Canada-China Relations Committee on May 8th, 2023

[Paula Glick]

Actually, I think what would be more applicable is to talk to their clients. Some of these pension plans work with index providers and, as Monsieur Garant has suggested, they are actually engaging with the index provider. That is, in part, how indexes can make decisions.

I know that from an ESG perspective, a lot of custom ESG indexes can be made. That is just a client relationship: A client can say that they want to invest in this market or this index, but they would need to remove this or increase that. You literally customize an index and you create your own approach—

[Rob Oliphant, Liberal, Don Valley West, ON]

They're not really index funds, then. If it's customized....

I'm naive. I don't have background in this. I thought an index fund mirrored the index, but maybe I'm wrong on that.

[Paula Glick]

The indexes all have rules. You could argue that nothing is truly passive, but the fewer rules there are, the more passive it is. If you just create a couple of key items to identify market cap and weight, off you go.

The more restrictions or parameters you put on it, the less passive it is. It's still considered a passive index.

Yes, you're—

[Rob Oliphant, Liberal, Don Valley West, ON]

I'm just trying to understand whether there are surreptitious ways that the People's Republic of China is finding investment in North America—in Canada or the United States—through indirect ways through index funds.

Do you have some suggestions on how we can monitor that and stop it, particularly when it comes to national security interests?

[Paula Glick]

I don't have a particular viewpoint on how the indexes can be managed. I think talking with the index firms and figuring out where, you know—

[Rob Oliphant, Liberal, Don Valley West, ON]

I thought you had an index fund as MSCI.

[Paula Glick]

I'm sorry?

[Rob Oliphant, Liberal, Don Valley West, ON]

Is MSCI not an index fund?

[Paula Glick]

It's an index firm. They create indexes, yes.

[Rob Oliphant, Liberal, Don Valley West, ON]

Okay.

[The Chair, Liberal, Ken Hardie]

Mr. Oliphant, you're out of time, sir.

We'll go to Mr. Trudel for two and a half minutes or less.

[Denis Trudel, Bloc, Longueuil—Saint-Hubert, QC]

Thank you, Mr. Chair.

Mr. Van Assche, in a fairly recent article published in Le Devoir on March 9, 2023, Mr. Saint-Jacques, the former ambassador to China, said that it was now more complicated to do business in China, owing to "the policies being pursued by President Xi Jinping".

Do you agree with him? How is it more complicated now?

[Dr. Ari Van Assche]

Thank you for the question.

It depends on which industry is involved. I think that for many of them, there's not much of a difference. However, we are beginning to see that certain strategic industries are wondering more about the role of China in terms of things like the resiliency of our economy. And China is doing more or less the same thing. We know now that it's very difficult for firms to say they are going to do business in the west as well as in China. Increasingly, these firms are having to make a choice.

Some policies, including the American CHIPS and Science Act, are already saying that companies will have to choose. If they decide to accept grants from the U.S. government, they will not, be able to engage in transactions that could help the Chinese semiconductors sector for 10 years. I fully agree that the realities have changed in strategic industries, and that things have become much more complex.

I would nevertheless like to once more underscore the fact that in many other industries in the consumer market, I don't think there's as much of a difference.

[Denis Trudel, Bloc, Longueuil—Saint-Hubert, QC]

One witness told us that there was a lot of political instability at the top of the Chinese power structure.

Do you think it's been like that since Xi Jinping has been in power? Do you agree with this analysis?

[Dr. Ari Van Assche]

I'm not much of an expert in Chinese political issues. I nevertheless think that whenever there is, not an election, but a decision made to determine what will happen to the new member of the politburo and the central committee, there's a great deal of political danger.

I think that Xi Jinping is in a very strong position and that he will remain in power for some years to come.

[The Chair, Liberal, Ken Hardie]

Thank you, Mr. Trudel. Your two and a half minutes flew by, as it always does.

Ms. McPherson, the last two and a half minutes are yours.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

Thank you, Mr. Chair. Mine will fly by as well, I'm sure.

I'd like to ask these two questions to Mr. Garant and Mr. McLennan.

One of the things we've been discussing in the House today, as we deal with the Chinese misinformation within our elections, is the need for sunlight and transparency.

I'd like to follow up a little bit on what Mr. Hoback was bringing forward to the committee. I looked at some of the websites where we are supposed to be able to get this information very easily, and it is at a very high level. It is not at a low level, where you can actually see individual investments.

How could that be improved so that investors would know that information, and is that something that would be to the benefit of funds? It does seem to me that it's a little bit more work for you if those who have invested with you or those whose funds you are managing don't have the information. It gives you a little bit more coverage, for example, Mr. Garant, when you are investing in something that may be very distasteful, like the Uyghur forced labour within Xinjiang.

How does transparency work? How could we make it stronger? Is that something the sector would do on its own, or is it something that the government would very much need to impose upon the sector?

Mr. McLennan, perhaps I can start with you.

[Stephen McLennan]

Sure. Thank you.

Look, it goes without saying that we're going to comply with all laws and regulatory requirements. Our current standard is that we actually disclose above what is required by our accounting standards and by the law. You can go to our website, and there we have a list of material investments, and I think that has served us quite well.

I would also just note that the Canadian pension model is the envy of the world, and that's really premised on this independence of governance between the pension plan and the government sponsor. I think we need to be thoughtful around how additional rules and regulations might affect that.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

When you say that you would follow the laws, you would be looking then for laws that would increase the transparency, I would assume.

[Stephen McLennan]

We'll follow the laws as presented and act within those boundaries.

[The Chair, Liberal, Ken Hardie]

Ms. McPherson, you are out of time.

I want to thank the witnesses for appearing this evening. It's a little later for some than for others. Out on the west coast, I suppose, it's almost dinnertime there, but we thank you very much for your attention and for the information that you passed along to us.

We're going to break very briefly to go in camera.

With that, we'll suspend for just a moment. Thank you.

[Proceedings continue in camera]