China Brief: China, the Indo-Pacific and Canada’s West
Issue 100 | February 2024
In this issue: We ring in the New Year by canvassing experts, stakeholders and leaders for a reflective look ahead to seek principles and advice for getting Canada’s relationship with China and the Indo-Pacific on the right track and to support western Canadians as they navigate these challenging times.
DISCLAIMER: Be forewarned! This China Brief is not brief at all. Don’t feel the need to eat this all at once. Also, the views expressed below are those solely of the authors and should not be interpreted as the opinions of their home organizations, the Canada West Foundation or the organizations CWF is affiliated with.
Celebrating 100 Issues & Welcoming the New Lead Author
This month marks the 100 issue milestone for the China Brief, which provides readers with insights beyond the headlines to help western Canadians manage the unique aspects of the West’s trade with China and the Indo-Pacific.
We’re also handing the pen over to our new Executive-in-Residence, Jeff Mahon, whose experience trading with China and working on Canada-China commercial policy will add new value to the China Brief.
Reflecting back to move forward
2023 was not a good year for Canada’s relationship with China or India, the Indo-Pacific’s second largest market. While it’s true that it wasn’t all doom and gloom as trade numbers continued apace, and there were individual wins, the general view is that Canadian foreign policy ran into quite a few walls last year. For this issue, we’ve sought the views of thought leaders who’ve contemplated the state of affairs and can offer their insight on how we got here and where we might want to go next.
These views cover a broad (though admittedly incomplete) swath of perspectives and professional expertise. Canadian Senator Yuen Pau Woo helps set the stage by challenging first principles and conceptual frameworks before we dive into country spotlights.
Vina Nadjibulla, Vice President at Asia Pacific Foundation of Canada, looks at the prospects for Canada-China relations and what could impact the politics of this crucial relationship in the year ahead while Jia Wang, Deputy Director, China Institute, University of Alberta, argues that China’s economy is more resilient than the headlines suggest. India is up next as Karthik Nachiappan, Research Fellow, Institute of South Asian Studies, National University of Singapore, highlights some challenges in the year ahead and the role the West can play in surmounting them.
David Detomasi, Adjunct Associate Professor and Distinguished Faculty Fellow of International Business, Smith School of Business, offers his take on the opportunities facing the energy sector. Greg Cherewyk, President, Pulse Canada, speaks to how the ag industry can step up with a renewed force in corporate diplomacy to secure and seize its interests.
Saskatchewan’s Trade Minister, The Honourable Jeremey Harrison, Minister of Trade and Export and Minister of Immigration and Career Training, Government of Saskatchewan, shares his views on the important role that provincial governments can play in mending ties and supporting industry. We close with Dominic Barton, former Canadian Ambassador to China, Chairman at Rio Tinto and Chairman at LeapFrog Investments, who offers an actionable plan for leaders looking to engage in the region.
But before jumping into our contributor’s pieces, I’ll offer a few thoughts about how Canada can improve its posture towards China.
Getting the Relationship Right Between Values, Interests, Objectives, and Priorities
Jeff Mahon, Executive in Residence, Canada West Foundation
A common thread running through commentaries and conversations here is that Canada needs to better pursue its interests abroad, as opposed to a singular focus on being driven by values. But what is the relationship between values and interests? ‘Values’ are principles that guide actions, whereas ‘interests’ are objects of common concern. These need not be in direct conflict, but this relationship is contingent on determining which values drive our international engagement and which interests we seek to pursue, a challenging task given Canada’s regional and economic diversity.
This is not obtuse philosophizing; it has real world impact. The interplay of values and interests sets the objectives and priorities for the federal government’s diplomatic and international commercial agenda. While the private sector and sub-national governments have a key role to play, the federal government commands serious resources and controls policy and regulatory levers that have far-reaching consequences. There needs to be consistency in strategy and action, otherwise relevant players will be pulling in different directions, spreading resources too thin and sowing confusion among trade partners who seek clarity.
And beyond thinking, the output of this exercise needs to be articulated clearly and logically to Canadians – and China.
This isn’t an easy endeavour. Complicating matters is that different worldviews underlie the identification of values and interests and in turn the determination of objectives and priorities. In the case of China, we’ve seen over the past few years a multitude of competing and sometimes contradictory views that can undermine strategic engagement.
