Edition 09: Golden opportunities for Canadian energy amid the U.S.-China trade fight, Wayne Gretzky is boosting China’s hockey profile and a rare public protest in China. Read more…
Quote of the week
“The Chinese people have really rallied around hockey. Someone told me that last year, Pittsburgh and Nashville had 36 million people in China that watched Game 6 [the last Game of the Stanley Cup].” – Wayne Gretzky, who is opening two hockey schools in China
One Big Story: Canada-China energy opportunities in an age of disruption
China’s independent refineries will receive their first batch of Albertan Cold Lake crude in August, a reminder that Canada still has opportunities to partner with China in the energy sector – and not just in primary sources of energy. Long viewed as just a destination for exports, China’s impacts on the Canadian energy sector are increasingly varied, from China National Petroleum Corporation initiating energy dialogues with Canadian partners to China signaling an intention to lead on climate action.
Trade disruptions could be a golden opportunity for Canadian energy
• As the U.S.-China trade war worsens, Canada is seemingly well-positioned to become a strong energy partner with China. Chinese imports of U.S. oil averaged 334,880 barrels per day earlier this year, but state-owned oil major Sinopec’s recent suspension of U.S. oil imports has reverberated across the industry.
• China has also said it will impose a 25 per cent tariff on U.S. oil, while prices are simultaneously slumping after Chinese import data showed a slowdown. If China follows through with both the tariffs and import suspensions on U.S. oil, it would essentially be stopping a competitor to Canada, at the same time that private Chinese firms are becoming more active in Canada’s energy.
• While China’s energy industry has implied that China will shift towards new markets for its oil, this realignment of industries has presented opportunities outside of oil, too. Sinopec is involved in the production of petroleum products, and China imported eight per cent of U.S. propane last year. Meanwhile, U.S. energy and petrochemical companies are hurriedly submitting comments to the U.S. government to keep China-sourced materials for their own production tariff-free.
But Canada faces its own challenges
• Now, the downsides: while access to importers like China and India — and relying less on the U.S. — drew the Canadian government to purchase the Trans Mountain pipeline, uncertainty within Canada’s regulatory process for energy projects is preventing Canada from capitalizing on the China-U.S. fight. Insufficient transportation infrastructure makes Canadian crude exports from Vancouver to Asia rare, even as the economic relationship between Canada and China is being redefined.?
• China’s energy sector is also tightly state controlled, with everything from oil extraction to the state grid owned by the state, and China’s interests in limiting outside influence in its domestic industry are clear. China is not an easy market for most foreign entrants, and its vast sums of government money being put into development could result in another glut of a range of energy equipment, from traditional to renewables.
• Canada also has new opportunities to export on the near horizon with development of solid bitumen, or CanaPux (following the Wayne Gretzky theme) targeted for the Chinese market.
Where is China heading?
• But this spending also could be a hint of what’s to come, as it’s part of China’s ongoing industrial strategy to strengthen its high-tech sectors – including electric vehicles and offshore wind power – as China attempts to improve the quality of its manufacturing industry’s supplies and outputs. China has also recently drawn Canadians to compete in energy efficiency challenges in Dezhou, and is recruiting outside expertise into its Institute of Nuclear Energy Safety Technology.
This week on the noise-o-meter…
Unusually low levels of stories across the West in the past two weeks.
Stories from the West
• The Province, August 11: this op-ed, by the Chinese consul-general in Vancouver, argues the importance of educational exchanges for furthering the China-Canada relationship.
• Times Colonist, August 8: Wayne Gretzky was named the global ambassador for Beijing’s Kunlun Red Star (hockey team) as China tries to boost the profile of domestic hockey before the Beijing 2022 Winter Games.
• Regina Leader-Post, August 2: a youth soccer team from Alberta and Saskatchewan got to play in the Hundredth Team Cup in China.
• Winnipeg Free Press, August 10: a rare public protest in China is scheduled; thousands of Muslims are expected to gather to protest the planned demolition of a mosque.
Issues that Matter
Trade and Investment
• An argument that China should be included in discussions about reforming global trade.
• The U.S.-China trade war has eaten into global factory activity.
• Part of the U.S.-China trade dispute is being fought through investment into other economies – and China is leaps and bounds ahead of the U.S. here.
• The U.S.-China trade war has the potential to do a lot of damage to the global economy – including crude oil prices, which have been declining since July, thanks to the implementation of U.S. tariffs on Chinese goods – including diesel and liquefied natural gas. Chinese consumption of these products has since lowered – given that China is one of the biggest global consumers of these products, a continued trade war will likely mean nothing good for the crude oil market.
• One outcome of the U.S.-China trade war has been a critique of both the direction of the country and Xi Jinping by Chinese elites.
• China is moving ahead with a huge robot farming pilot project, involving technologies such as unmanned tractors, rice transplanters, and pesticide applicators (none of which are widely used in China).
• It looks like Canada is going to export more soybeans to China as a result of the current U.S.-China trade war.
• Xinhua News Agency, the official Chinese state-run press agency, has accused the Canadian government of denying nine of its journalists from entering Canada to cover the June Group of Seven summit in Quebec.
• Recently, the Canadian Border Services Agency referred to Taiwan as “Chinese Taipei” – drawing outrage from activists.
• An op-ed argues that Canada needs a much more coherent China policy. Something that increasingly could be said about Canada’s trade and foreign policy in general.
• Huawei Canada has responded to Canadian concern about the “national security threat” Huawei poses.
By the Numbers
Source: Canadian Trade Data Online. Product Code: 1201 – soya beans, whether or not broken
In 2017, about 45 per cent of Canadian soy went to China. Analyst predict this will be 80 per cent for 2018.
• Globalization with Chinese Characteristics (Aug 10) Project Syndicate
• Whistleblowers reveals Google’s plans for censored search in China (Aug 1) The Verge
• China’s plan to win friends and influence includes ski slopes and spas (Aug 1) New York Times
That’s all for today! Questions, comments? Send them our way! – Sarah Pittman, policy analyst, and Kai Valdez Bettcher, 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.
[i] Media measurement is provided by a third-party, independent media monitoring service. To be included in the noise-o-meter, “China” must be in the title, and one of the four western provinces somewhere in the article. While not a perfect system, this gives us an idea of how much China and the West are being discussed together.