Canada-China Relations Committee on Oct. 4th, 2022

[Dr. Lynette Ong]

In my personal opinion it is still quite durable, but in relative terms I think durability has declined considerably because I think the foundation of its durability, particularly elite stability, has been eroded.

China has been a country of crony capitalism for many years—since reform and opening up in 1979—and I think in the last 10 years or so the very foundation, the glue, that holds the system together, which is mutual trading of interest and reciprocity, has been eroded by President Xi's anti-corruption campaign. He has really torn the fabric that holds the elite politicians together.

[Peter Fragistakos]

Because I have limited time, I'm going to jump to Professor Houlden and ask him the same question.

Sir, how durable is the regime in China in your view?

[Gordon Houlden]

Thank you so much.

I've had the opportunity to serve in Canadian embassies in three communist countries on three different continents. It's not an easy question to answer, but the watchword for me—and the reason I'm careful—is that I served in eastern Europe. My job was actually tracking opposition parties in Warsaw. I could see the cracks in the wall. I felt the Soviet Union would collapse. I thought it would take 50 years, but 18 months after I left, it was gone. These are very tough questions.

To me communist regimes have the strength of iron, not of steel. They can be very brittle. When you have disunity at the top, which to me is the most likely cause of change in China—that is, regime collapse—there will be a struggle at the top.

China has spent so much money and effort to manage and control dissidents at the street level, but my money would be on problems at the top. When those will emerge to such a point as to threaten the regime is a tough question. It could be soon or it could take a long time.

[Peter Fragistakos]

Thank you.

With my last question, I want to pick up on what Mr. Chong was talking about in economic terms. Which parts of Canada are most exposed to China, in economic terms, and which sectors are most exposed?

In other words, at some point in the future if we were to see western allies, Canada included, put in place sanctions in response to something that China had done—whether it's an invasion of Taiwan or something along those lines—which parts, geographically, of the country would be most impacted and which sectors would be most impacted?

[Gordon Houlden]

Who is the question for?

[Peter Fragistakos]

It is for you, sir.

[Gordon Houlden]

Thank you.

I would say just grosso modo—and I'm simplifying—the dependency declines as you move east. It's most severe in western Canada, British Columbia and the prairie provinces, where the percentage of trade with China is higher and most notable in certain sectors, particularly agriculture but also pulp and forestry.

There would be an exception for the Atlantic provinces. If that seafood trade were to disappear overnight, that would be a big issue, but as in my response to Mr. Chong, the overall dependency of Canada in supply chains on China is very high.

It's not just phones. It's auto parts and electronic goods. Chips may be coming from Taiwan, but the chips from Taiwan go largely into Chinese factories and then we get the laptops and phones. That's a very complex dance of inputs and outputs. We are at a high level of vulnerability, and western Canada in particular.

Thank you.

[Peter Fragistakos]

Thank you, sir.

[The Chair, Liberal, Ken Hardie]

Thank you, Mr. Fragistakos.

[Gordon Houlden]

We now go to Mr. Bergeron for two and a half minutes.

[Stéphane Bergeron, Bloc, Montarville, QC]

If I may, Mr. Chair, I would just like to follow up on the question Mr. Chong asked.

This is for all three witnesses. If Minister Joly were sitting at the table this evening and she asked you what you would like to see in Canadian policy on the Indo-Pacific region, what would you recommend?

[Gordon Houlden]

I think in fairness I should allow Madam Ong to go first, please.

[Dr. Lynette Ong]

That is a great question.

If I had the privilege to be in the presence of Minister Joly, I would say that we should double down and probably triple down on our investment on China endowments. We need to understand China inside out.

In my very modest view, on the term “Indo-Pacific”, we talk about the Indo-Pacific because we don't really have a China strategy. The Indo-Pacific is about encircling China from the outside, but we are not getting to the root of the problem. The root of the problem is how we actually tackle China. To me, I haven't seen any detail regarding an Indo-Pacific strategy. I think it's dancing around the question, and the question is how we deal with this rising monster.

[Aileen Calverley]

I want to take on this question.

I think a lot of us forget that our pension funds, a lot of the major market funds and all world funds, except U.S., are actually inside that. For example, you mentioned market funds. Over 30% are actually Chinese stocks. If anything happens to Taiwan.... We can see the experience from Russia and Ukraine. Russian stock is down to zero. It's just wiped out.

