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French President François Hollande, left, and Prime Minister Stephen Harper meet in Banff, Alta., on Sunday. (Jeff McIntosh/THE CANADIAN PRESS)
French President François Hollande, left, and Prime Minister Stephen Harper meet in Banff, Alta., on Sunday. (Jeff McIntosh/THE CANADIAN PRESS)

Harper seeking to reset relationship with China during Beijing visit Add to ...

Stephen Harper heads to Beijing this week to try and set the China-Canada relationship on a more even keel after a rough couple of years.

Mr. Harper, who has alternated as Prime Minister between a hawk on China who wouldn’t sell out to “the almighty dollar” and a pragmatist calling for deeper economic ties, will now try to strike a rapport with Chinese President Xi Jinping.

The two men have met on the sidelines of an international summit, but neither has visited the other’s country since the Chinese leader took office in the fall of 2012.

Relations have cooled since Mr. Harper’s last trip to Beijing when Canada and China clinched a foreign investment deal.

Since then, the Canadian government has barred Chinese state-owned companies from further investment in the oil sands, raised concern in the media about security risks of buying technology from a major telecom company in China and publicly blamed Beijing for hacking Canadian government computers.

Along the way Canada also declined an invitation to enter free-trade negotiations with China, saying it was too busy with other trade deals. Former government officials say there was a concern relations were growing closer than public opinion on Chinese investment would support.

But Mr. Harper can’t afford to stay home any longer when it comes to China – which is by some measures now the world’s largest economy.

The Prime Minister, who departs for Asia Wednesday, will hold his first lengthy sit-down meeting with Mr. Xi while in Beijing Nov. 8-10. The two leaders have a lot to talk about, including the lucrative prospect of Beijing designating Canada as a hub for the settlement for China’s currency, the renminbi.

Canadian government sources say there are “very serious discussions” about the hub, a major request of Canadian business groups.

Should China grant this, Canadian exporters and importers would be able to convert directly from loonies into RMB, saving the expense of first going through U.S. dollars. This is predicted to win more sales for Canada because Chinese customers could pay in their own currency, an attraction the Canadian Chamber of Commerce estimates could generate as much as $32-billion in additional exports over 10 years.

David Mulroney, Canada’s ambassador to Beijing between 2009 and 2012, says China is a particular challenge. It’s a foreign partner Canada can’t do without but the relationship is going to become steadily more difficult to manage.

For instance, for three months China has detained a pair of expatriate Canadians, Keith and Julia Garratt, whom it scooped up on suspicion of stealing military and defence research secrets. They were taken into custody shortly after Ottawa accused China of conducting cyberwarfare on Canadian computers.

An increasingly assertive China will throw its weight around on a more frequent basis – particular under Mr. Xi, whom Mr. Mulroney says has “centralized power in himself and around himself in ways that no Chinese leader since Deng Xiaoping has done” and talks of the “great renewal of the Chinese nation.”

China is becoming increasingly hard to understand as it gets bigger and more ambitious, he says, which means investing effort to put in place regular channels of communication to properly interpret what’s coming out of Beijing.

China’s direct foreign investment in Canada was down substantially in 2013 following Mr. Harper’s move to ward state-owned Chinese firms off the oil sands.

Business groups say they’d welcome an infusion of Chinese capital.

Perrin Beatty, president of the Canadian Chamber of Commerce, describes the Canada-China relationship as “underdeveloped” and applauds Mr. Harper’s trip.

“Our businesses are in an intense competition with those of other countries and the Prime Minister’s visit will go a long way to raising our visibility with the Chinese.”

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