One may see a vast market with complimentary economic needs creating trade and investment opportunities, while another sees mercantilist commercial policies that discriminate against foreigners while stacking the deck for local businesses. Another views China as an emerging country legitimately pursuing its objectives in an international system designed by other more powerful countries. There is the emphasis on the centralization of political control with weak countervailing forces, but also governance that seeks to address poverty and raise the overall welfare of its people. Human rights concerns might be paramount for one group with fears about ethical implications for supply chains. While a focus on military and geopolitical rivalry will emphasize concerns about technology and dual uses.
And here’s the rub: there is truth in all these views, but none of them is the truth. So, basing our engagement off any single view will lack nuance and harm the diversity of Canadian interests.
This doesn’t mean we’re destined for purgatory. Indeed, the government’s “Four C’s” approach to China (which recognizes there are domains for competition, challenge, cooperation and coexistence) is meant to capture the nuance. While pointing in the right direction, however, these vectors lack magnitude. What could be improved is greater articulation of specific objectives the government seeks to achieve, and more importantly, how they are being prioritized and supported. This will help ensure that no single view hijacks the relationship.
Furthermore, given the poor state of affairs and multiplicity of views, it’s up to the government to bring stakeholders together and collectively form new coalitions that support smart, nuanced engagement (instead of deciding first then consulting later). Creative thinking and argumentation can synthesize diverse perspectives to identify common interests amongst contesting camps. Take climate change as an example, some Canadians believe that Canada can only support mitigation by keeping our resources in the ground, regardless of the detrimental impact it has on jobs, innovation and even national unity. While this may lower local emissions, we can have a much larger impact on reducing global emissions by doubling down our efforts to export liquefied natural gas to China, in turn driving domestic economic growth and strengthening relations.
Developing a truly nuanced approach to China won’t please everyone, particularly those averse to reason and compromise. But it would help improve our engagement with China while on balance benefiting Canada.
Reappraising the Indo-Pacific Strategy
Senator Yuen Pau Woo
Heading into 2024, there are four key questions to consider about Ottawa’s flagship foreign policy initiative:
What is the analytic or operational value of a strategy that is framed as “Indo-Pacific”?
Unlike “Asia Pacific” or “East Asia”, which have institutional expression through regional organizations (e.g. Asia-Pacific Economic Cooperation – APEC) and free trade agreements, as well as business-driven regional production networks that bind many of the countries together, the concept of “Indo-Pacific” seeks to fuse two sub-regions (South Asia and East Asia) where economic integration is nascent.
The idea of an Indo-Pacific Strategy (IPS) may make sense as a geopolitical concept focused on maritime security, but there is no similar logic in treating the region as a coherent economic unit with common strategies for expanding trade and investment with the constituent countries. Canada should develop strategies for deeper economic relations with say India, Korea and Indonesia, but there is no one-size-fits-all strategy that applies to the Indo-Pacific as a whole.
If anything, the insistence on using an Indo-Pacific vector as a demonstration of Canada’s commitment to deeper economic ties with the region can end up undermining our credibility with individual countries that are more interested in knowing the economic initiatives Ottawa has in mind for them.
How is Canada’s Indo-Pacific Strategy different from that of the United States?
An Indo-Pacific framework that is heavy on military-security alignment with the United States, such as increased deployment of air and naval assets in the western Pacific, and light on measures to develop trade and investment with specific Asian markets, will further undermine the credibility of Canada’s IPS, especially among members of ASEAN. While it may be politically expedient for Canada to seek membership in the U.S.-led Indo-Pacific Economic Framework (IPEF), doing so will reinforce the view in much of the region that Ottawa is pursuing a lightweight version of the U.S. IPEF and has little to offer the region that is unique. The IPEF “pillars” do not include market access, which is the priority for most Asian countries.
How does China fit into the Strategy?
By describing the PRC as a “disruptive” power in its IPS, Canada has come out more strongly against Beijing than countries that are geographically proximate to China. Ottawa has thus created for itself an unnecessary hurdle that impedes the beneficial recalibration of bilateral relations that have been at a low point for at least three years.
