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Doing Business in China

Remarks by David Kilgour,

Secretary of State for Asia-Pacific and M.P. (Edmonton Southeast)

to the China-Canada Business Association, the Cathay Community Foundation, and the Canadian Chinese Professors Association Holiday Inn Express

September 12, 2002, Edmonton

As some of you know, I recently returned from a visit to China. Let me share some of my observations.

Shanghai: Shanghai has regained its place among the world’s commercial capitals and is becoming the epicentre of Canada’s economic relations with China. What struck me from the start was the glittering skyline which was only a wild dream ten years ago. In many ways, the skyline was predestined; the very first skyscrapers in Asia were in Shanghai’s Bund. In fact, since the implementation of the reform and opening policies of Deng Xiaoping in 1979, we have since seen a renaissance of commercial life in a city cut adrift from the business world for the better part of thirty years.

Guangzhou: While in Shanghai, I visited Nanjing and Suzhou, and then made my way to yet another captivating city - South China’s Guangzhou. Guangzhou opened my eyes to the opportunities for economic prosperity and growth in the country. It is a vibrant city. My only regret is that we couldn’t spend more time there.

Shenzhen: Finally, there is Shenzhen, the earliest and most successful of the five Special Economic Zones set up twenty-two years ago by the Central Government. How many of you would know that the combined economies of Guangzhou and Shenzhen are greater than the economies of Shanghai and Beijing? I certainly didn’t. It is truly a wonder, having transformed itself from a fishing village of 300,000 in 1980 to vibrant metropolis - and a leading high tech centre - with a population of 10 million in 2002. Now that’s progress!

A word about 9/11. Like all of you, I know exactly what I was doing at 6am Alberta time a year ago; attending a Special Assembly of the Organization of American States in Lima Peru as a follow-up to the Quebec City Summit. Representatives from 34 OAS countries that morning passed unanimously a Democratic Charter about an hour after the collisions in Manhattan, Washington and Pennsylvania.

Many of us there thought the American Secretary of State Colin Powell would leave immediately but after a dignified statement to the delegates he said he would not leave until the Charter had been adopted.

A lot of both wise and foolish things have been written and said about 9/11. I understand that an estimated 1500 books about the events of the day have been published in the U.S. but only one in Canada, Canada and September 11th: Impact and Response. Let me make only a couple of comments for your consideration:

Charles Kraht Hammer in Washington DC wrote in the National Post that the 9/11 events did not change the American national character. Instead, it forced “the emergence of a bedrock America of courage, resolve, resourcefulness and, above all else, resilience…how many thought that sheer resolve, fearsome technology, heightened vigilance, brute force, and a dragnet stretching from Yemen to the Philippines would make the enemy the hunted and give us all a year of respite.”

Our 23-year-old daughter Eileen wrote to our family last December from Thailand that the year 2001 was one where poverty, violence, HIV/AIDS had worsened.

The good news in Canada according to some is that apart from some isolated and unfortunate incidents, our commitment to respecting diversity, inclusivness and human dignity have all gone up.

We started our visit in Guangzhou with a presentation by our Consul General, Paul Lau, on the opportunities in South China, entitled "The Pearl of China." As I mentioned while I was there, I've never thought of a city or region as a pearl, but there seems to be no better way to describe this incredible place!

To borrow a few stats from Paul Lau, it ranks #1 right across the board #1 in trade volume, #1 in trading history, and #1 in foreign direct investment. It is the wealthiest region of China.

With a population of 165 million a full 13% of China as a whole it is an incredibly important regional force. Total imports and exports in and out of this region total $220 billion a year (CAD), representing 40% of China's total. Foreign direct investment to the region is higher still a staggering $220 billion (CAD). Not surprisingly, the region is leading the country in terms of disposable income and economic growth.

Canada-China Relations

Canada’s strategy has been to follow a balanced constructive approach to our relations with China. This ‘constructive engagement’ or ‘quiet diplomacy’ has been particularly effective. In addition, the ‘people to people’ links between China and Canada bring our countries even closer together. Because these ties are harder to define than trade statistics, this element of our relationship is sometimes overlooked. Yet, on the immigration front, China is our largest single source of new Canadians. Moreover, students, academics, and administrators on shortterm exchanges form a ‘humanbridge’ that brings us closer still. Chinese university students alone now number more than 20,000. CIDA estimates that more than 47,000 Chinese have come for shortterm learning stays since 1982.

