IN THIS EDITION: Cargill beef banned while other exports gain, floods hit Mainland China, back and forth over Hong Kong, COVID-19 update.

China bans Cargill beef, but other exports show promise

China announced a partial beef products ban as a result of the COVID-19 pandemic, which includes Cargill Protein’s High River facility. Cargill says the measures will not impact the plant’s production, as product originally meant for export to China makes up a small percentage of the facility’s total output. Cargill shut down this spring as a result of a COVID-19 outbreak at the plant but put additional safety measures in place when the plant reopened.

Brazil, Germany and the Netherlands are also included in the ban, with Brazil also facing a partial pork ban. Export nations have pushed back against China’s latest trade policy, on the grounds that there is no scientific evidence linking COVID-19 infections to food.

While ongoing trade spats with China have harmed the Canadian export of canola and soybeans, other agricultural commodities are on the rise. Canola acreage in Canada has fallen 0.8% in 2020 while Canada’s flax, wheat, and dry pea exports to China have hit their largest volumes in months. In the first six months of 2020, China imported 1.2 million metric tons of Canadian wheat, as the quality of China’s feed sector has floundered. In response, wheat acreage in Canada has risen by 16% in 2020.

China has also been turning to Canadian barley exports to quench its thirsty beer markets. As seen in a previous China Brief, China looked to Argentina to satisfy its barley demand, and the South American nation poses competition for Canadian barley. Adjusting to the weak demand for canola, Albertan farmers have shifted focus to increasing barley acreage. Shipments of Canadian barley to China rose in May as China simultaneously hit Australia, its top supplier of barley, with anti-dumping duties. As a result, Canadian barley exports to China were up 38% in May from 2019, according to the Canadian Grain Commission.

Floods hit China’s crop and pork production

Heavy rains in Southern China have flooded low-lying areas of the region and have caused an estimated 2.5 billion yuan in damage at the end of June. Hubei province estimates the floods have destroyed at least 80,000 hectares of crops. Commodities experts see a possible rise in Western rapeseed prices as a result of the drop in Chinese supply and expect floods to continue into July.

The floods may have led to an outbreak in African swine fever as it’s possible the flu is spreading through the groundwater, and pigs are typically buried once deceased. There were also outbreaks in April and May, with the last reported on June 5, so the spread could also stem from an unreported case in the region. Small producers and slaughterhouses have reported cases across 20 provinces in late June with an unknown number of medium and large operations also affected. Pork prices are up in affected regions, with some hitting near-record levels while supply drops; some analysts predict pork product could fall 20% between May and August.

Back and forth over Hong Kong

Canada-China tensions continue to dominate national headlines, as The Law of the People’s Republic of China on Safeguarding National Security in the Hong Kong Special Administrative Region came into force on July 1.

China implemented the law in response to anti-government protests in 2019 and to address what the Chinese government sees as threats to its national security. The law itself covers four areas: secession, subversion, terrorism and collusion with foreign or external forces. Section 38 of the legislation has been a focus of concern as it applies the law to foreign actions, which may take place outside of Hong Kong. The Canadian government has updated its travel advisory to the region to advise that travelers are at increased risk of detention on national security grounds.

The legislation (and previously identified concerns) led the Canadian government to announce on July 3:

• The suspension of Canada’s extradition treaty with Hong Kong

• The treatment of exports to Hong Kong will be the same as exports to Mainland China

• Sensitive military items will not be exported to Hong Kong

While Canada was the first country to cease extraditions as a result of the law, Australia’s government announced it would also end extraditions to Hong Kong. The Canadian government is not considering sanctions at this time but will continue to engage in a back-and-forth response.

Chinese officials responded to the Canadian government’s actions with disappointment and a spokesperson for the Chinese Embassy in Ottawa called the federal government’s comments and actions “erroneous.” Zhao Lijian, a spokesperson for the Chinese Foreign Ministry, condemned Canada’s actions threatened further retaliation against the country. Chinese nationals were warned about travel to Canada as a result of protests and police violence.

