British Columbia
 wants closer business ties with China, but the superpower’s rise has prompted concerns. How much of a threat does Beijing really pose to this province?

As he moves to consolidate power at home, Xi Jinping is sowing doubt abroad. From Asia to North America, other countries were already questioning the motives of an increasingly aggressive China. Now President Xi’s  apparent war on corruption—a key justification for extending his rule indefinitely at last March’s National People’s Congress—has created a new China threat for business partners and even political allies.

For the world's benefit Beijing recently  put on display the arrest of several tycoons who controlled global empires, including Anbang Insurance Group chair and CEO Wu Xiaohui. Until their downfall, these billionaires were the face of the new China, building international relationships to help Xi realize his vision for the Belt and Road Initiative (BRI). The BRI is China’s US$1-trillion effort to link the economies of Asia, the Middle East, Africa and Europe, and key ports in Asia, the Arctic and the Americas.

In Canada, titan Anbang owned a stable of assets that the Chinese government reportedly seized after Wu’s conviction on fraud and embezzlement charges. Among them: B.C.-based seniors care chain Retirement Concepts and Vancouver’s Bentall Centre office complex. Anbang paid roughly $1 billion for Retirement Concepts in 2017, and the four Bentall towers have a similar value. While Wu is appealing the conviction and an 18-year jail sentence, Canadian stakeholders remain in the dark. (Pacific Reach Seniors Housing Management, which operates Retirement Concepts, did not respond to a request for an update.)

For British Columbians, these events have only created further anger about China, which faces widespread mistrust, even from countries eager to share in its vast wealth. B.C. seems to be fanning fears of a secretive latent Chinese menace to Canadian society.

Anbang isn’t the only Chinese company that has been shopping in B.C. Last year, over complaints that Ottawa skipped a full national security review, Shenzhen-listed Hytera Communications Co. bought Richmond-headquartered satellite manufacturer Norsat International. Meanwhile, China Minsheng Investment Group, a Shanghai-based firm launched by the Chinese government, successfully purchased the Grouse Mountain ski resort near Vancouver.

More recently, U.S. lawmakers warned that Chinese smartphone maker Huawei poses a security risk to Canada and its allies. Their comments follow a Globe and Mail investigation showing that Huawei has been developing 5G wireless technology with help from UBC and other Canadian universities.

Then there’s B.C. winemaker John Chang, who has been imprisoned in China since 2016.

Besides those news stories, the media churns out alarmist tales that put Chinese migrants and their offshore money at the heart of Metro Vancouver’s growing list of problems: unaffordable housing, money laundering, organized crime and the opioid crisis, even linking Chinese gamblers with financing for Iranian terrorists. 

China hasn’t taken all of this criticism sitting down. In a 2015 interview with the Globe, Liu Fei, the nation’s consul general in Vancouver, blamed Canadian regulators, not offshore buyers, for the city’s out-of-control real estate prices, although he has since been proven wrong.

Charges of Chinese malfeasance are far more serious now than during the first half of the 20th century, when B.C. was a hotbed of anti-Chinese sentiment. Back then, the province’s politicians and press accused them of taking jobs from white workers and importing an alien culture to undermine the young country’s European character, operating as 5th columnists. 

Today, influential voices openly state that Chinese Canadians are working for Beijing to infiltrate Canada’s political offices, corporations and universities to further the cause of the motherland.
Xi Jinping

Chinese President Xi Jinping has been slowly consolidating power while ridding 
his country of “corruption”

The China question

Where does all of this leave British Columbians on China? Divided and fearful, observers say.

Bill Tieleman, 61, emphatically has no desire to visit China. The Vancouver-based political consultant watches but is not moved by the  transformation of China within a generation. Over the course of Tieleman’s life, China has attempted to rise from the ashes of Chinese Communist Party founder Mao Zedong’s disastrous policies of the 1950s and assume its current role as global superpower regardless of its people still remaining in dictatorship and poverty except for members of the CCP and their families.

Tieleman sees it differently, especially after receiving death threats in 2008 for calling for a boycott of Chinese products. Communist China has yet to evolve from a backward totalitarian state. Its attempts to show the world have resulted into a modern “bizarre bastardization of Western culture, capitalism, authoritarianism and environmental degradation,” he maintains.

