Nuctech Deal a ‘Worrying Glimpse’ Into Canada’s China Policy Competence: Former Ambassador to China

December 7, 2020 Updated: December 8, 2020

The federal government’s decision to award Chinese state-owned Nuctech a contract to supply X-ray equipment to its embassies around the world offers a “worrying glimpse” into the state of Canada’s China policy competence, says a former Canadian envoy to China.

David Mulroney, who served as ambassador in Beijing from 2009 to 2012, made the comments at a Dec. 7 meeting of the parliamentary operations committee. The committee is looking into the government’s contract with Nuctech to supply security equipment to Canadian consulates and embassies. The deal was cancelled amid controversy this fall.

Mulroney said China’s rise and the related implications for Canada presents a “once in a century challenge” that requires a “complete rethinking of foreign and domestic policies”—a comprehensive strategy that remains to be seen despite increasing aggression from Beijing.

“We’ve seen no signs of heightened awareness, no signs of increased urgency to identify and better manage anything and everything having to do with China, and no evidence of any effort to galvanize the entire government, all departments and agencies, in an effort of pressing national importance,”  he told the committee.

“This isn’t actually a policy problem—it’s a problem arising from the absence of policy.”

Mulroney said “bureaucratic disconnect” within the government may be partly to blame for loopholes that allowed the Nuctech deal to be considered, but that in itself points to the lack of a comprehensive China strategy.

“The Nuctech case is more than a bureaucratic disconnect, more than a performance failure by a government that is more challenged than most when it comes to actually getting things done,” he said.

“The experience offers us a brief, worrying glimpse of the state of China competence in a government that has had vivid daily warnings of the extent to which China poses what the deputy minister of global affairs has referred to as a ‘strategic challenge’ to Canada.”

In July, Nuctech was awarded a contract to install X-ray security equipment for 170 Canadian embassies, consulates, and high commissions around the world.

The deal raised immediate security concerns in light of the fact that the company is owned by Beijing, is founded by the son of former CCP leader Hu Jintao, and has links to the Chinese military. The contract was cancelled after the media reported on the deal and amid criticism by the opposition.

The Conservatives pressed the Liberal government in question period last month to explain why the contract was cancelled only after media reports sparked a backlash. Minister of Foreign Affairs François-Philippe Champagne responded that “the contract was not approved” and was still at the bidding stage when Nuctech was dropped from consideration.

Charles Burton, China expert and senior fellow at the Macdonald-Laurier Institute, said the deal shows that Canada’s procurement strategy needs to be adapted to better recognize threats, so that Chinese state-owned companies like Nuctech are not put on a level playing field with other companies.

“[Canada’s] agnostic approach obscures the realities of Chinese regime enterprises and the threat they pose to Canada’s national security,” he told the committee on Dec. 7.

“In short, like the Chinese Communist Party, Nuctech cannot be trusted by Canada under any circumstances.”

Burton said the government needs to understand that Nuctech, like other state-owned Chinese enterprises, is part of an “integrated party-state-military-civilian-market-PRC regime complex,” whose strategic intent is aligned with China’s geo-political goals.

“The Chinese state heavily subsidizes Nuctech and other Chinese hardware and software development and production to make [them] highly competitive in global markets. That’s why they rendered the cheapest bid to us,” he said.

“But like all Chinese state enterprises, Nuctech’s raison d’etre is not primarily economic profitability, but also to serve other overall PRC regime purposes.”

Christian Leuprecht, a political science professor at the Royal Military College of Canada, said the government now has an opportunity to learn from the “near miss” on Nuctech, “which manifests the extent to which the broad scale and threat risk of this bilateral relationship continually outstrips the government’s current toolkit and governance capacity.”

“Canada should not be doing government procurement business with a country that engages in hostage diplomacy, bullies Canada and some of its closest allies, spreads blatant false information, engages in large-scale and systemic foreign influence, regularly flouts international law including endangering allied warships, and is responsible for large-scale human rights abuses, on a scale not seen for decades,” said Leuprecht, who is also a senior fellow at the Macdonald Laurier Institute

The Liberals had pledged to unveil a new framework for a Canada-China policy before the end of the year. In testimony to the Canada-China committee on Nov. 23, Champagne appeared to back off that promise, saying only that Canada’s China policy is “evolving” and will be guided by “Canadian interests, our fundamental values and principles, including human rights, as well as global rules and strategic partnerships.”

“Our foreign policy needs to evolve with an evolving China … and that is what we are already putting in motion,” he said.