China

01

Overview

China is Canada's second-largest trading partner, with total bilateral goods trade of approximately C$100B+ (2024, Statistics Canada) CAD in 2024 (StatCan). The relationship is the most structurally complex in Canada's trade portfolio: China is simultaneously a critical export market for Canadian commodities — canola, wood pulp, copper, potash, seafood — a dominant supplier of manufactured imports, and a strategic competitor across technology, critical minerals, and Indo-Pacific influence. Canada runs a $67B trade deficit with China, the largest bilateral deficit in absolute terms. The relationship deteriorated sharply following the 2018 Meng Wanzhou/Huawei affair and arbitrary detention of Michael Kovrig and Michael Spavor. Both Canadians were released in 2021, partially normalizing consular relations, but Ottawa's 2022 Indo-Pacific Strategy explicitly frames Beijing as "an increasingly disruptive global power" requiring managed engagement rather than strategic partnership. Canadian businesses operating in China must price political risk at a level not required for any other Tier 1 market.

02

Political Context

SystemOne-Party StateChinese Communist PartyGen. Secretary / PresidentXi JinpingConsolidated power since 2012PremierLi QiangIn office since March 2023Canada Policy ToneManagedBilateral tension elevatedPolitical RiskHighInterference + detention riskCanada IPS FrameDisruptiveIndo-Pacific Strategy, 2022

Xi Jinping's third term as General Secretary — confirmed at the 20th Party Congress in October 2022 — eliminates term-limit precedent and concentrates decision-making authority in a manner not seen since the Mao era. Economic policy is increasingly subordinated to national security objectives. Xi's "dual circulation" strategy deprioritizes dependence on Western markets and technology while accelerating domestic substitution in semiconductors, aerospace, and advanced manufacturing.

For Canada specifically, the political climate is more stable than the 2018–2021 nadir but remains fragile. The Global Affairs Canada travel advisory for China (Q1 2026) cites arbitrary enforcement of national security laws, exit bans, and risk to individuals with dual Canadian-Chinese citizenship. Executives with mainland travel requirements should conduct personal security assessments before travel.

⚠ WATCHCanada's Indo-Pacific Strategy commits $2.3B over five years to supply chain diversification away from China-dependent nodes. Canadian firms receiving federal cleantech or critical minerals incentives may face restrictions on China JVs involving dual-use materials — review IPS compliance provisions before structuring China supply agreements.03

Economic Profile

GDP$18.5TUSD, 2024 est. (IMF)GDP Growth+5.0%2024 (NBS China)GDP Forecast+4.5%2025 estimate (IMF)Inflation0.2%2024 CPI (NBS)Urban Unemployment5.1%2024 (NBS)Credit RatingA1 / A+Moody's / S&P

China met its 2024 official growth target of "around 5%" despite significant headwinds: a prolonged property sector correction (Evergrande, Country Garden defaults), weak consumer confidence, and deflationary pressure at 0.2% CPI. The IMF projects growth decelerating to approximately 4.5% in 2025 as structural adjustments continue. Xi's government has responded with targeted fiscal stimulus — primarily infrastructure investment — rather than broad consumer demand measures.

The structural shift matters for Canadian exporters: China is rebalancing away from construction-driven commodity demand (which powered the 2003–2014 supercycle) toward advanced manufacturing, cleantech deployment, and domestic consumption. Canadian resource exporters face cyclically weaker demand for steel-making inputs but sustained demand for agri-food, potash, and critical minerals supplying China's battery industry — the world's dominant EV and energy storage manufacturing base.

04

Bilateral Trade

Total Bilateral TradeC$100B+ (2024, Statistics Canada)CAD goods, 2024 est. (StatCan)Canadian Exports$28B2024 est. (StatCan)Canadian Imports$82BConsumer goods, electronics, machineryTrade Balance−$67BLargest Canadian bilateral deficitBilateral Rank#2After United StatesExport Share4.2%Of total Canadian exports

Top Canadian exports to China: Canola seed and oil (~$5.5B) — dominant single category despite recurring market access tensions; wood pulp (~$3.8B); copper ore and concentrates (~$3.2B); potash (~$2.8B); seafood, particularly lobster and crab (~$1.8B); coal (~$1.5B, declining); soybeans (~$1.2B). Export composition is heavily concentrated in primary commodities — less than 15% of Canadian exports to China are manufactured goods.

Top Canadian imports from China: Consumer electronics and smartphones (~$12B); industrial machinery and equipment (~$10B); apparel and textiles (~$8B); furniture and plastics (~$6B); solar panels and cleantech hardware (~$5B, growing); vehicles and components (~$4B). Canadian importers of Chinese-manufactured solar panels, batteries, and EV components face tariff risk following Canada's August 2024 imposition of 100% tariffs on Chinese EVs and 25% tariffs on Chinese steel and aluminum.