“The Chinese people deserve much better than this,” the NDP supporter says over coffee. Worse, he asks, what if other developing countries adopt the China model, which combines political repression and environmental destruction with the pursuit of economic growth at all costs?

That assessment has growing support across the political spectrum. The Conservative Government of U.S. President Donald Trump calls China an evil threat in its latest National Security Strategy and World Trade Organization compliance reports. Even Trump’s bitterest opponents on the left agree. Democratic Senator Elizabeth Warren describes America’s decades-long policy on China as “misdirected” for having failed on human rights while allowing the theft of U.S. technology and knowledge to aid the rise of its Chinese strategic rival. For the European Union, China’s appetite for tech and infrastructure companies adds to the trading bloc’s growing list of complaints about unfair Chinese trade practices, awkward even restrictive business conditions for foreign firms.

Asian countries, including those friendly to China, suspect the geopolitical ambitions of President Xi, who recently abolished the two-term limit that would have seen him leave office in 2022. Combined with his ousting and sidelining of potential rivals, this move paves the way for Xi to become ruler for life, ostensibly so he can make China the world’s most powerful country.

The limits of pragmatism

Some of B.C.’s political, business and academic circles have been pushing for closer ties with China, saying that Canada has little choice but to engage the Chinese power, they also sought a piece of the fast-growing Chinese market to reduce overreliance on the U.S. But Canadians remain wary of,  the idea that China might exert more influence on their society through a Faustian exchange for economic growth. Canadian surveys show that the public prefers the status quo.

Canadians deeply distrust the Chinese political system, according to a poll released last October by UBC’s School of Public Policy and Global Affairs. Only 26 percent of respondents held a favourable view of the country. The 57 percent with an unfavourable view saw China through the lens of recent scandals: rising housing unaffordability, industrial espionage, cyberattacks, job insecurity and challenges to Canadian values. The remaining 7 percent were undecided.

“China remains a source of concern and anxiety,” says Paul Evans, an international relations expert at UBC, who designed the survey with political science professor Xiaojun Li. 

Making things worse Evans says Ottawa doesn't have direction in its foreign policy. “At this stage, Canada does not have a China or Asia policy. Ottawa doesn’t have a foreign policy,” says the professor at the Institute of Asian Research, where he serves as interim research director. “Our focus is taken up by our relationship with the U.S. our biggest trade partner. The NAFTA negotiations have superseded everything.”

But a deal remains a long way off because Canada’s focus on human rights, labour and national security issues prevents economic ties with China.  China presents a formidable barrier, starting with cultural and language differences. According to federal agency Export Development Canada, Canadian firms are worried about China’s opaque legal system, lack of intellectual property rights protection and rising labour costs.

The value of Chinese trade and investment

From 2008 to last year, trade between Canada and China grew by an average of 5.3 percent annually, according to Statistics Canada, from $44 billion to nearly $74 billion. But over the same decade, as the Chinese economy quadrupled in size, Canada’s exports to China merely doubled, to $27.3 billion.  The  neighbouring US market still has favour.

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 professor of political science, cautions that Canada would suffer if it stopped receiving Chinese FDI. “Not having access to Chinese capital will be a strong negative for the Canadian economy,” Houlden says, pointing out that China needs to reinvest the world’s largest foreign exchange reserves, which now stand at more than US$3 trillion. “Given that we’re a capital-importing country, that we have a massive territory and a small population, it will have a material effect 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 Canadian diplomat in Beijing and Hong Kong. Chinese FDI is also important because it creates opportunities for Canadian exports, he explains: “FDI brings market know-how and access to what will soon be the world’s largest economy.”

Ultimately, less FDI will weaken the Canadian economy and lead to lower living standards. But that isn’t Canada’s only worry. Capital is fleeing the country’s increasingly uncompetitive and unattractive business environment, the chief executives of BMO Financial Group and Royal Bank of Canada told the Canadian Press in recent interviews.

