Opinion: Canada should face the facts: China is currently out of business

Charles Barton is a senior fellow at the Macdonald-Laurier Institute, a non-resident senior fellow at the Center for Security Policy and European Values ​​in Prague, and a former diplomat at the Canadian Embassy in Beijing.

For more than 40 years, Canada's political and business interests have been eager to cash in on privileged access to China's huge market and global economic influence. The nightmares of Michaels Kovrig and Spavor are now behind us, and Canada may be tempted to resume old patterns of relations with China.

However, it is important not to do so. Canada must face the facts: China is currently out of business.

2023 plagues China with alarming concerns, including deflation, a frightening collapse in real estate, declining domestic consumer demand, and youth unemployment so severe that the Chinese government has stopped reporting on it. Overseas investment plummeted as foreign investors pulled billions of dollars out of China and sought better returns elsewhere. (Canada has “indefinitely suspended” its involvement in China's Asian Infrastructure Investment Bank.)

By November, Chinese leader Xi Jinping wanted to reset the economic clock and agreed to meet publicly with US President Joe Biden on the sidelines of a conference in San Francisco. News media around the world published photos of the two rivals smiling curtly and shaking hands. The images suggest that the two countries will resolve tensions that have led the United States to impose crippling tariffs and restrictions on Chinese imports, including a ban on products linked to forced labor in China. It sparked expectations. The Chinese government specifically wanted the United States to lift its ban on exports of advanced high-tech products, particularly computer chips.

But six weeks after the California photoshoot, nothing of the sort has happened. During his visit, Mr. Xi also held a lavish dinner party to persuade American business leaders that it was time to reinvest in China. That too disappeared. Billionaires were not buying Mr. Xi's reassurance.

Canadian businesses and investors should not expect the outlook with China to improve anytime soon for a variety of reasons.

To quell domestic dissatisfaction with the economy, Mr. Xi could play the nationalist card through military intervention in the South China Sea and Taiwan as early as 2027. Similarly, the regime is reaffirming its Leninist core through the new dominance of state-owned enterprises. More so than successful capitalists, China's largest corporations develop PR plans to deal with the sudden “disappearance” of their CEOs.

Foreign businessmen caught up in arbitrary commercial disputes are increasingly being refused permission to leave China until they comply with Beijing's demands. There are also more controls and restrictions on the security of business data than ever before, including prohibiting foreign companies located in China from sending information to servers outside the country.

And concerns about China's political stability are growing, as evidenced by the purges of the foreign minister, defense minister, and various senior military officials in 2023. This is not good.

But despite Beijing's efforts to stabilize its foundations, the West cannot afford to become complacent. China is a superpower striving to achieve global dominance on many fronts, including claiming control of important international sea routes. To establish unparalleled military capabilities on Earth and in space. Collaborating with Russia and other like-minded anti-Western states, using disinformation campaigns and other interference schemes to support extremist populist parties in countries from Argentina to the Netherlands, and The glory of Donald Trump's possible return to power.

For the Canadian government, 2024 will require walking a tightrope of tact and strategy as it reshapes key pillars of its foreign policy. The events of the past year have left Ottawa with the complex task of repairing economic and diplomatic relations with China and India, two of his most powerful adversaries, both of whom have their own thorny relationships.

India will soon overtake China as the world's most populous country. It is important that Western countries redouble their efforts to prevent India's democracy from turning into a full-fledged alliance with the authoritarian China-Russia-Iran axis.

For Canada, government and business urgently need to work together to achieve greater integration into India's economy and reduce dependence on China in the process. As the world seeks Canada's vital mineral and energy resources, our response has been shockingly weak. Ottawa needs to be more clear about where Canada's interests lie. Failure to do so will put us at long-term risk.

We seem to have reached the age of the “traditional” Chinese curse: “May you live in interesting times.” A long time ago, as a philosophy major at a Chinese university, I couldn't find the Chinese source of this proverb. But today, in 2024, this provision also applies to Canada.