TORONTO and BEIJING — Expanding into a new country isn’t a simple task for a Chinese company.
First, there’s the negative public attitudes that Chinese companies today face—especially in the West. A survey from the Angus Reid Institute last September found that 85 per cent of Canadians have reservations about Chinese business investment in the country. Fifty per cent say Chinese investment in Canada is either “equally good or bad,” while 35 per cent say it’s “more bad than good.”
Respondents said that concerns such as human rights in China, potential corruption and national security were behind their aversion.
Paul Evans, a professor at the Institute of Asian Research and Liu Institute for Global Issues at the University of British Columbia, notes that there is also the complication—at both the consumer and government level—that China is increasingly viewed as a “strategic competitor” to Western nations.
That’s a label that U.S. President Donald Trump slapped on China last year. His assessment was that the country, on every level from the economy to its military, is in direct competition with the U.S. for global leadership.
That heated rhetoric coincides with a wave of innovative Chinese companies that are expanding into new markets, including Canada. While some have found success, it’s clear the current climate complicates any entry into Western markets.
One successful example is VIPKid. With a valuation of $3 billion, VIPKid is the world’s most valuable education startup. The company recruits teachers from around the world to teach English online to students in China. It entered the Canadian market in January 2015 and has been expanding ever since.
In the past three years, it has recruited thousands of teachers from across Canada. Videos of teachers using props and costumes to teach smiling Chinese children English are easily found on YouTube, as are videos of teachers sharing their positive experiences working with the company.
“We didn’t encounter negative perceptions,” says Sophia Xu, the global head of marketing for VIPKid, about entering the Canadian market.
Companies such as VIPKid can help to soften China’s image and expose Canadians to the country. Xu points out that a number of teachers from VIPKid have travelled to China to meet students—something the company facilitates at its headquarters in Beijing.
“Many teachers are curious about China, and want to learn Chinese,” says Xu.
So far, Canada-China relations have not become confrontational the way they have between Washington and Beijing. Following the election of Prime Minister Justin Trudeau in 2015, there was a push to reach out to China and increase economic relations, including crafting a free trade deal between the two countries.
But those efforts have stalled. Evans says that amidst the rising antagonism between the U.S. and China, the Canadian government hasn’t clarified where exactly it stands.
“We’re in an era of techno-nationalism, where countries are now big players in industrial policies in areas that, until very recently, were seen as strictly commercial market-based transactions,” says Evans.
Still, amidst the political uncertainty, Chinese brands continue to enter Canada, which they see as a promising, growing market.
Earlier this year, Cadillac Fairview, which manages a number of malls in Canada, announced it was partnering with OTT Pay Inc. to bring two of the largest Chinese mobile payment systems to some of its malls: WeChat Pay and Alipay. China’s mobile payment systems are the most developed in the world. Most domestic retailers accept them, and such systems are integrated with everything from vending machines, public transit and social media apps.
So far, their launch here hasn’t been met with resistance.
“Any Chinese product is going to have to face an initial hurdle of a fair amount of negativity out there, but I don’t think that negativity is very fundamental and it will disappear if good services are put in place,” says Evans.
However, a vocal outcry has met Chinese companies attempting to buy major Canadian assets. For instance, deals such as the contentious $15.1-billion takeover of Canadian oil and gas company Nexen Inc. in 2013 by state-owned CNOOC Ltd. received widespread media coverage and political resistance. More recently, the rejection of the proposed $1.5-billion purchase of Aecon Group Inc. by CCCC International Holding Ltd. brought the issue of Chinese purchases of potentially sensitive assets into the spotlight again.
“With China, they’ve made some big and sometimes clumsy moves in the ways they’ve tried to move into Canada or other countries,” says Evans. “[Like] purchasing all of a company, or insisting on controlling shares in a company.”
There is also widespread concern about intellectual property theft by Chinese companies and misuse of consumer data. For instance, WeChat, the largest social media app in China, has struggled to find success outside of the country (especially beyond ethnic Chinese communities) because of fears that messages and consumer data can be accessed by Beijing at any time.
Evans says that these concerns are a clear indication that an agreement needs to be in place between Canada and China about how such companies operating in Canada (and vice-a-versa) will treat data.
“Information in China, every digital piece, is a sovereign issue, that is to say, that the Chinese state can control or at least monitor … all data in China,” he says. “In terms of our privacy world in Canada and the U.S., we draw distinctions between what is public and what is private. So you’ve got two competing understandings of who controls info and what the rules are around that control.”
Using government policy to reach such agreements can help better business relations and go a long way to tempering negative attitudes about Chinese investments, and benefit both sides.
“We keep telling the Chinese they simply have to adopt our standards,” says Evans. “China isn’t going to change on this. But maybe we can find some middle ground.”
John Shmuel is a 2017-18 Asia Pacific Foundation of Canada media fellow.