what’s important is that we’re having conversations and they will be unflinchingly honest.” The other elements of the agreement limiting non-tariff trade barriers are holding.
- Following Sweden’s ban of Huawei’s 5G products, Huawei has taken the country to court for damages. Swedish public television reports “the sum initially requested was 5.2 billion Swedish crowns (€495 million), but the figure could end up being much higher.”
- As Olympic Host Country, China gets to have a men’s hockey team in the competition. The team is comprised of 11 Canadians, 9 Chinese, 3 Americans and one Russian. All players have ethnic ties to China and play on the national KHL team, Kunlun Red Star.
- China will also unveil a six-legged ski-bot at the Olympics. The bot was created by researchers at Shanghai Jiao Tong University (SJTU).
- The Chinese men’s team’s 1-3 loss to Vietnam has knocked them out of the 2022 FIFA World Cup and angered fans. However, the Chinese women’s team are set to face South Korea in the Asian Women’s Cup and the team has qualified for the 2023 FIFA Women’s World Cup. Canada’s men, on the other hand, are almost assured a berth while the women’s team will play in the W Championship to qualify at a later date. (Hey, we are so excited about the Canada’s men’s team finally catching up to the women’s national team that we had to find a way to slip it in this Brief).
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’s energy opportunity with Iraq and Syria
Fanhai International School of Finance (FISF)’s Green Development Centre, based at the Fudan University in Shanghai China released its China Belt and Road Initiative (BRI) Investment Report 2021. In the past year, there was a “[s]trong shift of BRI engagement towards African and Middle Eastern countries” with Iraq being “the largest beneficiary from China’s BRI in 2021, with about US$ 10.5 billion in construction contracts.” The report also finds that Iraq “received by far the most energy investments from [BRI] in 2021” and “Iraq moved up to the third most important partner in the BRI for energy engagement between 2013 and 2021 (the most important partner is Pakistan, followed by the Russian Federation).”
Syria’s energy sector is also set to profit off BRI investment after it recently signed a Memorandum of Understanding (MOU) with China. The country is currently under Western sanctions and is looking to China for investment. Ibrahim Al-Assil, senior fellow at the Middle East Institute, summarized China’s opportunity in an interview with VOA:
Syria’s location offers a huge leverage for China. When any international player, if they have a leverage in Syria first, they can get some leverage over so many of its neighbors. We’re talking about Turkey which is important for China. We’re talking about Iraq, where more than 10% of China’s oil comes from. We’re talking about Israel. We’re talking about Jordan. We’re also talking about some global powers in Syria like Russia and the United States. So it’s more of geo-economic interests than just the pure economic interests for China to increase its investments in Syria.
China expands influence in Latin America
Nicaragua, which is under U.S. sanctions, has similarly turned to China and signed agreements, which include: “a political consultation agreement, a treaty on bilateral cooperation and diplomacy, a [MOU] on cooperation under the framework of the [BRI] and the 21st Century Maritime Cooperation, and the mutual waiver of visas for Chinese and Nicaraguan citizens carrying diplomatic passports or traveling for official business.
Our friends at the Latin American Dialogue have summarized Chinese interests, particularly those of insurers, in Latin America: “[T]he scope of China’s economic activity in Latin America is rapidly expanding into areas such as telecommunications, medical technologies, and renewable energy, supporting China’s efforts to upgrade its own economy and in response to the region’s surging demand for high-tech, low-cost solutions to long-standing development challenges.” Chinese insurers “are increasingly eyeing Latin American markets in support of the BRI or to provide life, health, and property insurance products to Latin American consumers.”
Despite geopolitical outcomes, BRI is still a domestic enterprise
The Diplomat explored the domestic drivers of the BRI. The report emphasizes that “the BRI is primarily about a state-building a process that involves the creation and maintenance of political and economic institutions. These institutions facilitate the reach of the state and the provision of public goods.” From this understanding, there are three key insights:
- “[W]ith each iteration of state-building projects, the CCP became increasingly aware that the development of its interior provinces was predicated on the development of its neighbors.”
- “[E]vidence suggests that China has not pursued ‘debt-trap diplomacy’ predicated on asset seizures; rather, it has frequently resorted to deferrals, refinancing, or writing off loans.”
- “[P]olicy formulation and implementation guiding the BRI is negotiated by various local and central officials. As a result, its geopolitical effects are incidental rather than its driving force.”
– 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.