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Incoming Chinese ambassador Luo Zhaohui (Chen Jingchao)
Incoming Chinese ambassador Luo Zhaohui (Chen Jingchao)

China decries Canada's ‘negative’ investment rules Add to ...

China’s incoming ambassador, saying Beijing still does not fully trust Canada, called on the federal government to roll back “negative” new foreign investment rules and smooth the way for increased trade with China.

Luo Zhaohui, a veteran diplomat with a love of basketball, will board a plane Thursday for Ottawa, where he will take charge of an international relationship that is as vital to Canada’s economic future as it is fraught with problems.

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China has become banker to Canada’s oil and gas industry and buyer of its minerals and lumber, a country whose vast market and deep pockets have stoked lust among Canadian political and business leaders alike. Annual trade has reached nearly $60-billion (U.S.), although that’s “not enough” in the opinion of Mr. Luo, who held out the promise of a China open to buying more of what Canada has to sell.

But mutual suspicion has clouded the relationship even as ties between the two counties have deepened, with Canadian anxiety over the clout of the rising superpower and China bridling at trade and investment restrictions.

In an exclusive interview with The Globe and Mail Wednesday, Mr. Luo, 52, said the Canada-Chinese relationship, closer now than in the early days of the Stephen Harper administration, has “very good momentum” although it needs more “political engagement for mutual trust.”

He also warned that Beijing is critical of Canada for impeding investments by its state-run companies and for moving slowly to knock down trade barriers. Chinese companies looking to do business in Canada, he said, are chafing under excessive red tape.

Still Mr. Luo will land in Canada with a set of gift-wrapped trade gifts. China “will buy more” Bombardier jets. It “will encourage Chinese companies” to do more business with Canada, and is prepared to discuss “a maritime energy corridor” linking the two nations – assuming pipelines can get built to send oil west. On long-sought sales of blueberries to the mainland, he said, “that’s no problem.” And China is ready to buy more Canadian beef, too. “If the price in your country is reasonable, why can’t we import more?”

China is also preparing to meet long-standing Canadian requests for formal meetings between China’s new leadership and Prime Minister Harper. A bilateral meeting on the sidelines of the November Asia-Pacific Economic Cooperation summit in Beijing is being prepared, said Mr. Luo. And, he added, “I am quite optimistic for Chinese leadership to visit Canada” – perhaps in the near future, although he declined to offer any specifics.

At the same time, he warned that trust remains an issue between the two countries, and that Canada’s reticence to lower trade barriers is constricting trade flows. Mr. Luo specifically called out Canada’s new foreign investment rules, saying China’s state-owned giants “think that the new policy is not positive.” There is a desire, he added, that it “must have some kind of changes.”

While saying Canada is within its rights to write its own policies, he suggested it would be better to roll back the clock to the earlier rules, under which Ottawa approved the $15.1-billion takeover of Nexen Inc. by CNOOC Ltd.

That deal, the biggest foreign acquisition in Chinese history, sparked changes in late 2012 that now restrict the ability of state-owned foreign firms to assume corporate control in sensitive Canadian sectors like the oil sands. The rules were seen as a direct shot at China, and have produced a tangible cooling in the Chinese desire to pour money into Canada.

In Beijing, diplomats have sought to reassure Chinese firms that Canada is not closed to their dollars. Mr. Luo’s comments, however, make clear Beijing remains concerned. Indeed, he said, Chinese state-owned firms have complained about their ability to work in Canada, with its lengthy procedures, environmental and otherwise, for approving new projects like proposed oil pipelines to the West Coast.

Those processes “are quite slow. The China speed is faster, and they want to recreate the China speed in Canada,” he said. And a pipeline west, “I think is a must.”

He reiterated China’s eagerness for Canada to ratify the Foreign Investment Promotion and Protection Agreement signed by the two nations in 2012. It has since languished in Ottawa amid criticism it will provide China undue leverage over Canadian political and economic decision-making. China, however, wants more. “We really wish to have a free trade agreement with Canada,” Mr. Luo said. He also held out the prospect of greater trade in education, tourism, high-tech and agriculture. Such prospects, however, must face growing worry in Canada over who is controlling resources, and what Ottawa has given up in muting human-rights concerns in the name of trade. A 2013 poll by the Asia-Pacific Foundation showed that nearly half of Canadians oppose free trade with China, and more than three-quarters don’t want state-owned Chinese firms buying out Canadian companies.

Mr. Harper’s caucus also includes several Tories who don’t like the idea of state-owned Chinese firms investing in Canada. That includes backbench MPs but it’s also said to include key figures like influential Employment Minister Jason Kenney, a long-standing critic of China’s human-rights record. Across Canada, and especially in the West, the Tories found that parts of their political base are uneasy with growing Chinese economic influence in Canada.

Canadians “are justifiably worried about all the implications of [China’s] growing power,” said David Mulroney, who was Canada’s ambassador to China from 2009 to 2012. China’s ambassadors, at the same time, have sometimes succumbed to “what I would call ‘G2ism.’ They are seduced by what they constantly hear about China’s power and influence. That leads them to believe that any problem in Sino-Canadian relations is due to ignorance or ill will on our part,” Mr. Mulroney said.

Indeed, Mr. Luo called on Ottawa itself to do more to allay suspicions of China. “You government should lobby the media, and the government should tell the people what is the truth, what are the benefits of co-operating with China. That’s also your job, not only my job,” he said.

He added, however, that China has its own role to play, calling on Chinese firms to conduct more charity work, community engagement and media engagement.

Mr. Luo, at 6-foot-2, is a basketball player whose foreign-service career has taken him to India, the United States, Singapore and Pakistan, where he was ambassador from 2007 to 2010. He has been a director-general for the past three years at the foreign ministry, where he was at the front lines of contentious discussions with Japan over disputed maritime territory.

He will be joined in Ottawa by his 16-year-old daughter and his wife, Jiang Yili. Ms. Jiang is a scholar who translated Benazir Bhutto’s memoir and wrote her doctoral dissertation comparing Buddhism and Hinduism. She and her daughter are now in Washington, where she works as a political counsellor in the Chinese embassy.

Mr. Luo takes over from Zhang Junsai, an occasionally sharp-tongued diplomat who said, during the debate over the Nexen takeover, that “we’re not coming to control your resources.” He also once suggested worried Canadians “shut up” about concerns about Chinese companies being used as fronts for espionage. Mr. Zhang left Ottawa last week.

Unlike some of his predecessors, Mr. Luo has little experience with Canada, having visited just twice, most recently four years ago. That makes him “an exception,” said Gordon Houlden, director of the China Institute at the University of Alberta, adding that the new ambassador “will need to get about and learn about Canada.”

With a report from Campbell Clark

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