As the Canadian economy slows down over the next few years, and relations with Trump’s America remain uncertain, China will come into sharper focus. Canada’s need for economic diversification, especially toward Asia, is happening just as Xi’s China asserts itself. For Canada, does the China question become the China threat?
Wu Xiaohui

Wu Xiaohui, former chair and CEO of Anbang Insurance Group

China’s trust deficit

Xi’s government has been praised for taking 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 Zealand sent shockwaves around the world last year that Beijing has been interfering in their domestic politics. 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 developing China anxiety syndrome. In 2013, state-owned China National Offshore Oil Corp.’s (CNOOC) US$15.1-billion purchase of Calgary-based Nexen was nearly scuppered by Canadians who believed Beijing would end up controlling their country’s oil and gas industry. Those fears have turned out to be sound. 

Nexen’s ghost has returned in the form of hostile questions over state-owned Chinese firm CCCC International Holding’s (CCCCI) proposed $1.5-billion takeover of Canadian construction firm Aecon, which the feds blocked this past May. 

Opponents such Canadian Security Intelligence Service officials Richard Fadden and Ward Elcock warned that Beijing is seeking a role in Canada’s infrastructure-building program to spy on Canadians and to steal their country’s technology. 

Teck Resources is another Canadian company that has found itself on the defensive over its China ties. In 2016, the Vancouver-based mining giant appointed former Chinese government trade official Quan Chong, then a member of the National People’s Congress of China (NPC), to its board. 

Critics called Chong a security threat who would look out for China’s interests at Canada’s expense. Teck countered that his appointment would help the company better understand Asia, especially China’s market for natural resources.

So, why would China want to harm Canada, and, if so, how?

“That’s the thing. What exactly are we talking about?” asks Yuen Pau Woo, B.C.-based leader of the Independent Senators Group in the Canadian Senate. “When I read about allegations of Chinese infiltration, I’m always puzzled by the type of infiltration and influence that China is supposedly propagating,” says Woo, former president and CEO of the Asia Pacific Foundation of Canada.

When a foreign investor proposes to acquire a Canadian firm, Woo asserts, the deal should be assessed on whether it serves Canada’s interests. “We should take each case individually, and be very clear about what kinds of threats we consider unacceptable,” he says. “We should not discriminate against Chinese companies because they are Chinese companies and  state-owned enterprises.”

In an interview with BCBusiness before Ottawa nixed the Aecon deal, Yu Shanjun, economic and commercial chief of the Chinese consulate in Vancouver, called CCCCI’s proposed takeover “a normal business deal between two enterprises which should not be politicized. The concept of ‘national security’ cannot be boundlessly extended to serve as tool of trade protectionism.”

Although Canada has every right to subject mergers and acquisitions to security reviews, Yu said his government wants Chinese enterprises to be treated fairly.

Supporters of the Aecon deal claimed it would make the construction company more competitive and give Canadian firms a chance to bid on China’s BRI projects. While the Chinese embassy in Ottawa was promoting the BRI in a series of events in Canada last year, a Richmond winemaker was languishing in an unknown jail in China. John Chang and his wife, Allison, of Richmond-based Lulu Island Winery were arrested in Shanghai in March 2016. She has since been freed, but he remains incarcerated.

In an email, Chang’s lawyer, Daniel Brock of Fasken Martineau, said he was not at liberty to discuss the case. In his last public statement, in May 2017, Brock denounced the couple’s arrest as “inconsistent with international trade law.” For his part, Yu hinted that this is not a straightforward commercial dispute as portrayed in news reports. 

While Chang’s guilt remains to be proved, the prolonged lack of information about the case and his reported poor health have been a public relations disaster for China, adding to the trust deficit it suffers with Canadians. 

Despite these concerns, B.C.’s year-old NDP–Green Party government is stepping up its efforts to expand trade and investment ties with China. In May, Minister of State for Trade George Chow announced a renewed focus on Hong Kong, which is set to grow in importance, given Beijing’s plan to expand the hinterland around one of the world’s leading ports. 

With the rise of the so-called Greater Bay Area, encompassing Hong Kong and the mainland cities of Guangzhou and Shenzhen, B.C. expects to build on the $200 million worth of investments it has attracted from Hong Kong businesses over the past five years, Chow says. In 2017, B.C.’s exports to Hong Kong rose 12 percent, to $221 million. The province’s Hong Kong trade office is hoping to attract investments in B.C. from firms in the Hong Kong region specializing in technology, mining, farming, seafood and research. 

