China has asked its regional governments to draw up a list of business dealings they have with Canadian firms in order to widen the scope of ways the superpower can strike back against Canada in the ongoing dispute over the arrest of a senior Chinese telecom executive, said former Canadian ambassador to China Guy Saint-Jacques.

"The central government of China has asked all provinces to make a list of all the ongoing transactions with Canadian companies and I think it's just another example that they want to build up an inventory of possible targets for future measures directed at Canada," Guy Saint-Jacques told CBC News Network's Power & Politics.

"We know it's the usual playbook of China when they are angry at a country they will take all kinds of measures to penalize this country, and of course, it's very easy for them to request such information from companies," he told host Vassy Kapelos.

Saint-Jacques said he learned of the effort "from a Canadian company that has long been established in China." He said the company's Chinese partners were informed that the request came "from Beijing." CBC News has not been able to independently verify the claim.

The Chinese Embassy to Canada responded Thursday, saying it's not aware of Saint-Jacques's claim.

"I wonder how this former ambassador to China learned the requirements of the Chinese central government for its provinces," wrote an embassy spokesperson. "I want to point out that irresponsible speculations and comments are not conducive to the healthy development of China-Canada relations."

Canada has been locked in an escalating diplomatic spat with China for months, following the arrest of Huawei CFO Meng Wanzhou in December on an extradition request from the United States.

Since the arrest, China has detained two Canadian citizens, Michael Kovrig and Michael Spavor, blocked Canadian canola shipments from two of Canada's biggest farm exporters and is now reportedly targeting shipments of Canadian soybeans, peas and pork.

Saint-Jacques said he sees this new development as a confirmation that the diplomatic dispute with China is worsening and that its time for the Canadian government to take action.

"The Canadian government should announce that Canada will no longer pursue a free trade agreement with China because of this trust that has disappeared," said Saint-Jacques. "I also think we should go to the WTO to file an official charge against China for what they are doing to our canola export."

Beyond those measures, Saint-Jacques said the federal government should put more effort into trade diversification and consider expelling Chinese athletes that are training in Canada for the 2022 Beijing Winter Olympics.

"The government has to take into account that, of course, any measure that we will take will be looked at in Beijing and they will want to apply reciprocity, but again I think the course that has been pursued so far has not produced any result," he said.

"I think we are at the stage where we have to be firm because this is the only language that China understands."