While western peer group countries like the U.S. and Australia have restored some high-level contacts with Beijing, Canada has had only one minister visit China in recent years – a visit that was widely criticized by opposition politicians and the media. Perhaps the “pragmatic” foreign policy approach recently articulated by Minister Melanie Joly expresses a “spirit” that is willing to re-open lines of communication, but the “flesh” of the Canadian body politic remains weak in its ability to follow through. The domestic politics of alleged foreign (i.e. Chinese) interference in Canada’s democracy, fueled almost exclusively by anonymous leaks from within the security and intelligence establishment, has made rapprochement with China a political poison. The situation is unlikely to improve before the next general election.
Whither Canada’s IPS?
An IPS that seeks to avoid or exclude China will effectively mean a diminution of Canada’s presence in the region. This is true not only because of the size of China’s market but also because Chinese enterprises are ubiquitous across Asia. While there may have been a slim prospect of economic ties with India compensating for losses in the Chinese market, that prospect has been set back by the ongoing diplomatic chill between Ottawa and New Delhi.
The reality is that Ottawa’s signature policy pivot of the last year was not the IPS; it was the embrace of a continentalist (i.e. North American) economic strategy that is based on ill-defined concepts such as friend-shoring, and a no-holds-barred effort to be included under protectionist laws in the U.S. such as the Inflation Reduction Act. Even though the IPS was intended to reduce Canada’s dependence on traditional export markets, the great irony is that it will – on the current trajectory – make us even more dependent on the U.S. market than we are today.
Canada-China Diplomatic Relations in 2023 and 2024
Vina Nadijibulla, Vice President, Asia Pacific Foundation of Canada
High-level meetings in 2023 between Chinese President Xi Jinping and his counterparts in Australia, the EU, and the U.S. helped to stabilize those relationships, even as tensions persisted. Canada, however, was an outlier. It had no such high-level dialogue with Beijing and in September 2023, Prime Minister Justin Trudeau reaffirmed that he saw “no room for rapprochement” with China. Then, his government signaled a change in tone. In November, Foreign Minister Melanie Joly telegraphed an openness to working with China in a speech that mentioned Canada’s embrace of “pragmatic diplomacy.” That same month, Trudeau also softened his message at the Asia Pacific Economic Cooperation (APEC) Summit in San Francisco, noting it was possible for the two sides to have “constructive dialogue” on a range of issues.
A call on January 11, 2024, between Joly and her Chinese counterpart, Wang Yi, seemed to provide an opening for such dialogue. But the two sides’ readouts of the conversation indicated that the gulf between them remains wide. Joly’s office noted that the two sides exchanged views on global hotspots and the importance of collaborating on issues such as climate change. The Chinese side, meanwhile, laid out a set of pre-conditions for improving ties, one of which was that Canada have the “correct cognition,” indicating that Ottawa should accept responsibility for the diplomatic chill in the relationship.
While it is in Canada’s interests to manage the relationship with China constructively and engage in dialogue at the highest level, we must do so in line with our national interests and without surrendering to Beijing’s pre-conditions. In that respect, Canada could learn from allies like Australia, Japan and the U.S., which have engaged with China while standing up firmly for their interests and investing in greater deterrence and defence capabilities to counter China’s growing aggression.
This approach requires a clear articulation of Canada’s strategic objectives with respect to China and the deployment of deft diplomacy in pursuit of those objectives. Whether Canada can achieve that in 2024 remains to be seen. But even a moderate improvement in bilateral relations is unlikely in the near term, as Canada will be conducting the first round of public inquiry into foreign interference in its 2019 and 2021 elections. That process – and the first report due in May – will shine a very bright and public spotlight on China.
The Resilience of China’s Economy is Good for Western Canada
Jia Wang, Deputy Director, China Institute, University of Alberta
China remains a leading trade partner for Western Canada in 2024. While news headlines tend to focus on troubles the world’s second-largest economy faces, we shouldn’t overlook its resilience. A better understanding of how China’s growing economic clout shapes the global economic landscape and the opportunities and challenges it presents will pay dividends for our business.
