What happened while I was away
MiddlePowers returns: key insights on China-Canada Relations
Greetings to all my fellow China watchers,
It's been quite a while since my last message landed in your inbox. The past few months have taken me on a personal journey. Kicking off a project on Substack came with its fair share of challenges. But I’m proud to say that during this break, other than taking on a few media interviews, I've engaged in numerous insightful conversations with other fellow writers who have generously shared with me their path to success. And now I’m more than excited to plunge back in and share more insights and analysis on China.
While I was away and quietly watching the middle powers and Beijing interacting from the back seat, my attention was locked on the China-Canada relationship. It seems that I’m not the only one that finds the relationship fascinating to watch. For the past few months, Beijing’s interference in Canadian politics has dominated not just domestic but international headlines. It’s arguably the biggest story of the year in the Great White North and it doesn't seem it will go away any time soon.
As we noted in a previous CAN-CHN edition, the overwhelming media coverage of Chinese interference in a country closely linked to the U.S.---Beijing's primary rival, makes Canada a very interesting middle power to monitor for China watchers.
Thank you for your patience and support as I slowly reel back from this long break. This will be a one-off edition—a short one. We will discuss some of the biggest news while I was away and what to expect in the next little bit. Parliament will be back in session next week and we will continue with our usual posts.
—Lu
Diplomacy
The takeaway: As the Chinese interference story was dominating domestic headlines in Canada, diplomatically, the fraught relationship between Beijing and this middle power has hit a new low. Both countries have taken the unprecedented step of expelling diplomats amidst a growing diplomatic dispute. Could this mean a new chapter of the relations between the two countries?
How it started: In May, a Globe and Mail story unveiled a top-secret investigative report by Canada's intelligence agency. The report, according to the news article, highlighted a wide range of Chinese intelligence operations, notably, Zhao Wei, a diplomat at the Chinese consulate in Toronto, allegedly working on efforts to threaten the family members of Conservative MP Michael Chong.
As expected, this caused quite a stir among Canadians.
Trudeau and his foreign minister Mélanie Joly diffused the possibility of expelling the diplomat in question, citing a lack of clear evidence and risks of retaliation from Beijing.
But it didn't quell Conservatives’ calls for an expulsion in the parliament as the cabinet might have hoped. In fact, shortly after Canada’s national public broadcaster CBC ran a story titled “How to kick a diplomat out of Canada”, the Canadian government declared Zhao a “persona non grata”, exactly as the news article has suggested.
Note*: Persona non grata is a Latin phrase meaning "person not welcome" and as the CBC article noted, this is a formal act of expulsion defined by the Vienna Convention.
What I told the Globe: What does this mean for Canada-China relations? That is the question that most Canadian critics and politicians grappled with for the following days. On the same day, when Ottawa expelled the diplomat I was reached out by the fantastic James Griffiths at The Globe and Mail.
As I told Griffiths, I do think that the golden age that began under Prime Minister Pierre Trudeau is now over, and both countries will need to explore a new way to re-engage.
A slow disengagement: Four months after Ottawa's expulsion, Beijing expelled a Canadian consul in Shanghai and excluded Canada from its approved international travel destinations for tour groups—actions which the media referred to as “tit-for-tat” retaliations. Nevertheless, the wrath that many had feared never really occurred. Instead, we have been witnessing a very steady but consistent withdrawal.
It’s worth noting that this new chapter unfolds not only in diplomacy but also in trade, domestic politics, and their ties with middle powers in the Indo-Pacific and, of course, the United States. I will be here monitoring it all with you.
Finance
Big move: Canada suspended activities at the Asian Infrastructure Investment Bank, a China-led development bank.
How it started: I have to say the following reads like a plot from a novel. Bob Pickard, a former communications head at a Beijing-based development bank, said he high-tailed out of China after posting the following tweet announcing his resignation from the bank.
https://twitter.com/BobPickard/status/1668912951561011201
This led to an immediate halt on all government-led activities on Canada’s side. Here’s an interesting quote from Canada’s Finance Minister Chrystia Freeland within hours of the event.
“However, as the world’s democracies work to de-risk our economies by limiting our strategic vulnerabilities to authoritarian regimes, we must likewise be clear about the means through which these regimes exercise their influence around the world.”
More about AIIB: Primarily backed by China, the bank has numerous regional members in Asia, including democratic middle powers like South Korea, New Zealand, and Australia, despite U.S. discouragement.
The latest: This Thursday, three ex-employees of AIIB refuted Pickard’s allegations in The Globe and Mail. Other middle powers have yet to join Canada in pausing its involvement.
Critical Minerals
The one to watch out for: Will Canada shake China’s dominance in critical minerals?
Supply Chain: Autocracy seems to be a buzzword for politicians these days in trade talks. Prime Minister Justin Trudeau said in April that Canada aims to establish reliable networks as “autocracies around the world are using supply chains to their advantage.”
The sharpened language is paired with effective policy and financial commitments from the Canadian government. As we mentioned earlier, this year's federal budget outlined lofty goals of becoming a global clean energy leader with domestic resources. In April, the federal government pledged $13 billion in subsidies to secure a Volkswagen EV factory in Ontario.
While the private sector for the past few months seems to share the government’s vision, some have encountered a few stumbling blocks. For example, a successful mining prospector named Lone wolf Mike Tremblay who was featured in The Globe and Mail, highlighted the omniscient power of China in his trade. The article points out flaws in the current system which makes the country susceptible to foreign firms with ties to authoritarian regimes like China.
That being said, Manitoba, a Canadian province, has doubled its mining exploration spending and released a critical minerals strategy aiming to reduce the country’s dependence on China.
Why this matters: Canada's advancement in critical minerals is a crucial area to monitor because its significant deposits of key minerals hold relevance for allies such as the U.S. and South Korea. Although it may take years, even decades, to convert them into operational mines, pursuing this long-term goal is imperative. Both Taiwan and China invested considerable time to establish their dominance in this field.
What’s next: Prime Minister Justin Trudeau's administration is to unveil a plan by year-end to simplify the permitting process for mining projects. This move is in line with the U.S. and its allies' efforts to expedite the production of critical minerals in North America.