Canada-China Relations Committee on April 19th, 2021

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

The points you make just underline how easy it would be to circumvent any kind of complaints-based system. Whether it's the framework that Representative McGovern put forward or something else, we need to do so much better here.

Jumping to another topic, there are those who say that the Asian Infrastructure Investment Bank is completely different from the belt and road initiative. There are others who see the AIIB as part of the strategic agenda that is the belt and road initiative.

What is your view on that?

[Carolyn Bartholomew]

The Chinese government will use all of the tools that it has at its disposal to accomplish what it wants to accomplish. In terms of the AIIB, it's incumbent on the other parties participating in the AIIB to make sure that contracts that are going out are not all being taken by Chinese contractors and to ensure that the projects uphold human rights and environmental standards. The onus in some ways is on the participants in the AIIB to make sure that it is not just being used to carry out China's plans.

Regarding the belt and road initiative, there's also some very interesting analysis. Some people think it just isn't going to become everything that China says it going to become, because it doesn't have the money to do it and it has push-back in its own population.

[Garnett Genuis, Conservative, Sherwood Park—Fort Saskatchewan, AB]

I have a quick follow-up question.

You spoke about having our own united front. It's interesting to me that on the one hand, China is creating its own institutions of influence, and on the other hand, there are countries, especially Canada, putting dollars into, in some cases, Chinese government-led vehicles like the AIIB, and in other cases it is through UN-led development vehicles over which China is exerting more or more influence.

You talked about creating our own united front. Is that a call to have a stronger infrastructure of democratic nations that are doing more things on our own and reflect our values?

[Carolyn Bartholomew]

You're talking about the summit of democracies. We have got to again figure out ways to work together with countries that are not necessarily good with human rights. I think of Vietnam for example, and with countries—

[The Chair, Liberal, Geoff Regan]

Thank you, Ms. Bartholomew. I'm sorry to interrupt.

Thank you very much, Mr. Genuis.

Mr. Lightbound, you have five minutes.

[Joël Lightbound, Liberal, Louis-Hébert, QC]

Good evening, everyone.

I'd like to thank the witnesses for being with us this evening. Their comments are very enlightening to all committee members.

Mrs. Bartholomew, you mentioned the $1 billion loan to Montenegro, if I'm not mistaken. You also mentioned China's economic coercion of Australia. What is China's most common modus operandi when it exerts its economic and monetary influence not only on western democracies, but on the entire planet?

What principles and practices should our democracies preserve to guide themselves and guard against this kind of economic coercion?

Finally, I'm going to pick up a bit on what Mr. Genuis was asking. Should a concerted international approach be a priority? As western democracies, should we work better together to guard against this influence?

[Carolyn Bartholomew]

I will start with the last one first.

Absolutely, we need to work together with concerted efforts, and be attuned to the fact that the Chinese government is really good at divide and conquer. I'm not sure that Montenegro was actually $1 billion. I'm going to have to check the facts on that one. I don't want to get that number wrong.

The tools of coercion that the Chinese are using are in some ways the business interests in all our countries. Before the pandemic, I participated in a conference in Australia where the defence and intelligence establishments were really trying to work at how to raise concerns and deal with the economic interests that they have, the economic interests in the United States and Canada and all of that. The important thing for politicians is to recognize that although they represent some of those interests, they also have a national obligation to national security.

It's a difficult message to deliver, but when I think of Chinese economic coercion, the first example that I think of—and it might not be the first—was when the Chinese cut off its imports of Norwegian salmon because of the Nobel Prize going to Liu Xiaobo. In some ways, it's like a test case. That's what I think the Chinese do a lot. Now the Chinese are doing this with Australia. It's a test case, with Taiwan and pineapples. It's a test case to see how the world will respond. We respond by increasing our consumption of Taiwanese pineapples, Australian wines, and all of that.

Some of it is really educating the business community that continues to believe that things are going to go well for them inside China, and they aren't necessarily going to go well. If it's resources, that's a different story. You're going to have to make the case that there are national security interests and that selling these products has a cost, right? They have a cost beyond any financial cost that's taking place.

[Joël Lightbound, Liberal, Louis-Hébert, QC]

The commission you chair mentioned that greater scrutiny of U.S. investments in Chinese companies was needed to avoid funding the militarization of China, for example.

Can you elaborate on that and tell us what kind of impact western investment in China might have?

[Carolyn Bartholomew]

I think some of it is educating, again. On this issue of U.S. investment in China, some of it is the major investment banks. They're going to figure out a way to make money, no matter what. When you look at things, you see that we haven't mentioned the military-civil fusion that China is doing, using civilian companies and technologies to acquire developed technology, technology that they need for their military purposes. It's sticky. It's very difficult for some people, for some companies, to be able to figure out exactly who it is they're investing in.

That said, I think some of them don't care. Ray Dalio had this piece in the Financial Times relatively recently, and I was just frankly appalled at what he said, which was basically that money is money and we don't know who is going to win this competition, and so he's investing in China as much as he can. I just think that's appalling. We have to come up with ways to hold companies accountable when they are investing in something that is actually going to be a threat to us, not economically, in that sense, but militarily.

We're also very concerned about pension funds. People who have those pensions don't know where their money is being invested and they don't know how risky some of those investments are. It's twofold. It's risk, as in financial risk, and it's also risk as in what we are investing in and what we are getting out of it and what kind of a threat it is for us.

There are always going to be people, again, who—

[The Chair, Liberal, Geoff Regan]

Thank you.

Thank you very much, Mr. Lightbound.

Mr. Bergeron, you have two and a half minutes.

[Stéphane Bergeron, Bloc, Montarville, QC]

Thank you.

