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Meng Wanzhou arrives home after spending the day in court on Wednesday, ahead of extradition hearings. Photo: AFP

Huawei case puts two-way strain on Canada-China business confidence

  • Survey finds Canadian companies hardest hit but Chinese firms operating in Canada also report negative impact
  • Tensions date from arrest of Huawei executive Sabrina Meng Wanzhou

More than half of Canadian companies operating in China have changed, postponed or cancelled their business plans in the wake of the arrest of Huawei executive Sabrina Meng Wanzhou in Vancouver six months ago, according to a new report into business sentiment by Canada’s de facto chamber of commerce in Beijing.

The Canada China Business Council did not name Meng, or telecommunications giant Huawei, but found both Canadian and Chinese companies surveyed were facing challenges “stemming from recent bilateral political and legal tensions” in the period from December 1, 2018 – the date of Meng’s arrest – to March 1, 2019.

The survey, conducted every two years, covered 226 Canadian companies and 28 Chinese firms operating in each other’s markets and found that, while the negative impact had been two-way, Chinese companies had suffered less.

China has been Canada’s second largest trading partner since 2003, after the United States, but relations have deteriorated sharply, in what many observers have seen as retaliation over Meng’s detention. She is currently on bail pending an extradition hearing for her to stand trial in the US on fraud charges and breaches of US sanctions on Iran.

Canada has said more than a dozen Canadians – including former diplomat Michael Kovrig and businessman Michael Spavor, both accused of endangering state security – have been detained in China, which has also stopped imports of Canadian food products, including canola and pork.

Among the Canadian respondents to the business survey, 53 per cent said they had made changes to their business plans “as a result of the current bilateral situation”.

Meanwhile, 18 per cent said they had seen contracts or deals cancelled or postponed because of the “tensions”.

“Common concerns included projects or agreements put on hold with no information and company orders cancelled, not because the Chinese buyer had concerns, but because the buyer’s customers may,” the report said.

Canadian soybeans, peas and pork face new delays at China’s ports

Around 20 per cent of respondents said demand for their products had decreased, but the size of the drop varied dramatically, ranging from falls of between 20 per cent to 80 per cent. One Canadian company reported a 95 per cent decrease in demand for its products, commenting that Chinese consumers were “not interested in buying or putting money in Canada”.

About 22 per cent of Chinese respondents said they had experienced cancelled or postponed contracts but, at the same time, more than 50 per cent reported unchanged demand for their goods and services in Canada.

A significant number of the businessmen surveyed said they had changed their travel plans.

About 48 per cent of Canadian respondents had cancelled or postponed travel – or were expecting to – while 49 per cent said they were not concerned about travelling to China.

That compared with 26 per cent of the Chinese companies, which reported that their travel plans had been affected since the political spat broke out.

Canada launches full-court press in US for help in resolving China dispute

However, the CCBC reported that by late March there had been a noticeable pickup in its members’ business travel to China, as well as optimism for the future. Two-thirds of Canadian companies doing business in China said they still planned to expand in the country in the next five years.

Only 46 per cent of the Chinese respondents planned substantial expansion of their business interests in Canada, according to the report, which also noted that profitability for these firms had fallen since the previous survey two years ago.

“These results suggest that, despite the current trade and political tensions between the two countries, Canadian companies operating in China (and Chinese companies operating in Canada) see an optimistic future of continued business growth and development,” the report said.

This article appeared in the South China Morning Post print edition as: Canadian firms put business plans on hold amid tensions