What happens if China invades Taiwan and Chinese stock is actually under sanctions? Chinese stocks would be wiped out. What happens to our pensions? The amount is huge. It's not only pensions and not only stocks. We also talk about Chinese bonds. Actually, in our pensions, in our asset management, we have a lot of Chinese bonds. What happens if all of these bonds default?

That's why it's very important when we can see the Indo-Pacific strategy.... I think we need to look at our pensions and Canadian investments in Chinese companies and Chinese bonds. The number will be quite terrifying.

[The Chair, Liberal, Ken Hardie]

That brings your time to a close, Mr. Bergeron.

[Gordon Houlden]

Now it's Ms. McPherson, for two and a half minutes.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

Thank you very much.

One of the things I'm going to ask a few questions about, if I could, Ms. Calverley, is that you talked about the need for a human rights defender strategy for people fleeing violence in Hong Kong. Can you talk a bit more about that, but perhaps talk a bit more as well about what other steps Global Affairs Canada and IRCC could take to support the people of Hong Kong?

[Aileen Calverley]

I think that first they need to repair the problem. People who actually got their open work permit to come to Canada somehow could not apply for primary residency. I hope that you can speak to Global Affairs and immigration to fix that.

I think the existing so-called lifeboat is actually a leaking lifeboat, because it has helped only a very small percentage of people. There is a very small percentage of people who can qualify. Human rights defenders—for example, Jimmy Lai—all the journalists and also medical professionals are not covered.

We can see, in the situation in Ukraine, that there's a human rights defender category. Why can't we create the same category for Hong Kong to make the lifeboat more like a lifeboat? Right now, it's leaking. Those people who arrived who actually were interviewed by the Toronto Star, they're scared that they will be sent back to Hong Kong because they got the work permit, but they cannot apply for permanent residency.

This is something that Global Affairs and immigration need to work on.

[Heather McPherson, NDP, Edmonton Strathcona, AB]

Thank you.

The other thing, too, is this: Do you believe that Global Affairs and IRCC should work together to facilitate the departure of non-Canadian citizen family members of Canadian citizens? What would that look like, in your opinion?

[Aileen Calverley]

I'm sorry, your question…?

[Heather McPherson, NDP, Edmonton Strathcona, AB]

Yes, even more broadly, what other steps...? I think you outlined this particular strategy, but I think there are many other things we would like to see Global Affairs Canada and IRCC do together to make sure that people can come from Hong Kong to Canada. I think one of the problems that we have is that we need to listen to experts like you, so I just want to give you this opportunity for just a few more seconds.

[Aileen Calverley]

Thank you.

I think they should help those people who, for example, joined the pro-democracy movement. A lot of them were put into prison. Now they're out, but they're not eligible because they have criminal records. However, the record is only for illegal assembly, for example, but they were put into prison for three months so they're not able to come over.

Also, they need to get police certificates. This is something that our country needs to change, because those who move to the U.K. via the BNO scheme don't need to have police certificates. Over 10,000 Hong Kong protesters were arrested. Anyone who was arrested in the past needs to produce a police certificate, but all of them could not produce that.

I think this is very unfair. We say that this is Canada supporting democracy, supporting freedom and supporting Hong Kong, but all those people who fight for democracy, in fact, are the people who cannot come to Canada. I think that category needs to change. They need to give ways—

[The Chair, Liberal, Ken Hardie]

Thank you, Ms. Calverley. Again, we've run out of time for your segment.

[Gordon Houlden]

We have time for, actually, two more rounds of questions.

Mr. Hallan, I have you down next. Oh, we're going to Mr. Chong. All right. Then that will be followed by Mr. Oliphant.

You two gentlemen will wrap us up today.

[Michael Chong, Conservative, Wellington—Halton Hills, ON]

Thank you, Mr. Chair.

I'd like to explore this issue of the impact on two-way trade in the event that Canada and other allies were ever to sanction China because of some geopolitical event that took place. We know that we roughly export about $25 billion to $30 billion a year to China, most of it primary products in agriculture and mining. We know that we import roughly $70 billion a year from China, mostly a wide range of products like electronics, toys, plastics, machinery, furniture, all the things that consumers in this country consume.

My question is this: Would the disruption be bigger on our imports to this country in terms of the economic impact because the exports are so commodity-based? In other words, because they are commodities, we can get rid of them one way or the other on Chicago or whatever other exchanges are available to sell commodity-based products. Is that a fair assumption to make about the impact on trade—that it would have more of an impact on the imports from China to Canada rather than on the exports of Canada to China?