Welcome to Foreign Policy’s China Brief.
The highlights this week: China strikes a trade deal with Canada, China’s birthrate reaches record lows, and progress continues on a Chinese mega-embassy in the United Kingdom.
Welcome to Foreign Policy’s China Brief.
The highlights this week: China strikes a trade deal with Canada, China’s birthrate reaches record lows, and progress continues on a Chinese mega-embassy in the United Kingdom.
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Canada, China Agree to Trade Deal
Last Friday, Canada and China struck a preliminary trade deal that would open the Canadian market to Chinese electric vehicles and lower Chinese retaliatory tariffs on key Canadian agricultural exports. Ottawa has framed the move as an attempt to reposition Canada in a “divided and uncertain world” and to guard against the volatility of the United States under President Donald Trump.
It’s a remarkable development given how Canada-China relations deteriorated after 2018, when Canada arrested Huawei executive Meng Wanzhou (at the Trump administration’s request) and China retaliated by detaining two Canadian citizens, sparking a three-year diplomatic crisis.
The deal will undoubtedly revive accusations of malign Chinese influence and Canadian perfidy from U.S. right-wingers and China hawks. But a year into Trump’s second term, moving closer to Beijing makes perfect sense for Ottawa, as well as the European Union. China is a global leader in green technologies that Washington now opposes and, as Canadian Prime Minister Mark Carney noted during his Beijing visit, a more predictable partner than the United States.
Put bluntly, a relatively rational autocracy with limited, stable foreign-policy goals located an ocean away may seem preferable to a country run by an erratic autocrat next door. In this respect, the ongoing Greenland crisis has given Canada’s leaders brutal clarity about the United States as it is, not as it was or as they want it to be.
In contrast with the United States under Trump, China’s foreign-policy ambitions and ideological goals have been clear for decades: It wants to conquer Taiwan, control nearby disputed islands, and force the United States out of East Asia, while exercising its sway over the Chinese diaspora and silencing criticism of its human rights record.
Canada and other democracies don’t like these goals, but they’re at least consistent. For instance, China isn’t going to one day choose to invade North Korea or Thailand instead. To be sure, countries have often underestimated how far China is willing to go on these issues, but after years of diplomatic confrontation, Canadian leaders may feel they understand how to manage Beijing—something they can no longer say about Washington.
It helps that China has toned down its “wolf warrior” rhetoric and pulled back from some of its more aggressive stances, chastened by economic stagnation and domestic tensions over corruption and unemployment. The burgeoning Canada-China relationship could sour at any moment, as demonstrated by China’s ongoing spat with Japan, but this potential instability is far more tolerable than that posed by the U.S. president.
Trump will eventually leave office, but allies must live with the fact that the United States elected him twice and that checks on presidential power seem to have failed to restrain his imperialist ambitions. Even a future U.S. government that is stable and predictable will labor under that shadow, which erodes the goodwill Washington relies on to counter China.
None of this, however, guarantees that China will remain stable or predictable, either. President Xi Jinping is the most powerful Chinese leader since at least Mao Zedong, and so far he has led China in a rather unsurprising fashion. But that could change quickly, as European leaders learned with Russia’s full-scale invasion of Ukraine in 2022 after misjudging Russian President Vladimir Putin for a decade.
As Carney made clear in a speech delivered to the World Economic Forum on Tuesday, the real lesson here may be that mid-size countries are better off relying on one another’s solidarity than placing their fate in any superpower’s hands.
What We’re Following
Birthrate crash. On Monday, China released its 2025 demographic data, and it is as bleak as expected. China’s birthrate has fallen to a record low, and its population has shrunk by roughly 3 million people. The decline has been years in the making, despite repeated government efforts to reverse it, whether by changing population control policies or banning private tutoring to keep parents’ costs down.
In the long run, a smaller population could ease environmental and economic pressures. In the near term, however, it exacerbates fears that China will grow old before it becomes rich, with a shrinking workforce struggling to support a rapidly expanding retired population.
Beijing now faces a series of tough choices, including whether to raise the retirement age, encourage immigration, or revert to coercive pro-natalist policies, such as restricting abortion or attempting to further limit women’s participation in the workplace.
Taiwan blockade practice. China has been rehearsing using thousands of fishing boats to form massive maritime barriers, assembling barricades up to 200 miles long at least twice in recent weeks, according to a New York Times analysis.
Though nominally civilian, the vessels are widely believed to be part of China’s hidden maritime militia, a quasi-paramilitary force Beijing has long used to harass the Philippines and others at sea. The drills appear aimed at practicing a blockade of Taiwan, a just-short-of-war option intended to starve the island into political submission.
FP’s Most Read This Week
- The Grand Strategy Behind Trump’s Foreign Policyby A. Wess Mitchell
- Faulty Assumptions About Iran Have Driven a Failed U.S. Policyby Steven A. Cook
- Why a U.S. Attack on Iran Would Backfireby Marc Lynch
Tech and Business
EV glut. Efforts to curb the cutthroat price wars in China’s booming auto industry are failing, with the main auto dealers’ association warning that manufacturers are still dumping excess inventory on them. More than half of dealers reported losses last year, while just over a quarter were profitable.
Beijing is trying to rein in big discounts, but prices, especially for electric vehicles, continue to fall. That’s great for consumers today but unhealthy for the industry long-term: Roughly 80 percent of EV start-ups have gone bankrupt since 2018. A more stable market could also allay Western countries’ fears of being flooded by dirt-cheap Chinese EVs, potentially softening trade restrictions.
U.K. mega-embassy. China has finally secured planning permission for a huge new embassy in London, a project critics warn could function as an espionage hub. Chinese intelligence activity became a major political issue in Britain last year after a series of scandals, yet British Prime Minister Keir Starmer’s government is eager to improve trade ties with China to offset a Brexit-weakened economy and to hedge against the Trump administration.
Those hopes may yet be scuttled. Despite government approval, a wave of legal challenges with crossbench support from members of Parliament threatens further delays. Given Britain’s onerous building planning system, Starmer may struggle to convince Beijing that setbacks are bureaucratic rather than political.
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