All eyes were on China’s 20th National Congress of the Chinese Communist Party last week, especially on the expected tradition-breaking third term for Xi Jinping.
From hundreds to millions of people in some sort of COVID lockdown, to the delay of third-quarter economic numbers, the country did everything it could to ensure the important set of meetings went smoothly.
What comes next? And where is Canada in its relations with China?
A year ago when Meng Wanzhou, Michael Kovrig and Michael Spavor returned home, many predicted that even if a return to “normal” wasn’t in the offing, there would at least be increased bilateral interaction. However, interaction remains minimal, with a couple dozen frozen dialogues still very much on ice.
This is a pity, because it puts Canada on the back foot relative to its like-minded competitor countries. Take the U.S., which has been encouraging Canada and other allies to join it in opposing China on many fronts. My U.S. colleagues tell me that U.S.-China relations are worse than they’ve ever been, yet the U.S. sends nine per cent of its exports to China, while Canada sends only 4.5 per cent of its global exports there. Key products that are in demand by China’s growing middle class, like pet food and meat, are moving smoothly from the U.S. but are encountering market access issues from Canada. There is no good reason for this, but as U.S. officials frequently meet with their Chinese counterparts, I expect the U.S. is demanding its voice be heard, and we are not.
While 4.5 per cent of Canadian exports going to China doesn’t sound like a lot, it is seven times the country’s exports to India. The ranks of middle-class Chinese are growing, consuming and are interested in Canadian products and services, and while products like seafood, meat and grains are top of mind, let’s not forget that educational services are Canada’s No. 1 export to China and one that, pre-pandemic, helped 140,000 young Chinese citizens each year better understand how we do things in Canada.
Education is a great example of diversification, with Chinese students making up only 26 per cent of international students in Canada. A study commissioned by the Canada China Business Council (CCBC) in 2021 shows that exports to China create value to Canada of at least 2.2 times the actual export dollars, and China accounts for one-third of global growth, meaning that each year it creates demand equivalent to a Saudi Arabia or two Malaysias (or a new Canada every three years). Growth in China outstrips that anywhere else in the world, so while companies are diversifying, they also know that finding demand equivalent to China’s is not easy.
Canada’s prosperity depends on it engaging with as many countries as possible, including (and especially) China. We often hear that Canada is a trading nation, and our 66 per cent trade-to-GDP ratio puts Canada behind only Germany among G7 economies. That ratio in the U.S. is only 25 per cent; we are much more dependent on trade with the world, so it’s incumbent on us to be competitive everywhere we do business, including China.
And that’s the problem: Canada’s competitiveness lags behind like-minded Western countries when it comes to China. For many industries, business with China is not going well, as shown by CCBC’s 2021 business survey. Canadian companies are less profitable and less optimistic than their counterparts in the U.S., Europe and the U.K. Companies in those countries are being granted market access and are breaking down barriers, while Canadian companies have little hope of catching up as long as bilateral channels remain frozen. China’s zero-COVID policy, which disrupts regular business travel, also disproportionately impacts Canadian firms, many of which rely on travel for business development. Companies with teams and operations in China are faring better.
Resumption of bilateral discussions is the only way Canada can hope to catch up. Many of the frozen dialogues allow us to voice concerns on security, interference and other issues. One of the easiest – and for the business community, the most important – is the resumption of the Canada-China Economic and Financial Strategic Dialogue, which will help both governments address a growing list of commercial challenges, many of which can easily be crossed off the list if such dialogue takes place.
China is a complicated country, with many issues that Canada rightfully disagrees with. Canada needs to make a conscious choice to engage and use its relationship with China to explain its point of view, to push on issues it feels strongly about, but also to build the country’s prosperity. A bilateral relationship with such a large country needs to encompass multiple tracks, including channels that allow us to share with China why Canada sees things differently.
Speaking out on issues is important, but even more important is speaking with China on these issues. While returning to business as usual may not be possible, reopening channels of communication and engaging in productive dialogue needs to happen.
We can fight for what we think is right, while also fighting for our own position. If we’re falling behind our competitors in profitability and market access in China, it will impact our competitiveness everywhere in the world.
Sarah Kutulakos is the executive director and COO of the Canada China Business Council.
