The fortune in our future

Yuen Pau Woo and Wang Huiyao

Special to Globe and Mail Update, Monday, Jun. 22, 2009 05:58PM EDT

Chinese Foreign Minister Yang Jiechi's visit to Canada this week is a sign that recent Canadian overtures, including trips to China by Foreign Minister Lawrence Cannon and Trade Minister Stockwell Day, are bearing fruit.

It is too early to declare that the period of “cool politics, warm economics” is over. But it is not too early to think about what a new phase of Canada-China relations should look like. Most analysts agree that Prime Minister Stephen Harper needs to visit Beijing, and he has said he will. What then?

It would be tempting to rewind bilateral relations to 2005, when President Hu Jintao and prime minister Paul Martin announced a “strategic partnership.” Some even advocate a return to the heady days of the Team Canada missions of the 1990s. The current context for Canada-China relations, however, is vastly different from four years ago, let alone the previous decade.

First, the U.S.-China relationship has become the primary lens through which many global issues are addressed. From the reform of the Bretton Woods institutions to the conclusion of the Doha round, from the denuclearization of North Korea to a new global deal on climate change, solutions will have to be found in both Washington and Beijing. In the absence of a formal G2, new and old multilateral channels will continue to be important, especially the G20, which has solid Canadian pedigree.

Second, China has gone global. In both hard power and soft power, China's global presence will become more apparent, even as, ironically, its export products - especially of the cheaper mass-produced variety - become less dominant. China's global footprint will increasingly be defined not so much by the ubiquitous “Made in China” label, but by the more amorphous notion of “Made by China.”

Third, two-way people movements between China and Canada will become more important than simply one-way inflows to Canada. There is already a robust return flow of recent Chinese immigrants to Canada, many of whom are taking influential positions in their native country. Talent from many countries is starting to flock to China for professional and economic advancement.

Fourth, China's response to the current downturn will likely result in a profound restructuring of global demand, with China - and Asia more broadly - reducing its reliance on exports as a source of growth, and turning increasingly to domestic spending on infrastructure, social welfare, health and private consumption.

Some of these changes, such as a more assertive Chinese foreign policy and competition from Beijing for the attention of U.S. policy-makers, will be uncomfortable for many Canadians and challenging for Ottawa. But other features of China's globalization present Canadians with exciting new opportunities.

Chinese outward investment is set to increase in the years ahead. According to a recent Asia Pacific Foundation survey of more than 1,100 Chinese enterprises, Canada was perceived as the second-most open market for Chinese investment, behind the United States and ahead of Australia. Contrary to popular commentary here, Chinese enterprises do not believe that the Canadian government or public will react negatively to Chinese investment. Ottawa should put the attraction of Chinese investment at the top of a bilateral economic agenda, and address any residual concern about discrimination against Chinese enterprises, including state-owned companies.

Facilitating two-way people movements should also be given top priority. Aside from immigration, tourism and education flows, special attention should be placed on the growing number of “binationals” who have extensive personal and professional attachments to both Canada and China. Research by the Centre for China & Globalization suggests that the return flow of overseas talent will be a major factor in China's development in the years ahead, and that many of these returnees will re-enter China as citizens of other countries, including Canada. To take just one example, the head of Zhongguanchun, China's equivalent to Silicon Valley, has strong ties to Canada.

It is in the interest of both China and Canada to embrace this highly mobile talent pool by acknowledging their attachments to both countries. Recognizing that the quest for global talent has implications for citizenship policy, Beijing is looking at creative new ways to attract the world's best to China, including less stringent visa requirements and dual citizenship for former nationals who have immigrated to selected destinations. In this respect, Canada is one of China's most important partner countries, not only because of the number of Chinese nationals who have settled in Canada, but because of the substantial flow of returnees who carry Canadian passports.

A comprehensive human-capital agreement could clarify a number of thorny citizenship, extradition and rights issues, while advancing two-way people flows through scholarships, student and faculty exchanges, and mobility of temporary labour. Such an agreement would unlock the hidden potential of Canada-China people linkages and pave the way for deeper economic and political relations. On the eve of the 40th anniversary of bilateral relations, the need for new thinking along these lines is greater than ever.