Special edition: Canada's plan to cut dependency on China and confront Beijing's foreign interference
Plus, what China thinks about Canada
Dear China watchers, thank you for tuning in to another issue. And to our news subscribers, welcome.
It always amuses me when Canadian news makes international headlines. It’s a truth universally acknowledged, that what interests Canadians might bore others. It's a constant challenge for Canadian journalists working for U.S. publications to pitch stories that can intrigue folks south of the border. Personally, I find Canada a fascinating middle power to observe as a China watcher.
For one, it’s home to one of the largest Chinese diasporas, a large part of whom have arrived in Canada only during the last two decades. But more importantly, it is the neighbouring country of Beijing’s largest competitor, the United States. Its close relationship with the U.S. in trade, and academic research makes it a primary target for Chinese interference attempts dating back to the early 1970s, as pointed out in a recent story from The Globe and Mail. According to the article, in 2007, former Chinese diplomat Chen Yonglin, who defected to Australia, described Canada as a “second priority” for Chinese intelligence, next only to the U.S.
For the past couple of months, allegations of Beijing’s foreign intelligence have dominated the middle power’s public discourse. (Our friend Australia went through something similar five years ago) Most recently, in a Global News story, a sitting politician allegedly advised a Chinese diplomat to delay freeing two Canadians held by Beijing in private. The accused liberal MP Han Dong resigned from his party hours after the story came out. (The publication did say it approached Dong for a quote weeks before the publication time) Canada is facing a crucial turning point in its handling of China's overseas operations within its borders, and it's possible that we are witnessing significant historical moments in the making.
I’m dedicating this week’s issue to one of my favourite middle powers to watch. Readers from other middle powers, I'm curious, have you noticed similar developments in your own country?
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On the Hill
One Key Message: On Tuesday, Finance Minister Chrystia Freeland rose in the House and delivered the 2023 federal budget. Despite the media leak that came out before the official announcement, the sharpened language toward authoritarian regimes in Freeland’s key message still surprised me.
“At the same time, Putin and the pandemic have cruelly revealed to the world's democracies the risks of economic reliance on dictatorships. As a result, our allies are moving quickly to friendshore their economies and build their critical supply chains through democracies like our own….This is not hyperbole or mere turn of phrase. When President von der Leyen stood in this House earlier this month, she said that she wants Canada and Europe to “join forces for the climate, for our economies” and to end what she called Europe's “dangerous dependencies” on authoritarian economies.”
*If you're scratching your head about the meaning of 'friendshoring', you're not alone. According to the World Economy Forum, Friendshoring’ is a growing trade practice where supply chain networks are focused on countries regarded as political and economic allies. The word appears frequently throughout the budget.
The full speech from Freeland is here:
While the 25-minute speech makes no reference to China and only Russia, the key message should have all the attention of my fellow China watchers: The budget will enable Canada to join the U.S. and other democratic nations in adopting eco-friendly economies and decreasing reliance on authoritarian regimes namely China in terms of the supply chain. Because Canada has extensive natural resources, including oil, breaking ties with Russia would likely be less complicated than doing so with China.
We will delve more into this later under the business section.
But for now, let’s look at some responses to the budget from a couple of powerful opposition MPs.
Mr. Jagmeet Singh (Leader of New Democratic Party):
“Mr. Speaker, we need to fight the climate crisis like we actually want to win. There is an incredible opportunity. If we make the right investments to tackle the climate crisis and tie that to good jobs, good union jobs and good wages, we can actually create positive economic growth. We did that in this budget. We forced the government to have strings attached to investments so that any dollar that goes to a company has to be tied to guarantees for good wages, good salaries and good union jobs. Will the government commit to having strings attached to good jobs, good pay and union jobs for any future investments to incentivize business?”
Hon. Pierre Poilievre (Leader of the Opposition, Conservative)
“ Mr. Speaker, I will read what the minister of inflation stated last year: ‘On this point, let me be very clear. We are absolutely determined that our debt-to-GDP ratio must continue to decline...This is a line we will not cross.’ One year later, she has missed the mark. That is important, because she already admitted a few days ago that deficits would fuel inflation. Today, she tabled a budget of CA$43 billion in additional spending that will be paid for by taxes and result in inflation. The Conservative Party will always work for those who work. That is why we will vote against the Liberals' inflationary plan.”
