Summary Report
By Ron MacIntosh, Senior Fellow, and Tom Alton, Policy Research Assistant, China Institute, University of Alberta
On September 18, 2020, the China Institute at the University of Alberta hosted its 10th annual “National Forum on Canada-China Economic Policy.” Originally scheduled as an in-person forum, the event was instead held virtually as a Zoom webinar and received close to 500 registrations. The theme of the 2020 Forum was “50 Years of Evolving Economic Relations.” It convened a number of prominent current and former diplomatic officials, leading experts on trade and investment issues, and distinguished members of the academic community. A link to the event’s program may be found here. This summary report aims to recount the Forum’s main ideas and areas of discussion.
The Forum benefited from the perspectives of China’s Ambassador to Canada H.E. Cong Peiwu and Canada’s Ambassador to China H.E. Dominic Barton. Both Ambassadors made opening statements, but also responded to questions put to them by the Moderator. The full text of Ambassador Cong’s speech was made available by the Chinese Embassy, and may be found using this link.
With 2020 marking 50 years of diplomatic relations between Canada and the People’s Republic of China, the Ambassadors highlighted a relationship driven by many complementarities in such areas as agriculture, energy, forestry, fisheries and other resources. Ambassador Cong noted our trade had expanded 500-fold since recognition, significant growth in Chinese FDI and lately portfolio investment in Canada, and that ties had diversified over the years to people to people exchanges ranging from science, tourism to education. Both Ambassadors see new opportunities in health, clean tech and environment. Further progress may arise from Chinese initiatives in infrastructure and financial market opening as well as China’s good recovery from COVID-19.
The Ambassadors agreed it is important to understand the industrial transformation and demographic shifts at play in both our nations. As a backdrop, we must also recognize the rising role of China and Asia in global growth and the potential for Canada and China to cooperate on global issues of climate change, food security, infectious disease, and sensitive technology.
In addition to the pandemic and its associated stress on economies including trade and travel, it was acknowledged that our ties are in a period of acute difficulty, indeed perhaps the lowest point since 1970. These circumstances flow from extradition proceedings concerning a Chinese technology executive. Ambassador Cong described the extradition case as “concocted by the United States” but with Canada as an “accomplice”, while Ambassador Barton highlighted the arrest and imprisonment of two Canadian citizens – and a death sentence given to another, as actions which Canadians see as arbitrary, harsh and unjust.
The discussion highlighted the need for dialogues at all levels to resume - to expedite resolution of these issues, to address broader concerns over human rights, governance, peace and security and, in so doing, to rebuild public confidence, and thereby realize and regenerate the potential of the relationship going forward.
The first panel, titled ““50 Years in the Making – Key Lessons from Building the Canada-China Relationship,” featured three prominent experts on China-Canada relations and Canadian foreign policy - a former Canadian Ambassador to China, a former Canadian Minister of Foreign Affairs, and a leading Canadian academic. It touched on the rich history surrounding Canadian ties with China, examined the harsh realities of the current bilateral relationship, and mapped out potential future approaches in an increasingly polarized world.
In recognition of the title, panelists noted the complex history of the relationship between China and Canada. While Prime Minister Pierre Trudeau formally established diplomatic ties with China in 1970, trade, cultural, and people-to-people connections date back much further. Beginning with ginseng exports in the early 18th century, Canada has long cultivated a generally reciprocal, and largely friendly, trade relationship with China. The oft-cited legacy of Dr. Norman Bethune and Canadian missionaries, in addition to the more recent work of the Canadian Development Agency in China, were also noted as having created a sense of rapport between the two nations. One panelist recounted the November 1998 remarks of Chinese Premier Zhu Rongji, who described Canada as China’s “best friend.” Bilateral relations were indeed punctuated with periods of cooling off, but there was once a generally positive trajectory and even “special” relationship between China and Canada.
This reality, it was noted, no longer exists. The Meng Wanzhou case fundamentally reoriented the bilateral relationship and now, with Michael Kovrig and Michael Spavor nearing two full years of detention in China, Canadians facing the death penalty in China, and continued agricultural export restrictions, a short-term resolution of tension is unlikely. To this end, there was a general recognition of the “hardening” taking place in China under President Xi. Less internal dissent is tolerated and the country is facing international backlash for events in Hong Kong and Xinjiang. China is also increasingly engaging in a combative “wolf warrior” style of diplomacy and gaining influence in global institutions such as the United Nations.
These factors do not preclude the need for engagement between Beijing and Ottawa. China, for example, will continue to be an important market for Canadian goods. But they underpin the need for smart, flexible, and effective Canadian policy responses towards China. This includes a push towards reinforcing the global multilateral system, associating with like-minded nations, taking strong domestic measures to combat foreign influence and/or national security threats, and pursuing trade/investment diversification strategies in Asia.