COVID-19 Relations Update

Canada faced a personal protective equipment (PPE) shortage in March as COVID-19 cases rose (as discussed in a previous brief). In response, China donated thousands of masks, goggles, gloves, and protective clothes. Canada’s reliance on China for personal protective equipment has since dwindled as Canadian companies have ramped up production; Canada is now almost entirely self-sufficient. Federal financial support programs have allowed companies to adapt and start producing masks, gowns, ventilators, and sanitizer. A secure domestic supply of PPE will be crucial for Canada if there is a second COVID-19 wave.

Despite tensions, joint Canadian-Chinese research continues. On May 12, the National Research Council of Canada announced that it had reached an agreement with China’s CanSino Biologics Inc. to test the company’s COVID-19 vaccine candidate (subject to Health Canada and ethical approval). The Phase 1-2 trial of the vaccine is imminent, but has not begun as the vaccine has yet to arrive in Canada. Health Canada has not explained the delay; once the vaccine arrives, the agency will give up to 100 healthy people between 18 and 55 as part of the trials. Canada’s agreement with CanSino states that if the vaccine proves effective, Canada will be able to domestically manufacture and provide the vaccine, but will not be allowed to sell it or retain intellectual property rights.

Canadian researchers at the universities of Ottawa and Sherbrooke question whether the World Health Organization (WHO) is too closely tied to China in a new report. The team examines if the WHO made recommendations based on political motives, such as the organization’s praise of China’s response to the COVID-19 crisis without scientific evidence. According to the report, the WHO wrongly identified the global risk assessment of COVID-19 for three days in a row in January, provided ambiguous travel advice, and delayed declaring a pandemic for too long. A WHO team is currently on its way to China to determine the virus origins.

Everything Else

• Is there a possibility for increased China-Canada partnership in the North? Some analysts see COVID-19, the Chinese push for resources, and Canada’s need for a Northern strategy as a viable path to cooperation.

• Toronto-based Triple Flag Mining Corporation announced a streaming-financing deal with China Molybdenum Co. Ltd. (CMOC). The deal involves production at CMOC’s Northparkes Mine in Australia.

• A Nanos Research poll shows that 53% of Canadians want Canada to block Chinese investors and deny entry to Chinese government officials in response to the two Michaels case. The poll also showed that 36% wanted more diplomatic options to continue, 6% wanted to ask the United States to intervene and 6% were unsure.

• Sun Qian, a dual Chinese Canadian citizen, was sentenced to eight years in prison  in China. Qian, a member of Falun Gong, was arrested in 2017 and charged with using heretical religious organizations to disrupt the implementation of law. Qian’s lawyer believes the charges, similar to those of the two Michaels, were retaliation for the Meng Wanzhou decision.

• Bonnie Glaser, from the Center for Strategic and International Studies, believes that Meng Wanzhou’s release would damage Canada’s international reputation. The Prime Minister has refused to release Meng Wanzhou.

• Canadian security experts warn Canadians to be careful while using TikTok, a social video app popular with teens and millennials. The warning comes as the US threatens a TikTok ban, putting pressure on TikTok to reassess its relationship with China and pull out of Hong Kong. TikTok users have also worked together to  impact attendance at Trump campaign rallies in the lead up to the US election, which could also provide motivation for a ban.

• The TikTok issue reflects a wider concern over technology and whether companies will be forced to develop in-China technology to ensure access to both US and Chinese markets, which now includes Hong Kong. BBC’s Tech Tent has an in-depth analysis on the issue.

• Interesting piece in the South China Morning Post on the consumer realities of moving supply and production chains out of China. While consumers in the U.K. say they are willing to pay “more” costs for goods not produced in China, will that hold when they see the bill and is that even possible?

• Further to the above, Yukon Huang and Jeremy Smith with the Carnegie Endowment for International Peace argue such an end would be difficult, if not impossible, as these supply chains are “deeply rooted and remarkably stable over time” and other countries do not offer the same labour market size, manufacturing systems, or infrastructure as China.

– Stephany Laverty, policy analyst and Taylor Sterzuk, research 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.