In summary, the NDP is generally pleased with the budget the Conservatives are not.
Friendshoring; supply chains; trade dependency; conciliatory approach
The 2023 Canadian federal budget, which came out shortly after U.S. President Joe Biden wrapped up his two-day Ottawa visit, contains stronger language than that of previous ones in terms of “decoupling”. The change in tone reminds me of Canada’s recent Indo-Pacific policy, which describes China as “an increasingly disruptive global power”.
Under Chapter 5 Canada’s Leadership in the World, the government of Canada says the following:
“Depending on dictatorships for key goods and resources is a major strategic and economic vulnerability. The world has seen this over the past year with Russia’s attempts to break European resolve by cutting off natural gas supplies. Our allies are moving quickly to protect themselves from economic extortion, which includes friendshoring their economies by building their critical supply chains through other democracies.”
The word “China” appeared 13 times in the document.
After reviewing this lengthy report, from the perspective of a China watcher, the following paragraph is what I find most interesting:
“In the years to come, Canada will contend with two intertwined global economic shifts: first, the accelerating global race to build net-zero economies and the industries of tomorrow; and second, a realignment of global trade patterns as democracies move to friendshore their economies by limiting their strategic economic dependence on countries like Russia and China.” P4
The keyword here is 'intertwined', as it encapsulates the current predicament faced by many democratic middle powers. While they seek to transition to a clean economy, their heavy dependence on goods from China complicates that effort. As pointed out in the budget, “China currently dominates key portions of supply chains for clean technologies, including batteries”
For what it’s worth, I do applaud the Liberal government’s determination to become a global clean energy leader while relying on domestic sources. Ottawa’s so-called “made-in-Canada” plan has three highlights:
Generous tax credits for green electricity and other cleantech;
A recognition of Canada’s rich reserves of critical minerals that underpins a lucrative battery supply chain.
Financial commitments to domestic workers.
Here are some numbers if you are curious:
But to what extent, will Canada reduce its reliance on China? You might ask. In an interview with the Financial Times, the Canadian minister of natural resources Jonathan Wilkinson indicated that Ottawa would take a “more conciliatory approach” to China. “But that doesn’t mean we’re not going to buy solar panels from China. It doesn’t mean we’re not going to buy wind turbines from China,” Wilkinson noted.
This is a quintessential dilemma often faced by a middle power between the U.S. and the PRC. As Wilkinson stated in the FT article, when Canada and Europe pivot away from China, it’s difficult for smaller powers to compete with the domestic bandwidth of a superpower like the U.S. And a supposedly win-win situation could easily turn into a “one country winning” scenario for a smaller power. Needless to say, they are only more likely to adopt a comprehensive decoupling plan if they have to contend with two rival superpowers simultaneously.
Other smaller segments in the budget relating to China include a total CA$65 million fund to combat foreign interference as well as introducing legislation by 2024 to “eradicate forced labour” from Canadian supply chains.
Important caveat: there’s no apparent KPI in the document so it’s hard to predict how the Canadian government will perform on these goals.
Canada in China’s eyes
* Disclaimer: This goes without saying but the following excerpts are from state-owned Chinese media and may contain misinformation. However, they provide readers, especially Canadians, with a glimpse into how state media views Canada.
“On Friday, Canada announced that it was planning an investment of up to $250 million to "improve North American competitiveness and supply chain resiliency, help cut pollution, and foster economic and national security"; words that could have come from mouths in Washington. While it may sound highly principled, he is just fishing for economic benefits from the US and trying to prop up Trudeau's support at home.”
“Actually, Canada has many interests in common with China. Currying favor with the US and doing Washington's bidding will only further sour Canada's ties with China, its second-largest trade partner, and end up undermining its own interests.”
“Canada has eased its ban on residential property purchases by foreign buyers three months after the law came into force. A series of amendments were introduced on Monday to expand exceptions to the regulations. As of March 27, those who hold a work permit or are authorized to work in Canada under the Immigration and Refugee Protection Regulations will be allowed to purchase residential property.”
