Energy & Resources

Panda diplomacy pays off

Chinese and Canadian relations have never been better. Why? Oil

Panda diplomacy pays off

“You get me, plus a pipeline”: Harper’s wife Laureen holds baby panda

Stephen Harper eats his greens. His mother will be very pleased to hear it. And so were watching Beijingers last week, as the Canadian prime minister tucked into a plate of local vegetables.

In fact, Harper deserves special merit. Jiemo dun – Chinese cabbage topped in local mustard with a spicy kick – is not to everyone’s taste, so onlookers were suitably impressed when he not only ordered the dish but also seemed to enjoy eating it.

Equally noteworthy, the adventurous eater coped well with dou zhi, a pungent, rotting soy juice that’s also a local favourite.

All in all it was a world class display of ‘stomach diplomacy’ for Queen and country, epitomising that Harper was more than willing to engage with China on his latest trip to the country.

It wasn’t always so. In the early days of his administration, the Canadian PM riled Beijing with critical remarks about its policies on human rights and such like – to such an extent that China Daily once described relations with Canada as “cool-to-icy”.

This time around Harper has “learned to apply a gentler touch,” was the verdict of Canadian Business magazine.

“I make it my habit when I’m in another country not to say anything publicly critical of that country,” Harper now notes.

Harper brought five government ministers, six lawmakers and a large business delegation with him on his latest visit. He also announced the creation of a new ‘goodwill’ ambassador to China – Mark Rowswell, the popular Mandarin-speaking Canadian (see Q&A on next page) who is known locally as Dashan.

In return Harper got the red-carpet treatment, said the Toronto Star, securing frontpage coverage in the Chinese media and enjoying a series of high-level meetings.

Even Canada’s zoos felt the love, with the promised gift of a couple of pandas (see Q&A).

More importantly, the delegations also signed a foreign investment protection agreement – a deal that had eluded both nations for two decades and which Harper called “historic”.

Relations between the two countries are on the up. Since 2009, the Chinese tourist arrivals in Canada have risen 25%. Chinese investment in Canada has reached $14.1 billion over the same period.

Canadian exports to China are also in an upswing, especially in natural resources, where Chinese demand has been crucial.

Don Kayne, CEO of CanFor, Canada’s second largest lumber producer, told the Toronto Star that without it, CanFor would have closed 15 sawmills (at a cost of 5,000 jobs) after the US housing market crash. Canada has now surpassed Russia as China’s top supplier of softwood timber, and expects exports to double within 10 years.

Indeed, the key message to come out of Harper’s trip was that Canada has plenty of natural resources still to sell – and sees China as a key customer. As Harper told his Chinese counterparts: “We have abundant supplies of virtually every form of energy. We want to sell our energy to people who want to buy our energy. It’s that simple.”

This was a none-too-subtle dig at Washington, which last month rejected plans (on environmental grounds) for a Canadian oil pipeline, the Keystone XL, which would have connected the oil sands of Alberta to the refineries of Texas.

Plan B? A pipeline to the Pacific coast: a $5.5 billion project backed by, among others, Sinopec, one of the Chinese oil majors. The likely result: a greater proportion of Canadian oil shipped to the Asia-Pacific.

Currently, 97% of Canada’s oil exports go to the US. But Joe Oliver, minister of natural resources, explained to China Economic Weekly that China is an integral part of Canada’s energy export diversification strategy. And not only as a customer: Oliver also says that the country’s oil sands projects require foreign investment too. “We simply don’t have enough capital in Canada,” he told Bloomberg.

Dealmaking is already well underway. This week Sunshine Oilsands launched its Hong Kong IPO, with the Canadian firm planning to raise as much as $606 million to finance oil sands projects in Alberta. The cornerstone investors are none other than Sinopec and the China Investment Corp (CIC), who have pledged to invest $300 million, reports FinanceAsia.

All told, Harper’s visit to China was clearly intended to tighten commercial ties. For the US, there was also a more reproachful subtext: that if it blocks proposals like the Keystone XL pipeline, Canada will find other export markets.

This interpretation was not lost on the Chinese media either. “Canada intends to sell China oil to ‘warn’ the US,” was the way that CBN summed it up.

Keeping track: in last week’s issue we reported on Canadian prime minister, Stephen Harper’s trip to China. One of the key subjects of dialogue was energy – or more specifically, Canada selling more of its oil to the Chinese. It emerged this week that another key energy source was discussed too. According to Reuters, Harper has signed a deal with Beijing that will “make it easier for Cameco Corp and other Canadian uranium producers to sell nuclear fuel into the fastest-growing market for atomic power”. Harper’s office said the new nuclear pact would “substantially increase” exports of uranium to China – which is currently building 27 new reactors. Previously Cameco was not permitted to sell to China. (Feb 24, 2012)

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