Noah Zivitz

Managing Editor, BNN Bloomberg

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The federal government faces a delicate balancing act navigating a diplomatic feud with China but the flare-up is unlikely to derail economic ties between the two countries over the long term, according to a former chief executive of the Canada Pension Plan Investment Board.

"These short-term tensions, I do think, require some deft handling by the government, and by business leaders," said Mark Wiseman, who led the country's largest pension fund from 2012 to 2016, in an interview with BNN Bloomberg on Thursday. "But I think long run, and one thing to remember about China: They play a long-term game."

"I think they understand the benefit of the Canada-China relationship, and I think Canada equally understands the benefit of the Canada-China relationship. And this too will pass."

Tension between Canada and China has been mounting since Huawei Technologies Co. Chief Financial Officer Meng Wanzhou was arrested in Vancouver in early December at the request of the United States, which is seeking her extradition to face fraud charges related to alleged violations of sanctions against Iran.

China's ambassador to Canada has blasted this country's involvement in the file, decrying it this week as "a serious political incident." Ottawa has insisted it's following standard procedures as a rule-of-law nation. Meanwhile, the situation was further complicated in mid-December when U.S. President Donald Trump told Reuters he "would certainly intervene" in Meng's case if he thought it could facilitate a trade deal with China.

But Wiseman, who left CPPIB to become global head of active equities at BlackRock Inc., says the present situation is "short-term friction."

"We find ourselves in the current circumstances in a very difficult position, not a position of our making or of our choosing. And so we have to, I think, ensure we circumvent a very fine line between the world's two superpowers, both economically and geopolitically."

Despite the tense situation Canada has landed in, Wiseman said there are plenty of reasons to be hopeful about this country's economic outlook, pointing to trade ties with the U.S., the Comprehensive Economic and Trade Agreement (CETA) that will open up opportunities in the European Union, and stronger connections with Asia.

"Canada is actually, in the long run, in a fantastic position," he said.