Trudeau’s China problem starts at home

Prime Minister Justin Trudeau faces a delicate task on this week’s China trip: convince Beijing it needs more Canada at a time when Canadians are questioning whether they want more China.

The history-laden trip—Trudeau’s father was the first Canadian prime minister to visit the People’s Republic of China in 1973—comes as Canada grapples with stubbornly slow economic growth, with GDP suffering its biggest drop since 2009 in the second quarter thanks to the wildfires that disrupted Alberta’s oil and gas operations (a backhanded reminder of oil’s importance to the Canadian economy and the potential opportunities afforded by China’s interest in taking it off our hands). So it’s no surprise Trudeau and Trade Minister Chrystia Freeland have agreed to launch a feasibility study on a China-Canada free trade deal, part of an overall commitment to deepen relations. China, after all, is already Canada’s second-largest trading partner behind the U.S. and, despite its slowing growth, remains on track to one day eclipse America as the world’s largest economy.

At the same time, however, polls repeatedly show Canadians’ enthusiasm for China is on the wane. A 2015 survey by Pew Research found the number of Canadians who held a favourable impression of China fell by 19 percentage points to 39 per cent, compared to 10 years earlier. A more recent Ekos poll, commissioned for the Asia Pacific Foundation of Canada, found Canadians are essentially split on the notion of a free trade deal with China and hold serious concerns about certain aspects of Chinese investment, particularly the flood of hot Chinese money that’s believed to be contributing to a housing affordability crisis in Vancouver and Toronto.

The competing viewpoints have led to some seemingly contradictory policies. In August, Immigration Minister John McCallum visited China to lobby for more visa application centres needed to lure tourists, temporary workers and university students, who often subsidize their Canadian peers by paying up to three times as much for tuition. That was the same month the B.C. government hastily slapped a 15 per cent tax on (mostly Chinese) foreigners who buy homes in Vancouver.

David Mulroney, a former Canadian ambassador to China from 2009 to 2012 and the current president of the University of St. Michael’s College at the University of Toronto, says Canada’s awkward relationship with China and its money isn’t surprising given Ottawa’s incoherent, on-again, off-again China policy over the past decade. “We’re getting caught now because we weren’t paying attention” he says of the current backlash to Chinese investment in the real estate sector. “There’s this great explosion of wealth coming out of China and people are looking to have a second address because they’re not confident they can protect their fortunes. Of course, some of that money was going to end up on Canada’s doorstep.”

Former prime minister Stephen Harper’s government has been blamed for allowing Canada’s “strategic partnership” with China to wither after first coming into power in 2006. But while Harper initially seemed to take a hard line on human rights with Beijing, his tone quickly changed in the wake of the 2008 financial crisis when it became clear that Canada had become increasingly reliant on China’s ravenous appetite for raw materials—including oil—to fuel growth. Even so, it was far from a consistent approach.

In addition to opening up new economic opportunities, Mulroney says Trudeau’s promise to “reset” Canada’s relationship with China may help smooth out some of the lumps that are currently giving Canadians indigestion. For example, he says a closer working relationship might be used to develop mechanisms to transfer money legally between the two countries, allowing authorities to track who’s buying what and where. By contrast, the B.C. government crafted its controversial foreign buyer tax after looking at a few weeks of data that suggested as many as one out of every 10 homes in the region were being purchased by people offshore.

Mulroney offers another example of an ill-informed China policy: Ottawa’s recently shuttered immigrant investor program, which essentially allowed wealthy Chinese to gain permanent resident status in exchange for an interest-free loan of $800,000 to the province where they planned to live. Many who took Canada up on the offer bought expensive real estate in Vancouver, parked their families there and paid little or no income tax because they continued to work and, ostensibly, reside overseas (at least for tax purposes). “We were putting our passport on sale and then complaining bitterly when people weren’t coming out of love or devotion [to Canada],” Mulroney says.

Such missteps are inexcusable for a country that now counts ethnic Chinese as its largest immigrant group and China as its fastest-growing trading partner. Mulroney blames it on a lack of China competency. While countries like Australia, New Zealand and even the U.S.  put increased emphasis on Mandarin language training, in-China work experience programs and even ensuring a degree of China knowledge within the senior ranks of the public service and on corporate boards, Canada’s understanding of China and its myriad nuances still appears to be guided by happenstance and the occasional trade mission. Even in Vancouver, Canada’s Asia-Pacific Gateway, there’s concern that local businesses are missing out on a potentially huge opportunity overseas. “The local businesses don’t really have a clue of how to deal with business in China, especially when it comes to digital marketing,” Kevin Li told China’s Xinhua news agency when asked why he helped put together a recent e-commerce-themed Canada China Trade Conference. “They don’t know how to generate interest, or get attention, and communicate with the Chinese consumers.”

There are, of course, legitimate reasons to be wary of China. Beijing has repeatedly ignored calls to improve its record on human rights and appears to be in the process of militarizing the contested Spratly Islands after an international court ruled against its territorial claims in the South China Sea. On the economic front, meanwhile, there are concerns about allowing unfettered investment by Chinese state-owned companies given that China has been accused of cyberattacks that have targeted Canadian government departments and Canadian firms. China’s foreign minister also embarrassed the Trudeau government by lashing out at a journalist who asked a question about China’s human rights record at press conference in Ottawa, all while foreign minister Stéphane Dion limply looked on.

Yet, as the concern over China’s influence on Canada’s all-important housing market demonstrates, we can no longer afford to engage China only when it suits us. Says Mulroney: “They’re going to engage us whether we want it to happen or not.”