2023 was another challenging year for the top global exporter as the country’s post-Covid recovery faltered. There are a plethora of challenges and headwinds ranging from a property market crisis, low consumer and investor confidence, mounting regional government debts, deflationary risks and unbalanced labour market conditions (a labour shortage in manufacturing sectors coupled with high youth unemployment rates). As such, the economy underperformed more than many expected, though the reported 5.2 per cent of GDP growth rate hit the target set by the government.
Focusing solely on GDP growth figures, however, can be misleading. While economic drivers appear lacklustre at first glance, China’s internal dynamics, such as regional developmental gaps, which leave millions yet to reach middle class status, and an accelerated shift to a domestic market and innovation driven economy, can generate sustained growth opportunities and build resilience. Wide application of automation in manufacturing sectors, for example, also offers a solution to labour shortage.
China is also poised to be resilient in the face of international headwinds. In recent months, Chinese leaders repeatedly categorized the “international environment” and economic conditions as “challenging and perplexing”. Such geopolitical tensions will persist and may even exacerbate in 2024. Faced with lower demand for Chinese goods in the global market and tariffs or restrictions implemented by the U.S. and some allies, China made deliberate efforts to expand and deepen its regional networks with ASEAN countries, which has become China’s largest trading partner, and others in the global south.
Western Canada needs to be alert to these trends because China’s share in the global economy continues to climb to nearly 19 per cent in 2023, while contributing to approximately 30 per cent of the global economic growth. China remains Canada’s second largest trading partner, with increased trade despite cooling diplomatic relations. All Prairie provinces recorded export hikes to China, especially in agricultural products with canola leading the pack. B.C. unexpectedly saw a dip in its total exports largely due to a sharp drop in coal demand from China, however, copper exports expanded.
A robust Chinese economy is good news for Western Canada. From canola and pork in the Prairies to wine and seafood in British Columbia, Chinese middle-class consumers value quality Canadian products and offer premium pricing for Canadian producers. Western Canada’s rich mineral deposits also fuel China’s economy especially in the renewable and EV industries which is destined to expand exponentially. If the restrictions on flights and group tours are lifted, B.C., Alberta and the Northwest Territories stand to benefit from an influx of high-spending Chinese tourists.
Geopolitical factors pose the most risks for business connections with China. Recent exchanges between the U.S. and China senior officials seem to suggest Beijing’s desire to ease the tension with Washington. Rivalry between China and the global North (the U.S. in particular) on advanced technologies, however, may intensify in 2024 forcing countries to pick a side. Fortunately for Western Canada, further technological divide and Canada’s newly tightened research security measures will have little impact on its commodity exports and economic engagement with China.
Western Canada’s Role to Play in Stabilizing Relations with India
Karthik Nachiappan, Research Fellow, Institute of South Asian Studies, National University of Singapore
Will Canada-India ties turn in 2024? Last year marked a nadir in bilateral relations due to an unprecedented crisis precipitated by an alleged extra-territorial assassination. The upheaval triggered mutual recriminations, unexpected and unfortunate diplomatic exits, a freeze on trade talks, and a media furor in India targeting Ottawa and Trudeau himself.
Needless to say, Canada has little leverage in Delhi given the Trudeau government’s India policy that’s all politics and no strategy.
Canada has largely dithered as our allies and partners invested in India, nurturing links to deepen access to the Indian market, use India’s growth to lessen their dependence on China, and bank on India’s economic rise to check China’s dominance and restore balance in Asia. Our listless approach has cost Ottawa a viable political way to mend ties, get out of the crisis and signal our relevance to India and the wider Indo-Pacific that’s grappling with intense security and economic competition.
Increasingly, the lack of a coherent India policy means the lack of a policy to seriously engage and help address regional challenges that largely hinge on bilateral, trilateral, and mini-lateral frameworks connecting India.
2024 could be more of the same for the relationship – stasis. The Indian national election cycle will soon consume the country. That said, with political ties frayed and an RCMP investigation that could further dip relations, we have to rely on trade and investment to open doors, reclaim leverage and restore our importance. Here Western Canada can play an outsized role.
Given India’s economic surge, demand will only increase for Canadian commodities, energy resources and services, all areas where western Canadian provinces and firms thrive. So far, India has largely relied on manufacturing and IT services to drive growth, but that trend is changing as consumption rises with growing incomes. As macroeconomic fundamentals continue to stabilize, the scope for external inflows from capital and knowledge rich countries like Canada will heighten. That said, pathways to access the Indian market as it liberalizes further have to be negotiated and netted. This implies politics and economics will continue to feed back into each other, for better or for worse.
