A Chinese-Canadian man has been charged with trying to leak classified information related to Canada's national shipbuilding strategy to China's government.
The man, identified as Qing Quentin Huang, 53, is an engineer with Lloyd's Register Canada, which was sub-contracted by Irving, Canada's largest shipbuilder, for design consultation.
RCMP Chief Superintendent Jennifer Strachan said: "On Thursday the RCMP was informed that the accused was taking steps to pass on information of a classified nature to China.
"In these types of cases, sharing of information may give a foreign entity a tactical, military or competitive advantage by knowing the specifications of vessels responsible for defending Canadian waters and Canadian sovereignty."
Beijing dismissed the spying allegations as "groundless".
Foreign ministry spokesman Hong Lei told reporters: "The remark saying that a Canadian-Chinese male provided confidential information to the Chinese government is totally groundless."
Irving is overhauling its shipyards in Halifax, Nova Scotia, to prepare for its share of a C$33 billion (HK$241 billion) contract to build ships for the Canadian Navy and coastguard starting in 2015. Bolstering Canada's Arctic sovereignty by beefing up its naval presence in the Arctic, Pacific and Atlantic oceans have been among Prime Minister Stephen Harper's stated priorities in recent years.
Huang, of Waterdown, Ontario, was arrested on Sunday in nearby Burlington. He was charged under the Security of Information Act with two counts of attempting to communicate information of national security to a foreign entity.
Deborah Page, a spokeswoman for Irving Shipbuilding, said Huang was never employed at the company or on its property.
Bud Streeter, president of Lloyd's Canada, said on Sunday: "We have been doing anything we can to assist the RCMP investigation." Huang is employed as a structural and design appraisal engineer at Lloyd's Register's Burlington office.
His main work was to assess and approve whether ship designs are compliant with Lloyd's and other international standards, said Streeter.
Lloyd's has about three of its 100 Canadian employees with the requisite security clearance working on the government's national shipbuilding strategy.
Huang wasn't among those and instead was working for commercial clients, Streeter said.
Police said Huang, who appeared to have been acting alone, will appear in court for a bail hearing tomorrow. Additional reporting by Reuters