China Brief: China’s relationship with Canada’s West
Issue 94 | May 17, 2023

In this issue: A diplomat for a diplomat, loopholes in Canada’s critical minerals protectionism and so much more. 

A diplomat for a diplomat

A tit-for-tat Deja-vu moment has inundated the headlines recently following China’s expulsion of Canadian diplomat Jennifer Lynn Lalonde in Shanghai just one day after Ottawa ordered Chinese diplomat Zhao Wei to leave the country, CBC reports. Wei’s expulsion comes after the Globe and Mail uncovered a 2021 Canadian Security Intelligence Service (CSIS) report that accuses Wei of intimidating and gathering information on diplomat Conservative MP Michael Chong and his family for their criticism of China’s Uyghur policy.  

Fears rise among Canadian farmers and business owners

Given China’s tendency to weaponize trade in past political disputes with Canada, the threat of additional retaliation from China looms over various Canadian sectors. Retail analyst Bruce Winder fears a “soft boycott” of Canadian brands, such as Tim Hortons, Canada Goose and Roots, that have entered the Chinese market in recent years. 

The Globe and Mail reports canola farmers are worried they will be caught in the middle again and face agricultural import restrictions akin to those imposed in 2019 following the arrest of Meng Wanzhou. Plus, chief commodity strategist with Farm.com, Moe Agostino, is “worried China could retaliate against canola and pork.” But Chris Dekker, CEO of Saskatchewan’s Trade and Export Partnership (STEP), says it’s far too early to speculate on China’s next move when it comes to agriculture exports.  

Experts ease trade-war concerns

  • Trade and Investment Centre Director Carlo Dade, in an interview on CHED Edmonton, doesn’t see escalation of the current dispute given the Canadian government’s measured response to date and provides extensive context.  
  • John Boscariol, head of international trade practice at McCarthy Tetrault law firm, told The Star that China, amidst grappling with the aftermath of the pandemic and unfavorable harvest conditions, is in no position to engage in a trade war right now.  
  • Guy Saint-Jacques, former Canadian ambassador to China, told CBC that China’s decision to expel Canadian diplomat Jennifer Lynn Lalonde was a measured action that shows China does not want to escalate the situation further.  
  • Gordon Houlden, the director emeritus at the University of Alberta’s China Institute, is on the same page: China doesn’t want a trade war right now.  
  • While short-term concerns are somewhat eased, long-term impacts of China-Canada decoupling are being raised by economists in this CBC piece.
     

If there is retaliation, it likely won’t be wheat

Despite rising political riffs between the two countries, Canadian wheat farmers don’t have too much to worry about. China has emerged as Canada’s largest wheat market, having purchased a record 2.15 million tonnes of the crop in the first seven months of the 2022-23 season, according to data from the Canadian Grain Commission, the Western Producer reports. Industry experts predict that China’s purchases will continue to soar, with seasonal estimates at around 12 million tonnes, the highest since the 1995-96 season when 12.5 million tonnes were imported. China’s rapid ascension as a major wheat importer is partly due to the country’s lagging domestic wheat crop conditions. 

Loopholes in Canada’s critical minerals protectionism

Back in November 2022, the Canadian government imposed restrictions on Chinese acquisitions of Canadian critical minerals companies due to concerns over China’s control over the global supply chain and worsening relations between the two countries (see in previous brief). But recently, the Globe and Mail reported that the prospecting system for Canadian critical minerals is virtually unrestricted and that despite the imposed restrictions on foreign acquisitions, foreign firms still face few barriers in buying claims across Canada.  

Canada’s prospecting system is managed at the provincial level which makes tracking ownership of claims complicated according to Mike Tremblay, a Canadian mining prospector. The current provincial systems allow financial backers to remain anonymous, which enables Chinese state-linked companies to operate secretly in the country’s prospecting system. 

CWF’s Belt and Road, Five-Year Plan and Indo-Pacific Monitor

Italy to exit the BRI

Italy, the only G-7 country (not counting Australian states) officially in the Belt and Road Initiative is on its way out as the European Union redefines its relationship with China, Bloomberg reports.  

Afghanistan to enter the BRI

Following the Taliban’s victory in Afghanistan, massive reconstruction plans have commenced in the region with help from China’s BRI infrastructure funding. China, Iran and Russia are some of the final few countries to “maintain warm ties” with the Taliban.  

BRI mapped out

Ever wonder what the BRI looks like on a map? CNBC has put together a series of maps that outline the planned and already-built train routes in the BRI regions. Check it out here.  

Canada walks a fine line between China and the Indo-Pacific

As Canada aims to peel back reliance on China and increase its presence in the Indo-Pacific region, Canada must not forget the deep-rooted interconnectedness of Asia, China included. While Canada’s Indo-Pacific strategy could aid in the significant infrastructure requirements of the region, chief economist of the Asian Development Bank Albert Park cautions that if Canada attempts to create divisions between Indo-Pacific countries and China, it may not be successful. Park explains that many leaders in Asia prefer not to take sides, particularly since Beijing contributes 50 per cent of Asia’s GDP and is the most critical trading partner for virtually all Asian countries.  

Asia Pacific investment in Canada

There was a significant gap between critical minerals investment values of Asia Pacific investors in Canada and Canadian investors in the Asia Pacific during the period of 2003 to 2021. While Canadian investors completed almost twice the number of investment deals in the Asia Pacific (145) than Asian investors in Canada (78), the investment value was significantly lower. In fact, Asia Pacific investors have invested almost three times as much in Canada (CAD$20.6 billion) as Canadian investors in the Asia Pacific (CAD$7.9 billion). Check out the Asia Pacific Foundation’s critical minerals investment monitor for more on critical mineral investments between the two regions. 

Canadian exporters looking to expand

Want to expand your business into the Indo-Pacific Region? Start with this market intelligence platform from Export Development Canada where you can spotlight countries, connect with a network of trade representatives in the region, and learn about high-potential sectors.  

Canada seeks to join non-nuclear pillar of AUKUS alliance

Canada wants to join the non-nuclear pillar of AUKUS, a security pact between Australia, the United States and Britain to combat China’s increasingly militant presence in the Indo-Pacific region. AUKUS’s non-nuclear segment includes sharing information and close collaboration to advance the development of technologies, such as undersea defense capabilities, artificial intelligence, quantum technology and hypersonic warfare. Canada’s acceptance has not been approved at this stage.  

Trade and Investment Centre Director Carlo Dade wonders if pulling the West Edmonton Mall submarines out of mothballs is next …

Other news  

  • Trudeau has called out China’s use of slave labour for lithium production. More on that here.  
  • The International Monetary Fund has predicted that the combined economic growth of China and India will account for approximately 50 per cent of the world’s growth this year. Long-term, however, things are looking different for China.  
  • Looking to understand China-Canada relations better? Read these books. 
  • Need a refresher on what happened in China-Canada relations in 2022? Our friends over at the University of Alberta China Institute have released their Canada-China Trade: 2022 Year in Review. 

– Taylor Blaisdell, policy analyst and Abygail Montague, policy intern

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.