Canada has other markets for our goods and services that might compel policymakers to pass on India given current issues. That would be shortsighted. Investing in India helps us politically given our fragile growth position and need to secure robust Asian market access and strategically as India’s power ascends in Asia. Economics, for now, will have to drive Canada’s strategic possibilities vis-a-vis India.
The Promise of Canadian Energy in Asia
David Detomasi, Adjunct Associate Professor and Distinguished Faculty Fellow of International Business, Smith School of Business
The case for selling Canadian hydrocarbons abroad, and to Asia in particular, has always been solid. In 2024 it will get even stronger. The economic case is clear, particularly in the realm of natural gas exports, which will lead the way.
Canada’s prolific basins are producing at an increasing rate and getting them to offshore markets represents a sustained, multibillion-dollar, multi-decade opportunity. Repeated studies have found that an LNG export industry equivalent to 30 MTPA (million tonnes per annum) in British Columbia would inject about $7.4 billion into the Canadian economy over 30 years, along with supporting 65,000 jobs.
The key, of course is building more LNG facilities, which will not only increase our exports but will demonstrate to the world that Canada can actually get things done, which would reassure foreign investors and partners.
Canadians should also increasingly realize that LNG exports represent an environmental win. The more natural gas Canada can provide emerging markets, the less coal they will burn to generate needed electricity. Because Canada’s environmental footprint is trivial compared to Asia’s large emerging markets (Canada represents less than two per cent of the worlds’ total emissions!) anything we do to reduce emissions from China, India and other growing markets will help the environment more than anything done at home. Moreover, our competitive advantage in energy will become clearer. Our distance to Asia is shorter, our gas can be cooled more easily, further reducing emissions in production and transport.
Here at home, the economic windfall of Canadian energy will be shared more evenly, particularly among Indigenous communities which stand to benefit from participation in energy projects. Many First Nations are increasingly in favour of such projects, especially in light of community investment and revenue-sharing agreements, and revenue sharing is just the beginning. Actual Indigenous ownership is becoming a reality. The Cedar LNG Project, Canada’s first Indigenous-owned LNG facility and the first Indigenous-owned LNG facility in the world, received approval from the B.C. government in March. More of this is likely to come.
Geopolitically, advancing Canadian energy projects will help re-establish Canada’s place in the world. President Biden’s recent moratorium on licenses for U.S. LNG exports – a not-surprising move to boost his environmental profile in an election year – may give Canada time to catch up and put some energy heft on the Canadian Indo-Pacific strategy.
It should be a good year if governments and industry can signal our support for this sector and put the political and financial capital up to seize the opportunity.
The Agricultural Sector Should Embrace Corporate Diplomacy
Greg Cherewyk, President, Pulse Canada
Looking back at 2023, it was a year marked by geopolitical tensions and diplomatic challenges, where Canadian industries, particularly the pulse industry, found themselves navigating precarious waters. As diplomatic ties strain and political headwinds hinder government officials from engaging with counterparts on priority issues, the imperative for Canadian businesses to take charge of their international engagements is becoming increasingly evident.
The agriculture industry faces the daunting task of maintaining and expanding its presence in its key markets. Traditionally, businesses have relied on government officials to create enabling conditions by swiftly addressing market access issues and establishing favourable agreements that help frame future trade opportunities. However, the current geopolitical climate demands a paradigm shift. To weather the storm of political tensions, Canadian industries must proactively forge strong business-to-business and industry-to-industry ties.
In 2024, Canadian business should pursue direct engagement with counterparts in China and India with a focus on common ground and shared interests. By collaborating on mutually beneficial initiatives, Canadian businesses can transcend political barriers and build bridges where governments struggle. This approach not only fosters goodwill but also opens avenues for market growth.
China is Canada’s largest market for yellow peas and India is Canada’s largest market for lentils. Both markets exhibit significant growth potential, but strained diplomatic relations and increasing competition from Russia and Australia will challenge Canada’s ability to stay in the pole position. Collaboration becomes the cornerstone of success in this scenario.
