Looking for deals and warmer relations

For his visit to Canada this week ahead of the G20 meeting, Chinese President Hu Jintao brings with him more than 300 Chinese business executives, a high-powered delegation reminiscent of former prime minister Jean Chrétien's Team Canada trade missions to China in the 1990s.

The formal visit is part of a special high-level meeting in Ottawa in advance of the G20 and can be seen as an attempt to warm up relations between China and the Stephen Harper government.

Harper mortified Chinese leaders with his sharp criticism of China's human rights record and by waiting four years before making his first official visit to the Asian powerhouse.

When he went there last year, the PM was famously rebuked in public by Chinese Premier Wen Jiabao.

The centerpiece of President Hu's reciprocal meeting to Ottawa is Thursday's Canada China Business Forum, an important networking opportunity for Canadian and Chinese executives.

Among the invited participants is Wenran Jiang, a political scientist at the University of Alberta who has written widely about Chinese foreign policy and energy security. He spoke with CBC Producer Jennifer Clibbon.

Clibbon: What's the political importance of Hu Jintao's official visit in advance of the G20/G8 summit?

Jiang: It shows that China is putting its relations with Canada on the priority list.

In the past year, the Conservative government has made substantial adjustment to its China policy, sending a message to Beijing that Canada would like to have close ties with China and that Chinese investment in Canada is welcomed.

President Hu's visit to Ottawa is aimed at riding the upward momentum and further improving the bilateral relationship.  

When he first came to power, Western pundits joked "Who is Hu?" Now that he has been in power for seven years, what is known about him?

Jiang: He is articulate, even-tempered, calculated, pragmatic, and has focused on the big-picture issues that China faces today. When it comes to systemic reforms, Hu is a firm believer that stability is the overwhelming priority.

Economic and political reforms can continue but must have limits; that is, they cannot challenge the leadership position of the Communist party.

Faced with a fast growing economy and a widening gap between rich and poor, Hu and Wen Jiabao have focused on easing the pains of modernization.

Their calculation is that if the government can keep the economy growing, wages increasing, and jobs created, then the legitimacy of the Communist party will be maintained.

So they have pushed hard on social welfare reforms, medical care, benefits to the rural population, and gone after corrupt officials.

On the other hand, growing social injustices, environmental destruction, and fueling the Chinese economy will continue to haunt Hu and his colleagues in years to come.  

China is especially interested in investing in Canada's oil and gas sector. What are the big deals to date?

Jiang: This month China Investment Corporation signed an $817-million agreement with Penn West Energy Trust to form a partnership to develop Penn West's bitumen assets in the Peace River district of Alberta.

Last month, a subsidiary of China's Sinopec Group agreed to pay $4.65 billion for ConocoPhillips's stake in a Canadian oil sands project, making it China's second largest investment in North America.

And in February, PetroChina, China's largest listed oil producer, completed the $1.9 billion acquisition of a 60 per cent interest in two oil sands projects from Canada's Athabasca Oil Sands Corp.

There have also been high-priced deals with cash-strapped Canadian companies to develop copper mines and other holdings in places like Ecuador and Chile.

Should Canadians be concerned about China gaining control of oil and gas reserves here?

Jiang: No. Chinese investments in Canada so far have had a net benefit to the Canadian economy and job creation.

The intention of the Chinese investment is twofold: to generate returns for the capital and, if possible, to import energy and other resources from Canada to fuel its own economy.

Many multinational corporations have moved their production lines to China. And the energy and resources that China imports are being used by these multinationals as well.

In fact, more than 60 per cent of Chinese exports are produced by foreign firms in China.

Furthermore, Canada has a well-regulated system for screening foreign direct investment and almost all Chinese investment in Canada is in a minority holding status.

Chinese companies are not sending their own workers over to Canada to replace Canadian workers. And in almost all companies with Chinese equity, Canadian management teams are in charge of operations, partly due to the fact that the Chinese investors lack know-how.

Finally, Chinese investment in Canada's energy sector is very small, and there is no possible future scenario that Chinese companies will control Canada's energy or other resource sectors.  

In which sectors in China can Canadian companies find opportunities?

Jiang: The Chinese economy has been growing at an average of more than nine per cent over the past three decades and, in almost all sectors, there are good prospects.

Energy and resource companies could provide management know-how and engineering expertise.

Canadian construction companies may have an edge on the market for quality housing and infrastructure building.

Canadian banks and financial institutions are well regarded and environmental firms could find business linked to the Chinese government's push for an environmentally friendly way of managing its economic development.

Harper initially criticized China's human rights abuses, but you argue that he never actually had any coherent policy on this agenda. What do you mean?

Jiang: The reality is that the Harper government only made some general and occasional public statements regarding China's human rights issues.

It suspended the bilateral human rights dialogues in 2006 on the ground that it was not effective, yet it has not replaced that mechanism with anything.

Harper stated that he would not sell out Canadian values for the mighty dollar when it came to Canada-China relations.

But Harper's stance on the relationship between human rights and trade relations was put on the spot by his decision to visit China last December.

The trip was an indication of how Harper would tread on his human rights agenda to promote better economic relations with China.

You also argue that Canada needs to formulate a serious, long-term China policy.

Jiang: With all that's being said about China's importance to Canada, few have come to terms with the potential impact for Canada of a rapidly rising China.

China is our second largest trading partner. China is also on its way to replacing Canada as the largest trading partner of the United States, and it will do so in part at the expense of Canada.

In developing a China policy, Harper should not shy away from human rights issues. Nor should he be raising these concerns only behind the scenes, as some have suggested.

What Canada should propose to China is a sincere dialogue, identifying the right mechanism to implement important human rights programs.

Should Canada and others be concerned about the recent spate of labour unrest in Chinese factories?

Jiang: It is clear that China's migrant workers are no longer satisfied with their low wages and poor treatment.

Unlike their parents, who lived through hardship and poverty in the first 30 years of the People's Republic, the younger generation has seen continuous economic growth since their birth and they feel they should benefit.

Because working conditions are poor, work-related stress is high and protests have started.

The latest examples of suicides at the Taiwanese-owned electronics assembly plants and the strikes at the Honda factories have shown that the Chinese labour movement is entering a new stage.

It is unlikely labour unrest is going to reach a "tipping point." The long-term question really is to what extent such protests and changes in wage levels could impact China as a favoured destination forforeign capital.