Robert Lloyd Schellenberg had originally been given a 15-year sentence after being found guilty in November, but prosecutors have now said the sentence was too lenient.
Dalian Intermediate People’s Court in the northeast province of Liaoning retried Mr Schellenberg and handed down the death penalty, the court said in a brief statement on its website.
The case is likely to inflame relations between Beijing and Ottawa, which have been tense since Canada’s arrest of a Chinese executive at the request of the United States in December.
This was followed by China’s detention of two Canadian citizens on suspicion of endangering state security.
The court said Mr Schellenberg has the right to appeal his sentence.
Mr Schellenberg was first arrested by Chinese authorities in 2014, in a case which went largely unnoticed by western media.
But the retrial comes amid a deepening diplomatic row over Canada’s arrest of Huawei chief financial officer Meng Wanzhou, who was arrested at Vancouver airport on 1 December 2018 at the request of US authorities.
America wants Ms Meng, the daughter of Huawei’s founder, extradited to face fraud charges. She is accused of using a subsidiary company to circumvent sanctions against Iran.
It has been suggested Beijing is attempting to use Mr Schellenberg’s case as a bargaining chip with Canada in an effort to increase the pressure on the Canadian authorities.
Beijing has expressed dismay at Ms Meng’s arrest and has warned Canada of “severe consequences” if she is not repatriated.
China has also detained two other Canadians who are reportedly suspected of “national security crimes”.