A recent survey of Canadian companies operating in China confirmed what has been widely suspected: the last few years have been among the worst for doing business since bilateral relations began in 1970.
The Canada-China Business Survey 2020/2021, released by the Canada China Business Council, noted that polling was done before the September release of Huawei Technologies Co. Ltd. CFO Meng Wanzhou from Vancouver and Canadians Michael Kovrig and Michael Spavor from Beijing. As such, the results “bear the full impact of nearly three years of bilateral tension.”
The survey, while noting the Canadian brand remains strong in the Chinese market, stated that the situation in 2021 surrounding the anger created by the Huawei case made business activities between Canada and China increasingly challenging – especially for industries not aligned with Beijing’s sometimes controversial policies.
“The operating environment is ever more difficult, because it’s also more political,” the poll concluded, adding that China’s decision to essentially close its doors to any foreigners’ plans for physical travel (due to a zero-COVID policy) further impedes business interaction.
Part of the challenge can be seen in the survey’s participants.
According to the report, only 8% of the respondents self-identified as Chinese companies operating in China, which highlights the aversion of many on China’s side to do business in Canada as relations deteriorated. As such, officials said they focused the survey on its 236 Canadian respondents.
Not surprisingly, a similar drop in interest in doing business with China was shown – even as the Chinese markets’ place in the global strategy of Canadian firms remains “prominent.”
Compared with the CCBC’s 2020 interim report, China is now identified as a Canadian company’s top global priority for only 21% of respondents, down from 26% last year. The Chinese market’s place as a “top-five” priority global market for Canadian companies also dropped, with 48% now agreeing with that assessment – down from 51% last year.
The overall sentiment of doing business in China had already been dropping prior to the pandemic, the survey showed. CCBC said the percentage of companies saying they’ve improved profitability versus the prior year fell from 33% in 2017 to 25% in 2019.
The percentage of companies that saw profits decrease grew to 21% from 14%.
“There’s no sugar-coating it, it has been a tough three years,” said CCBC president Graham Shantz. “I’ve dealt with Canada-China relations for decades, so I can say with some experience that the last three years have been the lowest point in the bilateral relationship.”
Shantz noted that things have improved since the return of Meng, Kovrig and Spavor, but for trade and investment to resume with a country as centralized in its political structure as China, there needs to be more government-to-government talks to promote the return of private-sector interaction.
The ongoing travel bans – where anyone visiting China will be required to quarantine for at least three weeks (two at the port of entry and one at the final destination) regardless of vaccination status – don’t help, he added.
The survey showed that, even if travel portals reopen, the bilateral relationship between China and western countries will play a key role in Canadian business decisions to take the plunge. According to the 2021 survey, Canada-China relations and U.S.-China relations ranked first and second among the challenges cited by respondents about doing business in the Chinese market, a stark change from 2019’s survey when neither reasons even made the list of top 15 concerns.
But the survey closes on a positive note.
It points out that companies already in China – especially those that are in line with Beijing’s policy objectives and priorities – are growing. That, the report concluded, may provide the backbone of what a future Canada-China business relationship will look like in the post-COVID world.
“Despite the difficulty, companies with an in-China presence are not only doing fine, they are planning on expanding,” the survey said. “China is determined to become the world’s largest economy, which creates this environment for growth.”
The full survey results can be found at ccbc.com/canada-china-business-survey-2020-2021-results. •