14 November 2018

Why more Canadian firms are waking up to China’s Trade Potential

The Chinese have a saying that “the gods cannot help those who don’t seize opportunities.” For ambitious Canadian businesses, there has never been a better time to trade with China.

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China’s ascent to the top of the global tree is relentless. Despite a recent slight faltering against expectations, economic growth remains at an enviable 6.5%. The country is set to become the world’s largest economy by 20301. And that is welcome news for Canadian businesses.

Already China is the second largest market, after the USA, for Canadian imports and exports. Along with India, China is expected to be the fastest-growing market for Canada, with export growth likely to average 9 – 10% per annum in the years to 2030.

Wood, metal and crops head east

This acceleration is already evident. Canada’s goods exports to China rose by 11.5% in 2017, almost tripling growth in 2016. The value of these exports soared above $18bn, up by 15% 2.

Chinese demand for raw materials benefits the Western provinces. British Columbia, in particular, has seen its trade with China expand by 240% over the past decade, mostly as a result of surging exports of wood pulp, lumber and coal, as well as copper, zinc and other precious metals.3

Agricultural products are prized in China too. It remains a key market for Canada’s canola producers, and that demand has grown recently as the Chinese seek to replace their imports of US soya beans, which have been affected by new trade tariffs.

A VIP place at China trade event

Canada was under the Shanghai spotlight during the China International Import Expo (CIIE) in November, as one of the twelve VIP countries with a country pavilion. The HSBC-sponsored event highlighted the overall trends and opportunities for Canadian businesses looking to trade with China.

Daniel Leslie, Senior Vice-President and Deputy Head of Commercial Banking at HSBC Bank Canada, was impressed by the sheer scale of opportunity demonstrated at CIIE. “We already know there is a willingness in general for Chinese businesses to sell to the rest of the world—but there is a huge willingness to buy too,” he said. “Most importantly there is strong demand for goods Canada can provide.”

“Traditionally, Canada has always been viewed as an exporter of commodities, and is very well known for its agricultural and food products,” he added.

“More interestingly, however, we see that Canada has a real opportunity to develop its value-added exports such as processed food goods, energy and others around advanced manufacturing technology. All of these exports are extremely relevant to the Chinese market, and China has a huge level of confidence in Canada to produce high-quality, healthy goods.”

Going global: China’s shift to a more open economy

Recent developments in the Chinese market mean it has never been easier for foreign businesses to get a foothold.

In a world of increasing protectionism, China has been bucking the trend, setting out policies that make it easier for foreign companies to get a foot in the door. Not only has local funding become more accessible, but regulatory reforms have levelled the playing field, putting foreign businesses on the same, or a very similar, footing to local ones.

At the heart of these changes is the country’s desire to satisfy its exploding middle class — an estimated 550 million-strong swathe of the population with a growing appetite for consumer goods and services.

China is also keen to boost its reputation for innovation: to strengthen its technology sector, cut greenhouse gas emissions and bolster its healthcare so it’s better equipped to serve its ageing population. These are all key components of the Government’s Five-Year Plan. The Chinese government is also keen to improve life for its growing population by improving the economy and modernizing its infrastructure.

First steps to capturing China’s potential

A growing number of Canadian companies sense the potential of China. In 2017, around one in ten Canadian firms that sell internationally chose China as a destination for their goods and services4. And 14% of Canadian businesses are looking to expand into the Chinese market in the next three to five years5.

As enormous as the potential is, however, achieving long-term success in China requires patience and perseverance. There are unfamiliar and often lengthy administrative processes to contend with and a vastly different way of doing things.

With our local expertise and a network of more than 170 branches in 50 cities, HSBC can help you adjust to the Chinese culture, introduce you to local contacts and navigate the challenges of an unfamiliar business environment.

So, if you think it’s time to review your China strategy, talk to us.

  1. World Economic Forum, China’s economy in 2018 https://www.weforum.org/agenda/2018/08/china-s-economic-outlook-in-six-charts
  2. Global Affairs Canada: Canada’s State of Trade 2018, https://www.international.gc.ca/economist-economiste/assets/pdfs/performance/state_2018_point/SoT_PsC_2018-Eng.pdf
  3. Canada West Foundation: Western Canada’s trading relationship with China, http://cwf.ca/news/blog/western-canadas-trading-relationship-with-china/
  4. Canadian Trade Commissioner Service, https://edc.6connex.com/event/DigitalContent/W12a/login?lang=en-us
  5. Navigator, Now, next and how for business, Canada report, page 2

Disclaimers

The information presented is not meant to be comprehensive and does not constitute financial, legal, tax or other professional advice. You should not act upon the information contained in this document without first obtaining specific professional advice. While reasonable care has been taken in preparing this document, HSBC does not make any guarantee, representation or warranty (express or implied) as to its accuracy or completeness. The information presented in this document is subject to change without notice.

Certain of the products and services offered by HSBC and its subsidiaries and affiliates are subject to credit adjudication and approval. This document does not constitute an offer to provide the services and products described and the provision of such services and products remains subject to contract.

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