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Chinese supporters line up on the street outside Premier House as they wait for China's Premier Li Keqiang in Wellington, N.Z., on March 27, 2017.MARTY MELVILLE/GETTY IMAGES

Canada’s spy agency is being warned that New Zealand, one of this country’s closest military allies, has been deeply affected by a Chinese government campaign of foreign interference.

The new report from the Canadian Security Intelligence Service cites “a curtailing of freedom of speech, religion and association for the ethnic Chinese community” in New Zealand and a “corrupting influence on the political system through the blurring of personal, political and economic interests.”

“The People’s Republic of China’s political influence activities in New Zealand have now reached a critical level,” according to the report made public this week, only a few days after Canada-China relations suffered a blow when the Trudeau cabinet blocked one of Beijing’s state-owned firms from buying Toronto-based Aecon Group on national-security grounds.

CSIS gathered international analysts in Ottawa earlier this year for consultations on China and summarized what it heard in the report it published, called China and the Age of Strategic Rivalry.

“The impact of China’s political influence activities on New Zealand democracy has been profound,” the CSIS report says.

New Zealand is one of five countries including the United States, Britain, Canada and Australia that belong to the Five Eyes intelligence-sharing community, in which police, prosecutors and spies co-operate to prevent espionage and terrorism.

The report says China has worked to co-opt the New Zealand business, political and intellectual elite but also made targeted financial contributions through business figures with links to the Chinese Communist Party (CCP) and worked to bring Chinese-language media, Chinese community groups and ethnic Chinese politicians under control. Beijing has also used corporate takeovers and partnerships with companies and universities to gain access to military technology, commercial secrets and other strategic information.

New Zealand is valuable to China not only as "a soft underbelly, through which to access Five Eyes intelligence,” the report says, but also because it is responsible for the defence and foreign affairs of three South Pacific territories, because of its role in international money laundering, its claim in Antarctica as well as its relatively inexpensive farming land and unexplored petroleum reserves.

New Zealand, which along with Australia has signed free-trade deals with China, should serve as a lesson for other nations, the report warned.

“New Zealand provides a vivid case study of China’s willingness to use economic ties to interfere with the political life of a partner country. An aggressive strategy has sought to influence political decision-making, pursue unfair advantages in trade and business, suppress criticism of China, facilitate espionage opportunities, and influence overseas Chinese communities,” the report said.

New Zealand’s Prime Minister Jacinda Ardern said in a statement to The Globe and Mail that the report only repeats what has been reported in newspapers.

“I take my steer on these matters from official channels, not opinions expressed at a workshop,” she said. “I have had no indication that our Five Eyes membership is under question, from Canada or any other of our partners, nor have I heard that it has been raised with any of my colleagues.”

Australia, meanwhile, announced plans on Wednesday to review its espionage laws to counter concerns about China’s rising influence.

The review will be headed by former Australian spymaster Dennis Richardson, who last year warned that China in particular was conducting extensive espionage against Australia.

There have been widespread concerns in Australia that its free-trade deal with China is one-sided and that Beijing has been interfering in domestic politics, including on university campuses.

In Ottawa, the office of Public Safety Minister Ralph Goodale declined to say if Canada has similar concerns about China as New Zealand and Australia.

“The government constantly works to assess threats and takes action to keep Canadians safe, however, we do not comment on specific threats or operations,” communications director Dan Brien said.

The CSIS report lays out a range of hurdles in trying to pursue free trade with China, a strategic goal of the Liberal government since it came to power in 2015.

The report notes that China demands open investment in Western countries but has restricted or closed off 63 sectors of its own economy to foreign investors, such as stem-cell research, satellites, exploration and exploitation of numerous minerals and media, as well as humanities and social-sciences research institutes.

“China’s aggressive diplomacy and insistence on asymmetrical trade are particularly challenging for countries like Canada which seek mutually positive trade relationships,” the report said. “It insists on investment rights in the partner country that are not available for that partner in China.”

The CSIS document said the ruling Communist Party also compels companies to enter into joint ventures and many find that “they have lost control of the company, and their intellectual property, and have been displaced by that partner from markets inside and outside China.”

“Unless trade agreements are carefully vetted for national-security implications, Beijing will use its commercial position to gain access to businesses, technologies and infrastructure that can be exploited for intelligence objectives, or to potentially compromise a partner’s security,” the report warned.

The CSIS findings said it doesn’t seem to matter if Western firms are dealing with a Chinese state-owned enterprise or one held privately because the corporate executives “will have close and increasingly explicit ties to the CCP.”

In many cases, Beijing will use enticements and even threats to Western business leaders and politicians to encourage them to defend China’s stand on such disputes as the status of Taiwan and the South China Sea.

Recently Air Canada joined a growing list of air carriers that bowed to Chinese pressure by listing Taiwan as part of China on its booking website.

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