However, the United States, and by extension the upcoming American presidential election, will heavily factor into any Canadian approach to China. While a Biden Administration would be expected to work closely with Canada and other allies to implement a common approach to China (with an emphasis on security, competition, and multilateralism), the re-election of President Trump could mean the continuation of the great-power conflict between the U.S. and China, and a shift away from participation in international institutions. It was noted that Canadian interests are restrained by the United States, and a power-based global system is less advantageous for a country like Canada. While the U.S. is by far our closest and most powerful ally, we cannot afford to always echo the American line. This is where the U.K., EU, and Japan factor in. They are deeply concerned with many of the same issues, and will serve as key allies in any global push to uphold a system of rules-based order.
Drawing on the expertise of a leading Washington think tank, a Canadian economist based in China with deep government experience, and the CEO of a major Canadian business organization, Panel 2 - “Charting China’s Economic Future and Implications for Canada” - surveyed the principal issues and trends facing China’s economy. It was recognized that the most consequential element was the COVID-19 pandemic and how successfully (or otherwise) China was weathering this crisis, not only in terms of public health but in stimulating economic recovery and of managing associated structural change. Additional factors have been the deepening trade and technology conflicts between the U.S. and China, with adverse impacts on Canada. At the bilateral level, as discussed in Panel 1, we have had to face some especially serious consular, trade and international controversies that have undermined public support for the development of Canada-China ties.
The consensus among panelists was that, after an exceptionally difficult first quarter affecting wide areas of economic activity, including trade and investment, China’s “v-shaped” recovery has been remarkable – significantly outpacing that of the US, EU and Japan. Second quarter growth was 3.2% and annualized growth is expected to reach towards 3%. This will likely make China the only major economy to record positive growth on the year.
The key factor in China’s recovery was its relative success in containing the virus since its disastrous onset in Wuhan in late 2019/early 2020 and several smaller flare-ups since. In China as elsewhere, this progress is vulnerable, and will require successful vaccine and/or anti-viral treatments and other public health measures to consolidate.
Economic planning and business investment are obliged to adjust to both current challenges and ongoing transformations. This involves not only the macro dimension, but specific industry sectors - such as energy, and finance - with initiatives and investments suitably calibrated to evolving needs and priorities. It appears that this is what is happening, though concerns remain that domestic reforms must be followed through and market opening measures continued. In fact, recent economic recovery seems to have arisen less from specific policy changes than such factors as savings rate changes and labour market flexibility provided by migrants. Concerns over infrastructure mis-investment (“roads to nowhere”, etc.) and the related distortions may have been exaggerated. The overall trajectory remains powerful and toward China’s convergence with the US as the world’s leading economy.
Bilaterally, to ensure our market position, speakers urged Canadians to better follow and understand the dynamics of China’s transformations, whether in economic structure or in changing demographics. There are clearly difficulties including some unresolved market access questions (canola, for example), but after a sharp 16% decline in the first quarter, our trade is moving up again with exports rising 2.2% on a year-to-date basis (January-July) in 2020.
Contrary to impressions, American, European and Japanese firms are not moving back home i.e. “re-shoring” in great numbers. The concept of “decoupling” has political appeal but, apart from specific, publicized company cases and a drive for self-sufficiency in select areas (with regards to personal protective equipment, for example), a broader trend is not evident. And according to surveys, decoupling is not a favoured business strategy. Inward foreign direct investment (FDI) to China sits at the same pace as 2019. Moreover, with less investment controls and new access to domestic bonds, portfolio investment in China is increasing.
An enhanced understanding of what is happening in China is at premium in appreciating emerging systems and admittedly difficult business practices. This is essential as new sectors of opportunities arise, and with concomitant needs to update market intelligence and promotional toolkits in a timely accurate fashion. Markets in such areas as health services, seniors’ needs, food security, education and training, personal finance, and a range of climate and environment-related activities that animate clean energy and clean-tech are evolving rapidly in China. Optimism was expressed in the ability of Canadians to compete on a global stage.
To reiterate, China’s drive towards becoming the world’s leading economy - with an increasingly central role in trade, manufacturing, innovation, finance - continues. If anything, China may have gained further in relative terms. On the debt to GDP ratio, for example, China (10.6%) will have fallen to half that of the US (22%) by the end of 2020. This major and rapid change in the global order, in conjunction with political realities, represents a challenge to all of us and to institutions such as the WTO – imperfect but nonetheless essential in mediating conflict and sustaining common rules.
Whether bilateral or global, the webinar agenda included investment, fair competition (subsidies etc.), trade barrier reduction, and intellectual property where progress has been made but confidence remains weak and perceptions are a constraint - as is the lack of progress on some serious non-business issues in our relationship. Progress, it was agreed, should be possible between nations of different governance and values. But the need for Canada and China to find common cause and build on shared interests remains.
It is in this context that dialogues, such as this Forum, can contribute. Ambassadors Cong and Barton provided key diplomatic perspectives and the distinguished panelists engaged in a high-level discussion of the many variables surrounding the Canada-China relationship. This summary does not intend to capture every question, comment, or argument. We instead aim to provide an overview of the main themes and/or perspectives from the day’s proceedings. Consistent with the Chatham House Rule, we have not linked specific individuals to specific comments during the Forum.