From the Frontier Centre for Public Policy

By Scott McGregor

Scott McGregor warns BC Ferries’ contract with a Chinese state-owned shipbuilder reveals Canada’s failure to align procurement with national security. It is trading short-term savings for long-term sovereignty and strategic vulnerability.

BC Ferries’ recent decision to award the construction of four new vessels to China Merchants Industry (Weihai), a state-owned shipyard under the Chinese Communist Party (CCP), is a cautionary tale of strategic policy failure. While framed as a cost-effective solution to replace aging vessels, the agreement reveals a more critical issue: Canada’s persistent failure to align vital infrastructure procurement with national security and economic resilience.

The situation goes beyond transportation. It is a governance failure at the intersection of trade, security, and sovereignty.

Outsourcing Sovereignty

China Merchants Industry is part of a sprawling state-owned conglomerate, closely connected to the CCP. It is not merely a commercial player; it is a geopolitical actor. In China, these organizations thrive on a unique blend of state subsidies, long-term strategic direction, and complex corporate structures that often operate in the shadows. This combination grants them a significant competitive edge, allowing them to navigate the business landscape with an advantage that many try to replicate but few can match.

The same firms supplying ferries to BC are also building warships for the People’s Liberation Army Navy. That alone should give pause.

Yet BC Ferries, under provincial oversight, proceeded without meaningful scrutiny of these risks. No Canadian shipyards submitted bids due to capacity constraints and a lack of strategic investment. But choosing a Chinese state-owned enterprise by default is not a neutral act. It is the consequence of neglecting industrial policy.

Hybrid Risk, Not Just Hybrid Propulsion

China’s dominance in shipbuilding, now over 60% of global orders, has not occurred by chance. It is the result of state-driven market distortion, designed to entrench foreign dependence on Chinese industrial capacity.

Once that dependency forms, Beijing holds leverage. It can slow parts shipments, withhold technical updates, or retaliate economically in response to diplomatic friction. This is not speculative; it has already happened in sectors such as canola, critical minerals, and telecommunications.

Ordering a ferry, on its face, might seem apolitical. But if the shipbuilder is state-owned, its obligations to the CCP outweigh any commercial contract. That is the nature of hybrid threats to security: they appear benign until they are not.

Hybrid warfare combines conventional military force with non-military tactics (such as cyber attacks, disinformation, economic coercion, and the use of state-owned enterprises) to undermine a target country’s stability, influence decisions, or gain strategic control without resorting to open conflict. It exploits legal grey zones and democratic weaknesses, making threats appear benign until they’ve done lasting damage.

A Policy Void, Not Just a Procurement Gap

Ottawa designed its National Shipbuilding Strategy to rebuild Canadian capability, but it has failed to scale quickly enough. The provinces, including British Columbia, have been left to procure vessels without the tools or frameworks to evaluate foreign strategic risk. Provincial procurement rules treat a state-owned bidder the same as a private one. That is no longer defensible.

Canada must close this gap through deliberate, security-informed policy. Three steps are essential for the task:
Ottawa should mandate National Security reviews for critical infrastructure contracts. Any procurement involving foreign state-owned enterprises must trigger a formal security and economic resilience assessment. This should apply at the federal and provincial levels.
Secondly, when necessary, Canada should enhance its domestic industrial capabilities through strategic investments. Canada cannot claim to be powerless when there are no local bids available. Federal and provincial governments could collaborate to invest in scalable civilian shipbuilding, in addition to military contracts. Otherwise, we risk becoming repeatedly dependent on external sources.

Canada should enhance Crown oversight by implementing intelligence-led risk frameworks. This means that agencies, such as BC Ferries, must develop procurement protocols that are informed by threat intelligence rather than just cost analysis. It also involves incorporating security and foreign interference risk indicators into their Requests for Proposals (RFPs).

The Cost of Strategic Amnesia

The central point here is not only about China; it is primarily about Canada. The country needs more strategic foresight. If we cannot align our economic decisions with our fundamental security posture, we will likely continue to cede control of our critical systems, whether in transportation, healthcare, mining, or telecommunications, to adversarial regimes. That is a textbook vulnerability in the era of hybrid warfare.

BC Ferries may have saved money today. But without urgent policy reform, the long-term cost will be paid in diminished sovereignty, reduced resilience, and an emboldened adversary with one more lever inside our critical infrastructure.

Scott McGregor is a senior security advisor to the Council on Countering Hybrid Warfare and Managing Partner at Close Hold Intelligence Consulting Ltd.