05

Market Access

No Bilateral FTA WTO MFN Access OnlyCanada and China have no bilateral free trade agreement. Both are WTO members; Canadian exports enter on Most Favoured Nation (MFN) tariff rates. Canada suspended bilateral FTA exploratory discussions in 2018. Canada's Indo-Pacific Strategy does not include a China FTA as a policy objective — no resumption is expected in the current political environment.CPTPP note: China applied to join the CPTPP in September 2021. Canada has not indicated support for China's accession. CPTPP partners with high China economic interdependence (Vietnam, Malaysia) may face pressure to accommodate China's interests; monitor for CPTPP rules-of-origin implications if China accession proceeds without Canadian support.

Non-tariff barriers for Canadian exporters in China are substantial and often politically applied. Canola access has been suspended twice (2019, 2022) using phytosanitary justifications widely assessed as retaliatory. Chinese customs can impose informal slowdowns without formal justification. Regulatory approvals for agri-food, pharmaceuticals, and technology products are subject to lengthy and unpredictable timelines. Technology companies in data-sensitive sectors face data localization requirements and cybersecurity law obligations under China's Data Security Law (2021) and Personal Information Protection Law (2021) that create material compliance complexity for Canadian operators.

TARIFF REFERENCE

Look up import and export tariff rates for goods traded between Canada and China.

Open Tariff Reference Tool →06

Opportunity Assessment

Agri-food — STRONG (with access risk)China is the largest or second-largest market for Canadian canola, seafood, and pulses. Demand is structurally sustained by food security imperatives. However, market access is politically fragile — subject to discretionary closure without WTO recourse. Companies with China agri-food concentration must maintain diversification contingency plans.Critical Minerals — STRONG (dual-use constraints)China's battery, EV, and cleantech manufacturing sectors consume Canadian lithium, cobalt, nickel, and copper at scale. Federal policy under Canada's Critical Minerals Strategy increasingly directs mineral supply toward allied markets (US, EU, Japan, Korea). Investment Canada Act scrutiny applies to Chinese SOE investment in Canadian mineral assets at all deal sizes.Advanced Manufacturing — EMERGINGNiche opportunities exist for Canadian precision components and industrial software suppliers to Chinese OEMs — but technology transfer risk, IP protection deficiencies, and export control compliance under Canada's Export and Import Permits Act significantly limit addressable market without extensive legal structuring.Technology & Digital — LIMITEDCanada's 5G exclusion of Huawei and ZTE, combined with China's Great Firewall and data localization requirements, effectively closes the bilateral tech market for most Canadian software and platform companies. Government-adjacent and defence technology is prohibited. Consumer digital services face structural market access barriers that make commercially viable entry impractical.Energy & LNG — EMERGINGLNG exports from Canada to China are a long-term strategic option as LNG Canada Phase 1 production begins in 2025. China is a plausible offtake market for Canadian LNG, though US pressure on routing Canadian LNG to adversarial buyers and long-term offtake contract complexity limit near-term commercial certainty.Aerospace & Defence — LIMITEDDual-use export controls, NATO alignment obligations, and Canada's IPS designation effectively exclude most Canadian aerospace and defence suppliers from Chinese procurement. ITAR-controlled components in Canadian aerospace products cannot be exported to China without US State Department approval, which is not available for PLA-adjacent buyers.07

Canadian Business Presence

Canadian financial institutions maintain structured China operations. Manulife operates through a mainland China JV (Manulife-Sinochem) covering life insurance and wealth management — one of the most established foreign insurer positions in China. RBC Capital Markets and TD Securities operate in Hong Kong and Shanghai for institutional clients. Canada's large pension funds — CPP Investments, OMERS, Ontario Teachers' Pension Plan — hold substantial China private equity and real estate positions accumulated during the 2010s; several are under strategic review given political risk repricing and IPS alignment requirements.

In agri-food, Richardson International, Viterra (now Bunge/Glencore), and Canola Council member companies maintain China sales offices and distribution relationships. Nutrien is among China's largest potash suppliers through long-term offtake agreements with Sinochem and state-linked buyers. In mining, Teck Resources and First Quantum have historically sold copper and metallurgical coal into Chinese markets; Teck's coal exposure to Chinese demand remains a revenue variable following 2024 asset sales.

Several Canadian technology and cleantech companies have exited or substantially reduced China exposure since 2019. The directional trend is managed reduction of China operational exposure, particularly in technology and strategic inputs, while maintaining commodity and agri-food market relationships where Canadian leverage is stronger and political cost of withdrawal higher.

08

Risk Register

09

Corruption & Compliance Risk

TI CPI 202442 / 100Rank #76 globallyFATF StatusRegular ProcessNot grey/blacklistedWB Rule of Law48th pctileWorld Bank 2023Control of Corruption50th pctileWorld Bank 2023PEP ScreeningMandatory EnhancedSOE & Party-linkedCTI Compliance RatingHigh RiskAs of Q1 2026

China presents one of the most complex compliance environments for Canadian companies. Despite Xi Jinping's anti-corruption campaign, bribery risk remains significant — particularly in permitting, licensing, customs, and government procurement. The opacity of the Chinese legal system, the prevalence of state-owned enterprise counterparties (where individual employees may hold CCP roles), and the lack of independent judicial oversight create a high-risk CFPOA exposure environment. Canadian companies must maintain documented anti-corruption due diligence for all Chinese agents, distributors, and joint venture partners.