Canadian businesses and their counterparts in China and India can leverage their collective strengths to navigate challenging terrains and grow opportunities that will deliver value on both sides of the equation. Shared research and intelligence, joint initiatives to seize new opportunities and collaborative marketing efforts are powerful tools that transcend political differences and fuel economic growth. And maybe – just maybe – through such efforts, industry can create enabling conditions for government officials to come back to the table and find common ground opportunities to re-engage on.
It’s time for Canadian industries to lead the way, ensuring they don’t lose ground in vital markets when political tensions threaten to overshadow economic progress. By directly engaging with international partners, the pulse industry can help insulate itself from the impact of diplomatic turmoil. It’s a proactive stance that positions Canadian businesses as resilient and adaptable players on the global stage.
When Federal Foreign Policy Faulters, Provinces Need to be Ready
The Honourable Jeremy Harrison, Minister of Trade and Export, Minister of Immigration and Career Training, Government of Saskatchewan
It’s more than safe to say that the view on the Prairies is that Canada’s diplomatic relations with our international partners, particularly with India and China, are at a low point. Who is being hit the hardest for the federal government’s handling of these files? It’s not the eastern provinces; it’s western farmers, miners and companies.
Take the case of Saskatchewan. In the aftermath of the Prime Minister’s trip to India in 2018, we saw Saskatchewan go from being Canada’s largest trading partner with India to losing over 40 per cent of trade in one year because of tariffs imposed by India. Saskatchewan went from $500 Million in lentil exports to India to zero dollars. To put this in a broader Canadian perspective: 99 per cent of the lentils Canada exports to India are produced in Saskatchewan.
Saskatchewan’s exports to India usually rank first or second amongst the provinces and are worth over $1 billion to our provincial economy. In fact, Saskatchewan trade with India accounts for 25-40 per cent of Canadian trade with India in any given year.
From my vantage point in Saskatchewan, it appears that the federal government is putting domestic political issues ahead of national economic interests, particularly as it relates to exports and trade of western Canadian produced commodities.
To salvage its interests, Saskatchewan has made strategic investments to establish its own relationships globally.
That is in part why the Saskatchewan government has opened nine international trade and investment offices, and why our Premier, Cabinet Ministers and senior officials embark on missions to meet with foreign governments and officials to tell our story and advocate for more open trade access for our exporters.
In December, the Premier led a delegation of approximately 60 Saskatchewan businesses, institutions, and organizations to the COP28 Climate Change Conference. This mission provided an opportunity to showcase Saskatchewan’s innovative and environmentally sustainable practices with industry and government leaders from around the globe. Our producers are creating the food, fuel, fertilizer and critical minerals the world needs for generations to come and in the most sustainable way of any jurisdiction on the entire planet.
Saskatchewan’s international engagement is making an impact. Our province sold $53 billion of commodities around the world, which means we export over two-thirds of what we produce. This is leading to record levels of employment. In December 2023, Saskatchewan added over 22,000 new full time jobs year-over-year.
We will continue to take care of our interests and tell Saskatchewan’s story, even if the government in Ottawa refuses to do so.
Building deeper relationships in Asia – strategically and deliberately
Dominic Barton, Former Canadian Ambassador to China, Chairman, Rio Tinto, & Chairman, LeapFrog Investments
Reflecting upon 2023 and the year ahead, I’m reminded of a mentor’s response when I asked what he would teach his 21-year-old self: ‘learn to have a microscope in one eye and a telescope in the other, without getting a headache’. A lesson for leaders is that while it is important to be aware of and deal with short-term challenges and opportunities, it is also critical not to forget about the longer-term and take actions corresponding to that timeframe and context.
We’re awash in information about the ‘here and now’ and there is a lot of good commentary on key issues for the year ahead that a conscientious organization can and should use to help prepare for the next quarter and year. But an effective strategy needs to keep the long-term in mind. That means at least the next 10 years; and I would argue for most companies and organizations (including governments), the next 20-30 years. I feel that business leadership and other organizations are spending too much time focusing on the short term and, in particular, the next 12 months.