If the trade office attracts more Chinese investors to B.C., how will the province deal with Metro Vancouver’s already stretched housing supply? Will the focus on technology and research investments increase the risk of Chinese espionage and intellectual property theft in Canada?

Acknowledging that the NDP-Green government “doesn’t have a good handle” on the housing challenge, Chow says his focus is on boosting trade and investment to create business opportunities and jobs for British Columbians. His ministry’s role is to promote B.C. as a Chinese hub by providing information, facilitating meetings and explaining the province’s business environ
ment and regulations to investors, he notes.
On national security, Chow says Ottawa must provide the “leadership” because it’s the federal government’s responsibility to screen companies for potential threats. “It’s not something that we can manage,” he admits. “It’s something that we have to manage as a nation together with the federal government.”


The Bentall Centre towers in Vancouver, purchased by Anbang and now reportedly owned by the Chinese government

The diaspora threat

Beijing’s power to disrupt the global operations of Chinese companies adds a new dimension to the China threat by putting more businesses, big and small, at risk of being caught up in President Xi’s anti-corruption crackdown. As B.C. learned from its dealings with Anbang Group, international companies with Chinese partners and countries courting FDI from China will be exposed to Beijing’s ability to arrest key executives.

“Xi Jinping is not a policy wonk,” says Willy Lam, a China watcher to blow the whistle on the 65-year-old leader’s plan to extend his stay in office. “His knowledge of finance and economics is very limited.”

Image result for Willy Lam, a China watcher

There’s also no guarantee that Xi will win the war on corruption, an endemic problem throughout China’s long history, observes Lam, an adjunct professor at the Chinese University of Hong Kong and a senior fellow at the Washington-based Jamestown Foundation. China faces more domestic turbulence as Xi’s crackdown, while popular, threatens the careers, the fortunes and even the lives of many of the country’s rich and powerful, who will intensify their plot to bring him down.

Xi’s appetite for power has seen him reach out to the estimated 60 million people of Chinese background living outside China. In Canada, influential commentators have fretted that some among the country’s 1.5 million ethnic Chinese groups, along with the 186,000 students from China, would be operatives for Beijing. The spotlight could shift to the ethnic Chinese community, who make up 40 percent of Metro Vancouver’s population.

In a Canadian Press interview last year, David Mulroney, Canadian ambassador to China from 2009-12, warned of Beijing’s attempts to tap members of the Chinese diaspora in a bid to influence Canada’s political process. This spring, Charles Burton, a well-known China expert, penned an Ottawa Citizen column that advocated expanding resources for “our police and security agencies to counter Chinese subversion.” The assistant professor of political science at Ontario’s Brock University wrote of flushing out “politicians with divided loyalties” and “apologist pundits” who he believes are acting for China’s interests in Canada. 

Burton’s commentary draws a rebuke from the CUIA’s Houlden, who thinks Canadians would be better served by informed dialogue and debate on China issues, insisting that [Burton’s comment] is seen as an attack on former and current civil servants,” he says. “Both will have difficulty defending themselves against these charges .”

People of Chinese ancestry are a variety of different ethnic groups. “Canadians of Chinese origin have very different political views,” Houlden says. 

To engage an increasingly complex China, Canada needs to draw on the knowledge and skills of the tiny pool of Chinese talent who now face the  hurdle of proving they’re not fifth columnists.

Related image

“They could go anti-China to prove that they are even more anti-China than the non-Chinese,” Senator Woo suggests with a tinge of sarcasm. “That would be the easy way out.” 

Woo says this is already happening in Vancouver, where some of the more patriotic voices hitting out at Chinese and other foreign buying of real estate belong to Chinese Canadians.

Image result for Chak Au, a member of Richmond city council since 2011

Chak Au, a member of Richmond city council since 2011, decries the increasing difficulty for officials of Chinese ethnicity to operate if questions about their loyalty grow. “If such suspicion becomes realized, what good will it have for the country?” asks the former mental health worker, who emigrated from Hong Kong in 1988 and served as a school trustee for 12 years.