“At the 18th council inauguration ceremony of the Confederation of Toronto Chinese Canadian Organization (CTCCO) in Toronto on March 26th, CTCCO President Wu Guoning stated that they oppose any deliberate smear campaign or false reporting against the CTCCO and the Chinese community, and no one should view anything with a racist or ideological bias.”
“当地政、商、侨等各界人士近千人出席活动。安大略省议员Aris Babikian，万锦市市长Frank Scarpitti， 列治文山市市长 David West等出席并向新一届理事会表示祝贺。”
Parliamentary Committee; former diplomat; Han Dong
The Q&A between Politico and Paul Maddison, a former Canadian diplomat and now Director of the UNSW Defence Research Institute in Australia, deserves more media attention. The brief but highly informative conversation was based on foreign interference. Having witnessed both Canada's ongoing reckoning with Beijing's foreign interference and Australia's model for resisting such tactics, Maddison offers an invaluable perspective.
“My message to Canada was that we really need to be paying attention here, because the assumption should be that whatever's happening here is happening in Canada as well. If the consulate in Melbourne or in Sydney is active in the Chinese language and media, and shaping opinion and active at the state level, at the party level, then we should assume this is happening in Vancouver and Toronto as well.”
“When I talk to my friends, and I frequently do, in Canada, the level of frustration is just so high and almost a feeling of helplessness — watching Canada kind of fail to reach up towards the government's most important responsibility, which is defending sovereignty, protecting those values that we hold so dear.”
To file or not file: In the latest development regarding the MP's alleged involvement in Beijing's foreign interference, Dong has issued a notice of libel suits to Global News, the outlet that published the two most damaging reports. He provided the notice to Canada's national broadcaster, demanding a retraction and apology.
In a later wire story on the same day, the Canadian Press stated that Han Dong had not filed a statement of claim in court. Here’s what Global News said in response: “We are very mindful of the public interest and legal responsibility of this important accountability reporting,” Rishma Govani said in a statement.
It’s worth noting that Dong’s supporter Michael Chan, a former Ontario cabinet minister, also filed a lawsuit against The Globe and Mail in 2015 over similar but not as damning articles. The Globe’s series of stories noted that Canadian intelligence agents had expressed concerns about his "unusually close ties" to Chinese officials. Chan also threatened to sue then-MP Jason Kenney who has criticized him harshly in the media.
Finally, here’s a hot take from Matt Gurney, co-founder of The Line, a Canadian substack.
Sounding the alarm: On Friday, a rare group of six witnesses were called to the parliamentary committee on access to information, privacy, and ethics to provide their expertise on foreign interference. The two-hour session mainly focused on China, which was recognized by almost all the witnesses as the biggest player in foreign interference in Canada.
Sam Cooper from The Global, has a great piece summarizing some key recommendations from the witnesses.
In addition, here’s one noteworthy exchange:
From Liberal MP Parm Bains: “And how as MPs can we protect ourselves from bad actors when we aren't provided with the tools? So I think one of the issues is even if we proactively reach out to whether it's public safety agencies or anyone, and we try to ask who do we stay away from? That information isn't shared, because, quite frankly, it could compromise something. So what can we do as MPs?”
In response from Artur Wilczynski, who has over 30 years of experience in Canadian foreign policy, intelligence, security, and defence issues. “Well, I think having these kinds of sessions is profoundly important and having officials both current and previous from the national security and intelligence community to share what they can in a public environment about what the threat is. Personally, I've also believed that there can be far more transparency from Canada's security and intelligence communities. We can and have the ability to speak to the public parliamentarians and to others about the issues of foreign interference. ”
Military: HMCS Montréal and a supply vessel has left Halifax for a 6-month deployment to the Indo-Pacific region. Canadian defence analyst Ken Hansen said in the CBC article there has been growing concern over the years about China's activities in the South China Sea. "It looks like finally the political and military impetus is strong enough to get governments looking at the maritime security situation [there]".
Tibet: The BC Liberals are asking for a review of foreign interference at the legislature over the Chinese consulate's complaint about a Tibetan official's visit. They are investigating if this complaint affected the decision to exclude a group of Buddhist monks, including those from Tibet, from a cultural event.