A potential approach is to start with understanding relevant longer-term forces and how they may affect your organization. Then thinking carefully about how this all translates to specific people in your target markets who will be involved in driving these changes, benefiting from them, or playing a role in influencing responses to them. This is where deeper more deliberate actions need to be taken over time, and most of us fall short here.
More specifically, there are some underlying longer-term forces at work – which I believe will continue no matter what happens in the next 12-24 months – that will shape our future. They are unrelenting and the implications of them need to be seriously considered and prepared for now. There are at least four:
Energy Transition: A shift in composition from fossil fuels to include more renewable energy. Attempts to reach net-zero by 2050 will lead to the largest capital re-allocation in human history. We will all be affected. This will significantly shift both manufacturing footprints on the planet and where actual industry is done.
Technology Change: We’re beginning to see early glimpses of what AI can do to business, government, the social sector and, more broadly, to society at large. This will only accelerate and scale over the next 10 years with profound effects on innovation and on how we live, work and interact. Beyond AI there is quantum, nano, bio-tech innovation, nuclear fusion, and others still emerging. Taken together, this represents significant potential opportunities and threats to our entire “system”.
Political and Economic Transformation: Shifting economic power to Asia and the emergence of regional blocs are changing the landscape that companies and organizations operate within. While I believe that the U.S. will remain a dominant economy for the next 10-30 years, I see some significant shifts and new poles of economic power emerging. This is particularly true for Asia – and more specifically China, but also India, and Southeast Asia – and the Middle East. To mitigate new risks and seize opportunities, companies and organizations need to accept the reality of these changes and reflect this in their operations and strategic plans. However, most western-based companies are ‘behind the curve’ in terms of the proportion of their business, talent and deep understanding of this region.
Rising Domestic Instability: Rising income inequality, a key driver of a country’s domestic instability, has been accelerating and this weakens people’s faith in institutions and leadership – both business and government. Profound changes in how we communicate, receive and trust information – largely driven by social media – have accelerated fissures and challenged the ability to find consensus solutions to key issues. And these trends are affecting every single country on the planet and leading to an even more domestic focus and shorter-term focus in many Western democracies.
With these long-term forces in mind combined with an understanding of how they could specifically impact your organization and your interests, the next step is to zoom in to the level of people and relationships. Leaders need to ensure that they think about the key relationships (eg. clients/customers, government leadership, regulators, research analysts/advisors) that they would like to have over the next ten years in these increasingly important regions in the world, and again most notably Asia.
These relationships should be formed through deepening understanding of how the place actually works, how it is changing and who the key players are – particularly those with complementary interests to your organization. These are people that can help your organization get things done and deal with the inevitable challenges and crises that occur. And you need to have these relationships in place before you have a crisis.
The standard approach reflects the short-term mindset, and it won’t be sufficient for long term success. Most leaders and organizations think generally about priority areas, segments and top leadership to meet and see. Often this is worked on through a few visits a year to clients, senior government officials, and around major regional events.
Very few leaders have actually laid out a map of the key 250 relationships that they aspire to have over the next 5-10 years, and which would make a difference to their organization. If this seems like a large number, keep in mind the scale and diversity across markets as well as the complexity of domestic politics and local supply chains. As such, each organization will differ in how it spreads this attention based on the market’s importance to strategic goals, the nature of engagement and the local context.
Execution needs to be at a much more granular level than the ‘top of the house’. To understand how things actually work and to know where to focus if something goes wrong, visits should be made to those operating in key nodes and gate-keeper positions along the regulatory, supply and distribution chain (such as port authorities, customs offices, logistics providers, etc.); to up and coming government leaders in the country (as there is typically a leadership development process in many Asia countries); to key advisors to important leaders; and to locally respected (and often unknown) research analysts with expertise on industry, macro-trends and government policies. These relationships often take multiple visits to build and these will be the relationships that feed back into your understanding of the market while identifying key stakeholders.
There is no magic wand to wave or process that promises success, though I believe that as the world continues this multifaceted transformation the steps outlined above can help any organization develop and incorporate long-term strategic thinking to compliment and improve the quarterly and yearly planning already underway.
China Brief
Jeff Mahon, Executive in Residence, Trade and Trade Infrastructure
The China Brief is a compilation of stories and links related to China, the Indo-Pacific and relationships 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.
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