You mentioned the Confucius institutes in particular. It's hard to imagine a better developed system for trying to influence political and social life in the countries where they are established.

What difference do you see between the Confucius Institute and equivalents like the Alliance Française, which was set up by the French, or the Goethe-Institut, which is German?

Are there any elements of comparison, or are we simply in a different universe?

[Carolyn Bartholomew]

Again, that's another excellent question. I think that the Confucius Institutes play a role that the Goethe-Institut or the Alliance française do not. I think they are serving as a tool on campuses, both to control the Chinese students who are there and to spread the Chinese world view. I guess maybe some of it is that I'm just also concerned that I don't agree with the ideology of what the Chinese are doing. They also serve as platforms for espionage. Confucius Institutes are just being used for all things.

I want to mention one thing that hasn't come up: the education programs, which are starting even as young as grammar school and are being funded by Chinese entities. Children who are learning Chinese, which I think is a really important thing for them to be learning, are also learning the Chinese ideology that goes right along with it. It's not just the Confucius Institutes; it goes further down and it requires a government response in terms of funding to make sure that kids are getting what they need. To me, the Confucius Institutes are just fundamentally different from what western democracies are doing with their centres.

[Stéphane Bergeron, Bloc, Montarville, QC]

Thank you very much.

Since I don't have much time left, I don't want to insult our witness by asking a question that she won't have time to answer.

[The Chair, Liberal, Geoff Regan]

Thank you very much, Mr. Bergeron.

We'll turn now to Mr. Harris for two and a half minutes, please.

[Jack Harris, NDP, St. John's East, NL]

Thank you, Chair.

Ms. Bartholomew, your interchange with Mr. Genuis interested me in that you seem to have a slightly different view from Mr. Genuis, who seems to think that we—i.e., the democracies—must get together and stave off China and its friends. You suggested a little bit more of a nuanced response to that in terms of not disengaging totally with China, obviously, but also in making sure that we're engaged with other players to convince them, or to work with them, to develop better norms. Could you elaborate on that a little bit, please?

[Carolyn Bartholomew]

I don't want to leave the impression that I don't agree that democracies need to get together. I think they do, because, again, I think our own united front.... You know, our values stand for something and they stand for something around the world, and I think that we diminish the importance of those values.

That said, I think we have to recognize that there are times when we are need to work with countries that might not align with us completely on things like human rights. Would I invite the Government of Vietnam to join an alliance of democracies? No. However, would I believe that there are ways that we need to work with the Government of Vietnam to address concerns about what's happening in the region? My answer would be yes. I think in that sense, the fluidity is that we just have to acknowledge that there's not going to be a 100% purity test with the countries that we need to engage with around the world.

That said, there is a core group of western liberal democracies that I think really need to work together on all of these issues.

[Jack Harris, NDP, St. John's East, NL]

Then you're not suggesting some sort of cultural cold war.

[Carolyn Bartholomew]

No, I'm not suggesting a cultural cold war. I think what I'm trying to do is to be realistic about the fact that even within western liberal democracies there are going to be some differing interests in the relationship with China. We have to figure out a way to accommodate those. “Accommodate” isn't the right word; we have to figure out a way to recognize that those interests are going to be there and not let those interests get in the way of the places that we can all work together.

[Jack Harris, NDP, St. John's East, NL]

Thank you.

I think that's probably close to time, Mr. Chair.

[The Chair, Liberal, Geoff Regan]

You have about 15 seconds.

[Jack Harris, NDP, St. John's East, NL]

I'll pass that on to the next intervenor.

[The Chair, Liberal, Geoff Regan]

That's very kind. Thank you very much, Mr. Harris.

Now we'll go to Mr. Williamson for five minutes.

[John Williamson, Conservative, New Brunswick Southwest, NB]

Thank you very much, Chairman.

Chairwoman Bartholomew, it's nice that you could join us. This has been very, very interesting.

You had an interesting exchange with MP Lightbound a few minutes ago about the review of investments into mainland China and the impact on your security, as well as the risk. What about the other way around in terms of any kind of investigation on investments into the U.S. stock exchange, the bond market and equity markets?

I read an interesting paper recently that looked at how one of the challenges the Soviet Union had during the Cold War was in having very little access to western capital, whereas in today's world, China has great access to capital—to American capital in particular, but also to western in general. It is helping them immensely. We don't even know how these investments are being made and how they're helping China often use our own technologies against us or, if not against us, against minorities in mainland China.

[Carolyn Bartholomew]

You know, of course, that when you take on the moneyed interests, you're taking on big giants who don't want anybody to get in the way of what they are doing—again, sort of the Ray Dalio view of the world.

I'm just trying to think of the number of years that we at the commission have been talking about and raising concerns about Chinese companies on the U.S. stock exchanges, on things like the accounting standards. We can't get access to the work product, to papers, to the account of audits in Chinese companies, to the risks that take place. There are all sorts of mechanisms that are happening for the flow of money.

I think the CFIUS reform we did under FIRRMA was an effort to try to address some of these concerns about the acquisition by Chinese companies of American assets, including even real estate. If they're buying land for a “warehouse” near a sensitive military installation, somebody needs to be making sure that we're paying attention to that.

The concerns about the stock market have been there. I think Congress is really aware of that and is paying a whole lot more attention to it and to the concerns about what Chinese companies, through a number of mechanisms, are buying in the United States. I'm even going to put money laundering on the table. There was a story that just came out about a delicatessen owned by a coach in New Jersey that made $100 million. There was a very complicated shell corporation system that tied in to Macau. There's a money-laundering aspect to all of this too.

[John Williamson, Conservative, New Brunswick Southwest, NB]

There's more work to be done on that in both countries, then.