WHO CAN VOTERS TRUST TO GRAPPLE WITH CHINA?
The leaders haven’t exactly been stellar on this file
Black Monday, everyone seems to be calling it. Some economists are calling it a slow-motion global meltdown of 2008 proportions. Others are saying this week’s heartstopping event in Chinese equity markets is merely an overdue and sudden deflation of bloated stock values. But Black Monday it is, in both camps, and in Canada the respectable question the event raises appears to be this one: which of the three main federal election contenders is best suited to steer Canada though a volatile and newly strange global economy?
Another question that should be considered is worth asking precisely because neither Stephen Harper nor Thomas Mulcair nor Justin Trudeau, for differing reasons, would want it asked too persistently. As impolite as it may be to put the question in these terms, it is about who should be trusted to keep Canada from the harm that the gluttonous Leninist kleptocracy in Beijing causes us all.
Stephen Harper’s Conservatives cannot be faulted for failing to possess the gift of clairvoyance, but there has been a cost to Harper’s 2006 declaration that Canada’s destiny was to be an “energy superpower” and to his own stubborn imagining of China as the gold hoard at the end of an oilsands-rich rainbow. Canada has been left both vulnerable to unseemly diplomatic compromises with dirty Chinese money and economically exposed to plummeting resource commodity prices – oil, natural gas, copper, coal, iron, the lot.
During the summer of 2014, the North American benchmark price for oil was $105 a barrel. It’s now down to $39, and the Chinese economy – the real one, not the poker championships of equity trading – still isn’t all that desperate for our oil, even at these prices.
So far this year, China has imported a whopping 6.7 million barrels of crude a day, a jump of 640,000 barrels over last year, but China’s stateowned oil complex is now exporting roughly 670,000 barrels a day in refined products.
The Chinese economy benefitted from $120 billion in foreign direct investment last year, but another $102.9 billion in Chinese capital flowed out of the country.
It’s taken too long for the penny to drop, and when the necessity of a policy shift becomes too painfully obvious, Harper has tended to opt for the feint or the sop.
By 2012, Beijing ’s intrusions into outright oilpatch-property ownership had reached such scandalous proportions that Harper was forced, by his own caucus as much as by public opinion, to do something. It took the $15.1-billion takeover of Calgary’s oil-and-gas poster boy Nexen by Chinese state conglomerate CNOOC – China’s largest-ever overseas acquisition – for Harper to make a move. And even then, he vowed only that the deal would mark the end of a trend. Further takeovers would be discouraged, but according to rules of sufficient opacity to allow the broadest exceptions.
It took no small amount of boat-rocking within Harper’s caucus for former Citizenship and Immigration Minister Jason Kenney to get a green light in 2012 to rein in Canada’s most embarrassing ingratiation of Chinese capital – the out-of-control Immigrant Investor Program. Taken together with its Quebec version, the IIP scam allowed roughly 50,000 mostly Chinese millionaires to acquire Canadian citizenship over the program’s final decade or so, and to settle down — or not — in the Canadian real estate they’d acquired, mostly in Metro Vancouver.
Two weeks ago, the sop: Harper promised new measures to help track the property-bubble impacts of “foreign, non-resident” real estate acquisitions in Canada. This is not a bad idea, but it neatly misses the point. The world-class unaffordability of housing in Vancouver shouldn’t be expected to result from the appetites of “foreign” buyers, which count for near to nothing against the impact of all those millionaires who bought their Canadian citizenship papers.
Nobody quite knows where they all went, anyway. There are more than 300,000 Canadian citizens living and working in Hong Kong and Mainland China now, and as Ian Young of the South China Morning Post reports, here’s how weird things have gotten in Vancouver, where the average price for a detached house is now $1.4 million: there are 24,960 households within the city limits with a declared income that is a lesser amount than the cost of the household itself in utilities, property tax, and mortgage or rent. “Think about that,” Young writes, “these households claim to earn less than they spend on accommodation alone.”
But if all this makes Harper look a bit lame, Justin Trudeau’s best known pronouncement on China is probably this November 2013 flippancy: “There’s a level of admiration I actually have for China because their basic dictatorship is allowing them to actually turn their economy around on a dime.”
Aside from all that, this week’s hemorrhaging of $8 trillion in worldwide wealth — $5 trillion just from the Shanghai and Shenzhen stock exchanges — proves painfully that Beijing’s tyrants can’t quite turn the Chinese economy around on a dime after all. Then there was Trudeau’s weirdness in the lead-up to CNOOC’s takeover of Nexen, when he explained that he was content with the acquisition because his “instincts” told him it was fine, adding “obviously my family has historical ties with China.”
As a corrective, last December Trudeau appointed the Beijing-based consultant and former Foreign Affairs bureaucrat Margaret Cornish as his senior adviser on China. A slight problem, more optics than anything else: in August 2013 the Ontario Superior Court approved an $8.1-million class-action settlement against Cornish and four of her fellow directors of the Zungui Haixi Corporation, a Chinese sportswear and shoe factory.
The class-action settlement was a compromise, and not a finding of wrongdoing by its directors. Cornish and her colleagues denied the allegations against them, and bad things do happen to good people, so let’s be fair. But it isn’t so easy to dismiss the strange enchantment that seems to possess Cornish when it comes to Beijing’s state-owned enterprises.
In 2012, Cornish undertook a study for the Canadian Council of Chief Executives that reached conclusions that can best be described as eccentric: Chinese SOEs don’t act like implements of the Chinese Communist Party, they’re “profit driven to their core” and Ottawa should treat them just like any other company. This flies in the face of the U.S.China Economic and Security Review Commission, the Economist magazine, and even the 5th plenary session of the 15th gathering of the Central Committee of the Chinese Communist Party, which counted on SOEs to be Beijing’s primary instruments in the party’s overseas-acquisitions strategy.
Over the past two years, Chinese president Xi Jinping has been tightening his grip on SOEs and running an oldfashioned purge through the companies’ ranks.
As for Thomas Mulcair’s New Democrats, there’s not much to be said because they just don’t like talking about China, lest a party candidate says something that someone might construe as “sinophobic.” Mulcair is happy to berate the Conservatives for ratifying the Foreign Investment Promotion and Protection Agreement (and the Liberals for voting with the Conservatives on it) but he’s less than clear about what a Mulcair government might actually do about it.
During the Chinese government’s buying spree in the Alberta oilpatch, the New Democrats were strangely quiet. The NDP has no Bernie Sanders, the left-wing outlier for the Democratic ticket who has raged consistently and understandably that American workers are forced to compete with the captive labour of one-fifth of humanity now controlled by President Xi.
Say what you like about Harper and China. The Opposition leaders have been mostly useless.
So if the challenge of coping with China after the polls close Oct. 19 is something that matters to you, you’re on your own.
It is about who should be trusted to keep Canada from the harm that the gluttonous Leninist kleptocracy in Beijing causes us all.