PEP risk in China is structurally elevated: CCP membership is pervasive in SOE leadership and extends through local government commercial networks. All counterparties in government-adjacent sectors (energy, infrastructure, defence supply chains) require enhanced PEP screening. Export control compliance — including Canada's EIPA obligations and US re-export rules for US-origin content — adds a further compliance layer requiring a separate China-specific export control program. CTI rates China High Compliance Risk requiring a documented CFPOA program, enhanced agent due diligence, and export control screening before engagement.

10

Procurement Pipeline

Canada and China have no bilateral government procurement agreement. Canadian companies are not eligible to bid on Chinese state procurement as recognized foreign suppliers under any treaty framework. Chinese SOE procurement — which constitutes a large share of capital expenditure in infrastructure, energy, and industry — is generally not accessible to Canadian bidders on competitive, non-discriminatory terms.

⚠Investment Canada Act — SOE ThresholdsChinese SOE acquisitions of Canadian businesses are subject to ICA review at lower financial thresholds than private-sector acquirors. Since 2022, no Chinese SOE acquisition in critical minerals, AI, or defence-adjacent sectors has received federal approval. Do not structure transactions assuming Chinese SOE investment will clear ICA review.⚠Export Controls — Dual-Use GoodsCanadian exporters of dual-use goods on the Export Control List to China require permits from Global Affairs Canada. Following Canada's alignment with Wassenaar Arrangement and post-2022 semiconductor controls, the list of controlled goods requiring permits for China-bound shipments has expanded materially. Consult GAC export controls guidance before shipping advanced technology, electronics, or precision manufacturing components to Chinese buyers.🔗TCS China — Market Access SupportThe TCS maintains offices in Beijing, Shanghai, Guangzhou, Chengdu, and Hong Kong. The TCS China mandate remains active — particularly for agri-food market access and regulatory approvals. CanExport SME funding is available for China market development subject to Canadian export control compliance certification.11

Government Signals

📄Canada's Indo-Pacific Strategy · Global Affairs Canada · November 2022The IPS — Canada's most explicit foreign policy document on China — frames Beijing as "an increasingly disruptive global power" and commits $2.3B over five years to regional engagement, supply chain diversification, and expanded defence cooperation. The IPS explicitly excludes deepening trade dependence on China as a policy objective. Ottawa will not pursue a China FTA and will use procurement, incentive, and regulatory tools to shift supply chains toward allied countries.📄Investment Canada Act Amendments · 2022–2024Successive ICA amendments tightened national security review of foreign investments, with particular application to critical minerals, AI, and defence-adjacent sectors. Ministerial direction (2022) signals that Chinese SOE acquisitions in critical minerals will not receive approval. Companies in strategic sectors should not rely on Chinese SOE capital as a financing pathway.📄NSICOP Report on Foreign Interference · 2024Canada's National Security and Intelligence Committee of Parliamentarians documented Chinese state interference in Canadian federal elections and business networks. The report identifies PRC-linked actors attempting to influence Canadian trade policy through diaspora business networks and academic institutions. Canadian boards with China-linked advisors or investors should review governance arrangements for compliance with the Lobbying Act and related disclosure requirements.📄China EV / Steel Tariffs · August 2024Canada imposed 100% tariffs on Chinese-manufactured electric vehicles and 25% tariffs on Chinese steel and aluminum in August 2024, matching US Section 301 measures. These apply to Canadian importers purchasing Chinese EVs, batteries, and solar products. Companies with Chinese-sourced EV components, battery cells, or solar modules must audit supplier country-of-origin declarations for retroactive tariff exposure.12

Sources

1. Statistics Canada, Table 12-10-0011-01: International merchandise trade by country, 2024 annual data.
2. International Monetary Fund, World Economic Outlook, October 2024: China GDP, growth, inflation data.
3. National Bureau of Statistics of China (NBS): GDP growth 2024, urban unemployment, CPI data.
4. Global Affairs Canada, Indo-Pacific Strategy, November 2022: China policy framework and $2.3B commitment.
5. National Security and Intelligence Committee of Parliamentarians (NSICOP), Annual Report 2024: foreign interference documentation.
6. Investment Canada Act, as amended 2022–2024: SOE thresholds, critical minerals guidance, ministerial direction.
7. Department of Finance Canada, Notice on Chinese EV and Steel/Aluminum Tariffs, August 2024.
8. Global Affairs Canada, Export Controls Bureau: Export Control List amendments, 2022–2025.
9. Moody's Investors Service / S&P Global Ratings: China sovereign credit rating, 2024.
10. Trade Commissioner Service, China Country Market Reports, 2024–2025: market access intelligence.