BCBusiness

SEptEmBER 2018 BCBusiness 41 science professor Xiaojun Li. Making things worse is what Evans sees as Ottawa's lack of direction in its foreign policy. "At this stage, Canada does not have a China or Asia policy. Ottawa doesn't even have a foreign policy," says the professor at the Institute of Asian Research, where he serves as interim research director. "Our bandwidth is taken up by our relationship with the U.S. The NAFTA negotiations have trumped everything." As much as Canadians fear China, wor- ries over the North American Free Trade Agreement help explain a surge in their support for negotiating a bilateral free trade agreement (FTA) with the country: 69 percent of the UBC survey respondents were in favour. Even taking methodološy di…erences into account, this represents a big jump from surveys by Vancouver-based think tank the Asia Paciœc Foundation of Canada, which found that, in 2014 and 2017, only 36 percent and 55 percent of Canadi- ans, respectively, supported an FTA. But a deal remains a long way off because Canada's focus on human rights, labour and national security issues will prevent a full blossoming of economic ties with China. Even for businesses that sup- port a closer relationship, China presents a formidable barrier, starting with cul- tural and language di…erences. According to federal agency Export Development Canada, Canadian œrms are most worried about China's opaque legal system, lack of intellectual property rights protection and rising labour costs. THE VALUE OF CHINESE TRADE AND INVESTMENT What's at stake for the Canadian economy? From 2008 to last year, trade between Canada and China grew by an average of 5.3 percent annually, according to Sta- tistics Canada, from $44 billion to nearly $74 billion. But over the same decade, as the Chinese economy quadrupled in size, Can- ada's exports to China merely doubled, to $27.3 billion. Despite the lure of China's huge and growing market, Canada remains addicted to the U.S., which absorbed 75 per- cent of its exports last year. More telling is the plunge in Chinese foreign direct investment (FDI) in Canada, from a peak of nearly $21 billion in 2013 to $7 billion last year, according to the China Institute at the University of Alberta (CIUA). CIUA director Gordon Houlden, a pro- fessor of political science, cautions that Canada would su…er if it stopped receiving Chinese FDI. "Not having access to Chinese capital will be a strong negative for the Canadian economy," Houlden says, point- ing out that China needs to reinvest the world's largest foreign exchange reserves, which now stand at more than US$3 tril- lion. "Given that we're a capital-importing country, that we have a massive territory and a small population, it will have a mate- rial e…ect on the value of our assets." Without fresh capital, Canadian assets across the board will decline in value, predicts Houlden, whose 36 years as a China watcher include postings as a Cana- dian diplomat in Beijing and Hong Kong. Chinese FDI is also important because it cre- ates opportunities for Canadian exports, he explains: "FDI brings market know-how and access to what will soon be the world's larg- est economy." Ultimately, less FDI will weaken the Canadian economy and lead to lower liv- ing standards. But that isn't Canada's only worry. Capital is f leeing the country's increasingly uncompetitive and unattract- ive business environment, the chief execu- tives of BMO Financial Group and Royal Bank of Canada told the Canadian Press in recent interviews. As the Canadian e conomy slow s down over the next few years, and rela- tions with Trump's A merica remain uncertain, China will come into sharper focus. Canada's need for economic diversiªication, especially toward Asia, is happening just as Xi's China asserts itself. For Canada, will the China question become the China threat? CHINA'S TRUST DEFICIT Xi's government has been praised for tak- ing on more international responsibilities and defending the global free trade system, but it's also encountering unprecedented distrust from friendly countries that once welcomed closer political and economic ties with China. Australia and New Zea- land sent shockwaves around the world last year with angry accusations that Beijing has been interfering in their domestic poli- tics. Asian and African nations that have received substantial Chinese investments and loans wonder if their independence is at risk from further exposure to the world's second-largest economy. Canada is ahead of the pack in devel- oping China anxiety syndrome. In 2013, state-owned China National O…shore Oil Corp.'s (CNOOC) US$15.1-billion purchase of Calgary-based Nexen was nearly scup- pered by Canadians who believed Beijing would end up controlling their country's oil and gas industry. Those fears have power play Chinese president xi Jinping has been slowly con- solidating power while ridding his country of "corruption" COURtESY Of www.KREmLIN.RU

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