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Our strained China connections: B.C., Canada in holding pattern

Canada-China political and trade ties will remain tense for the next five years as global tensions intensify: Experts
Image credit: Benguhan/Getty

In early 2017, at the height of the Canada-China relationship, Ottawa appointed John McCallum – then the federal immi gration minister and a veteran politician with no formal dip lomatic experience – to Beijing as the new Canadian ambassador.

At the time, McCallum said of his eyebrow-raising appointment that his philosophy in China would be “more, more, more”: More  trade, more investment, more tourists, more students and more co-operation, all while “not agreeing with China on everything.”

“The general point is that we are open for business,” McCallum said at the time.

Five years later, one can hard ly imagine a landscape more drastically altered. Following a 2017 visit to China by Canadian 
Prime Minister Justin Trudeauthat failed to advance trade-deal talks beyond exploratory stages as expected, the Ottawa-Beijing relationship entered a free fall. 

The late 2018 arrest of Huawei Technologies CFO Meng Wan zhou in Vancouver, Beijing’s retaliatory arrest of Canadians Michael Kovrig and Michael Spa vor, China’s harsh crackdowns in Xinjiang and Hong Kong, the increasing tensions between China and the West and the tacit backing of Russia’s invasion of Ukraine successively drove pub lic government engagements to non-existent levels.

Jeff Nankivell, president and CEO of the Asia Pacific Founda tion of Canada, said this spring’s appointment of career-diplomat Jennifer May as Canada’s am bassador to Beijing is a telling sign of the state of Canada’s re lations with its second-largest trade partner.

“I think the appointments of a couple of non-career diplomats as ambassadors was reflective of an era in which the expectation was that trade and investment relations with China would con tinue to grow,” said Nankivell, himself a former diplomat who served extensively in Beijing and Hong Kong. “Even with the ap pointment of ambassador [Dom inic] Barton in 2019, which came during a dark time with the two Michaels case not resolved, there was an expectation that – once the cases were resolved – the conditions would be there for major growth in the relationship.

“So to appoint a career dip lomat now is, I would say, consistent with the changing circumstances.”

On the surface, Canada-China trade has not been affected sig nificantly despite the major pol itical falling out. According to studies done by the China Insti tute at the University of Alberta(based on Statistics Canada data), Canadian exports to China grew 14 per cent in 2021 to $28.84 bil lion, maintaining a growth trend (with a dip in 2019 and 2020) for much of the last two decades.

British Columbia also main tained its role as the province with the most at stake. Data shows B.C. exports to China grew 64.65 per cent from 2020 to 2021, reaching $9.84 billion, which is more than double the total from Alberta, which had the second-highest export total to China last year ($4.55 billion). It is also at least $3 billion higher than B.C.’s reported 2018-20 ex ports to China.

But there are signs of trouble on the horizon. 

Chinese investment in Canada has slowed to a trickle compared with 2005-15 levels. More import antly, Canadian exports to China dropped 15 per cent and 14 per cent, respectively, in 2022’s first and second quarters. B.C.’s ex ports were up 28 per cent and 20 per cent in the same two quarters.

But those trade numbers do not mean that all is well with Can ada-China relations, one expert said.

“The Chinese don’t buy from us to be friends,” said Gordon Houlden, director emeritus of the China Institute. “They buy from us because they need what they are buying. We sell to them not because they are our close allies, but because we need to export.”

Perhaps the biggest reminder that the days of “more, more more” are over is a declaration this month by U.S. President Joe Biden’s administration that Washington is curbing Chinese access to technology associ ated with military operations, strictly controlling exports of advanced computer chips and semiconductors as well as lim iting American companies’ abil ity to work with their Chinese counterparts.

Given Canada’s heavy econom ic, social, cultural, military and ideological links with the United States, the growing U.S.-China divide has already complicated Canada’s ability to do business with China and will continue to do so, Houlden noted.

“It is very hard for Canada as a junior partner in a close alliance to the United States to be completely at odds with their policy. When the U.S.-China relationship is positive, that creates a lot of space for Canada to also have a positive relationship… But I think we are in a position where the U.S.-China relationship appears to be still deteriorating, so it is very 
hard to be optimistic.”

The key now for Canada, said Canada West Foundation’s Trade & Investment Centre director Carlo Dade, is for Ottawa to have a clear plan of how to approach China. Ottawa is expected to re lease its Indo-Pacific Strategy in the coming months, but Dade is pessimistic about the current government’s ability to navigate the relationship given its track record.

“It has been reported that the Indo-Pacific Strategy does not contain China as a central focus,” Dade said. “If that’s true, the 
strategy has gone from straight useless through idiotic to mor onic. You cannot have a strategy for the Indo-Pacific that does 
not take into account, not only what’s soon to be the world’s lar gest economy, but also the largest economy of the region, the lar gest foreign trade partner, the largest foreign investor, the top regional political and military power, and the country that’s 
literally building roads, bridges and ports connecting the region.”

Dade noted that the new strat egy should not shy away from China, but rather look for differ ent ways of engagement.

“We require a foundational shift in our trade planning and thinking,” he said. “The past few decades have been one of the more relatively stable per iods in the global economic order. You had China joining the WTO[World Trade Organization], the period of U.S. hegemony, the fall of the Soviet Union and relative harmony in international trade. But we had our luck run out on the pandemic front, and that per iod has ended. Our trade policy needs to adapt to that.

“This is not to say the strat egy needs to talk about how we start bilateral trade negotiations with China or how to sell more 
to China. But we need a strategy that understands China … and how we should deal with their dominance in the region.”

The Asia Pacific Foundation’s Nankivell noted that while Can adian engagement with China is still possible, Canada’s future 
economic dealings with China will have to operate within two lines that are now more concrete than ever: Canadian values such as human rights and democracy and Canada’s national secur ity interests in defending itself and the interests of the liber al-democratic global system.

“I would say one key thing is to look for opportunities in other parts of Asia,” Nankivell said. “It does not mean you are dir ectly doing business with China, but you are looking at expan sion opportunities in places like Southeast Asia where their econ omy is growing through great er integration with the Chinese economy. The whole region is growing; so, I’m still upbeat about the potential for deeper and broader engagement with the entirety of Asia.