Canada, China: A fragile dance

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Business experts say that China's unprecedented rebuke of the prime minister has far-reaching implications that highlight the fragile nature of the two country's relations.

Erik Nilsson, a senior economist with Scotia Capital, who specializes in international issues, said Canada has traditionally enjoyed relatively strong ties with China that have helped create a wealth of goodwill in Beijing.

But things have now changed. "It's clear Beijing is of the view that Canada has been negligent," Mr. Nilsson said.

"Ottawa hasn't been paying as close attention to the issue as it should have," he added.

Chinese Premier Wen Jiabao took Prime Minister Stephen Harper to task Thursday for failing to visit China sooner.

Mr. Harper listened, stone-faced, in front of Canadian, Chinese and international media.

Such a public scolding is unheard of in a meeting between heads of government.

It was the first meeting between the two first ministers, though Mr. Harper and President Hu spoke with each other as recently as the Asia-Pacific leaders' summit a fortnight ago. Mr. Wen is regarded as a highly capable, powerful and popular leader within China, although President Hu is its most senior statesman.

China's roaring economy, which is expected to grow by about 8 per cent this year, imports about $1-trillion worth of goods each year. Canadian goods, however, account for just 1 per cent of those imports.

For a country that prides itself as a trading nation with a focus on exports, a 1-per-cent market share of Chinese imports is disappointing, Mr. Nilsson said.

"We could and should do better," he said.

The economist suggested that China's rebuke may also be aimed at trying to ensure that Canada remains open to investment in its massive resource sector. State run Chinese companies are eyeing Canadian resource properties and companies who produce oil and base metals as China tries to secure supply of the commodities needed to fuel its strong economic growth.

Chinese firms have made small investments in Canada's resource sector. However, Canada's stance on China's ability to purchase a major Canadian mining or oil and gas company with Canadian assets has yet to be tested under new rules introduced by Mr. Harper's government.

In 2008, Canada exported about $5.8-billion in natural resource products to China which represented 55 per cent of all Canadian exports to the Asian country.

Jayson Myers, chief executive officer of the Canadian Manufacturers and Exporters, said it is more important in China for governments to have a strong relationship than in most other countries, where companies can do business irrespective of personal friendships among political leaders.

While many Canadian companies are successfully doing business in China - and more are looking now to expand to China as growth slows from U.S. customers - Mr. Myers said deals would be easier to conclude if there were better political relationships.

"I think the relationship has not been as strong over the last few years as it was, and in China, relationships among heads of government are very important, probably more important here than anywhere," Mr. Myers said in an interview Thursday from Hong Kong. "It really is very, very important in China to have an official relationship."

He added many deals in China need to be blessed by officials at a political level.

"It just goes a lot better when a Prime Minister or leading people within a government visit China. That's one of the things that help to cement business relationships here."

Canada would also have more ability to influence human rights issues in China if it had a closer relationship with the country, Mr. Myers argued.

"It's difficult to have any influence here if you don't have a relationship with the Chinese leadership," he said. "You can always discuss issues among friends. It's more difficult when you're trying to influence the leadership across the ocean."

Other China experts played down the significance of Mr. Wen's public dressing down of Mr. Harper. Paul Beamish, professor of international business and director of the Asian Management Institute at the Richard Ivey School of Business said it is understandable that a Canadian prime minister hasn't managed to visit China in five years, considering Mr. Harper's has been leading a fragile minority government.

Mr. Beamish also said it is unlikely China wants to create a major diplomatic rift with Canada.

"It would seem illogical, given China's need for resources and talent, that they would have intended this as any sort of major rebuke. I just don't see it that way," he said.

Pierre Beaudoin, president and chief executive officer of plane and train maker Bombardier Inc., carefully avoided the issue when asked about it on a conference call with the media Thursday.

"Bombardier has been established in China for a long time," in both the aerospace and rail sectors, he said. "We think the market potential is great. Bombardier's relationship in China is very good."

But he would not directly answer a question about whether he feels Ottawa has provided sufficient support to the company's efforts to drum up business in China.

Montreal-based Bombardier recently clinched a $4-billion high-speed train deal in China with its Chinese partner. It has several other rail projects as the country moves quickly to expand its transportation infrastructure.

The Canadian industrial giant has also been making inroads marketing its regional and commercial jets.

With a file from Bertrand Marotte in Montreal