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Fri, 29 Mar 2013 14:15:00 GMT | By Deirdre McMurdy, MSN Money

Why China sent us panda bears

Canada/China relations were on display with the arrival of the furry ambassadors. Canada has to up its geopolitical game. Fast.

Deirdre McMurdy

Let’s be perfectly clear about one thing: the Chinese pandas that recently arrived in Canada with tremendous fanfare are not a gift from the People’s Republic of China. They’re just visiting.

Given the huge diplomatic punch these black and white bamboo-eaters pack, that’s a significant detail. It’s clear that after a rocky start to its relationship with the Harper government, the Chinese aren’t rushing to commit — though they’ve waived the usual panda rental fee of about a million dollars a year. (The Toronto Zoo has invested $8 million in a new panda enclosure and will spend around $2 million a year on bear care.)

Although it was a far briefer and less photogenic exchange, Canada reciprocated by send something to China immediately following the release of the 2013 federal budget: Finance Minister Jim Flaherty.

It’s not uncommon for Canada’s finance minister to trek to New York City and London to explain Canada’s economic plan to capital markets. But it’s the first time that Hong Kong and Thailand have been the first destinations for these briefings.

Granted, the 2013 budget does eliminate some of the preferential tariffs for goods imported into Canada from China and Thailand (as well as over 70 other countries), but that’s not what this is about. (Although it’s undeniably good manners and good diplomacy to offer a senior Cabinet minister to deliver the rationale.)

Among other things, Mr. Flaherty’s Asian trip suggests that a significant amount of Canadian government debt (in the form of issued bonds) is now in Asian rather than American or European hands. And more broadly, it reflects the reality that China in particular — and Asia in general — have become hugely important to Canada’s economic future. (Annual bilateral trade between China and Canada is around $60 billion.)

Prime Minister Stephen Harper’s eastern orientation also reflects the fact that with a majority government, there’s less urgent need to sell the budget domestically and/or appease Opposition critics to keep the government in power. And neither are there any savage cuts to the civil service or program spending as was the case last year at this time.

There’s no question that there’s a strong diplomatic and trade component to the trip as well. The Chinese are highly sensitive to protocol and will certainly note that their country was the first priority for outreach — something that will not hurt long-term trade relations, even if it doesn’t immediately help them. And patient, long-term investment is what Canada, facing the costly development of energy resources, needs most these days.

But the real point of Flaherty’s visit is about continental strategy. Given the current struggle to win approval from the Obama Administration for the controversial Keystone pipeline, Ottawa wants to make very sure that the U.S. understands that Canada has other options and other energy markets and that it won’t necessarily fall into line when there are differences between Beijing and Washington.

It’s a delicate game to be sure: Relations between China and the U.S. are already fraught, and Canada is starting to look at ways to arbitrage those differences.

Given that China is expected to have the world’s largest economy as soon as 2016 and the U.S. may well be energy self-sufficient within the next eight years, Canada has to start getting serious about how it positions itself.

One step in that direction was the new foreign investment guidelines that were put into place at the same time as Ottawa approved the takeover of Calgary-based Nexxen by China’s national oil company.  But there will be more to come as the world’s geopolitical balance continues to recalibrate.

Whatever path Canada decides to take in its future dealings with China, it has to be clear and consistent. And it has to account for some profound cultural differences when it comes to managing expectations going forward.

Now that the Toronto Zoo has a couple of pandas and the Beijing Zoo has a polar bear, the real work is about to start.

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