Let’s look at our record. In 1960, Canada made its first grain sale to China. It was an act that would help to end China’s isolation. In 1970, we became one of the first Western countries to establish diplomatic relations with China. There was disengagement after the brutal suppression in Tiananmen Square in 1989, but since 1992, we have gradually but consistently escalated our re-engagement, and much of the credit must go to you.

The result:

· In 2001, China was Canada’s fourth largest trading partner, with total bilateral trade of $17 billion, an increase of 13% over 2000.

· Over 400 Canadian firms are established in China with more than 4,500 projects funded with Canadian dollars.

· Chinese firms are also sending money to Canada and creating jobs for Canadians. For example, the ‘China World Best’ investment in Drummondville, Quebec created 300 new jobs alone.

Canadian Companies – Leaving Their Mark
The interest is clear: with our Department’s support, the Canada China Business Council recently opened three new offices in China to support further growth. As we saw in Shanghai, Suzhou, Guangzhou, and Shenzhen, Canadian companies are leaving their mark. We saw first-hand how investment energizes cities, fuels local economies, and stimulates growth. In many cases - and Suzhou is a great example - Canadian companies are creating local jobs. A Canadian manufacturing company in Suzhou, for example, which I was fortunate to visit while I was there, went from a few employees to over 1000 in just a few years, with plans to reach 3000 by the end of next year!

Canadian firms, however, are not only establishing manufacturing bases; they’re also investing in R&D. In Guangzhou, for instance, there is Nortel's centre at Zhongshan University, which has grown from just a few to about 200 mostly young staff within just a few years.

It’s not just large institutions, however, that are reaping rewards. My office recently spoke with Ron Drews of Orbital Media Group from Ottawa who was involved in organizing the Shanghai International SME Trade and Economic Conference that took place in Shanghai at the end of August. It was the first of its kind in China and is expected to be an annual event. Ron tells us that the conference was organized with significant support and interest from various facets of the Chinese government and that, in China, the next wave of development is expected to be driven by small and medium sized enterprises (SMEs). This event alone attracted some 500 registrants along with dozens of high-ranking officials from municipalities, provinces and special economic zones. The sectors addressed included: finance and investment, processing and manufacturing, ICTs, medicine and life sciences, education, agriculture, tourism and transportation.

All this is to say that for many of you - whether you’re small or medium sized businesses, sole proprietors or just people with ideas - you don’t have to be a Manulife or Nortel to succeed in China. The opportunities are there. It’s up to you to take them!

A Changing Economy – The WTO

As business leaders, you all know that success in China requires a few key things - you need a cool head, a strong business plan, good “Guanxi” and perseverance. You also know that the landscape is changing, most notably by China’s accession to the WTO. Let me touch on a few points that I also raised in China about the significance of China’s entry into the WTO.

By most accounts, it will revolutionize commerce and trade with and within China. Some things, however, will not change, and these are perhaps the possibilities that you might want to explore. Shanghai, for example, will continue to play a special role as a testing ground for further innovation and reform. In fact, earlier this year, Shanghai’s Mayor told the Shanghai People’s Congress that Shanghai will take full advantage of the new liberalizations stemming from accession to the W.T.O. to attract foreign investment in the financial sector to promote the establishment of Sino-foreign financial companies.

I am also curious to hear your own experiences ‘from the trenches.’ What has the accession meant for you? Are you satisfied with the pace of change? What about transparency? Perhaps coincidentally, transparency is front and centre on many business pages in North America as well. As the recent accounting scandals show, strong economies require confidence and trust. Will the lack of transparency in China be a stumbling block to sustained economic growth?

A Changing World – Recent Trends

As people who follow global trends, you’ll also know that we are in the midst of a massive shift in the way we communicate, live, work and learn, and the way we do business and trade. You've heard all the buzzwords "wireless"; "ecom"; "the power of the Internet"; "globalization"; "the global village." We hear them so often, that it's easy to dismiss them, but they really are revolutionizing how we do business and live.

And they're picking up speed. In China, for example, the number of cell phone users is increasing at a rate of 5,000,000 a month! Technologies converge. New markets emerge. Mergers and acquisitions are a commercial "way of life." Companies are restructuring, and entire industries are cooperating. Trade barriers are giving way to trade integration. The monopolies and stateowned enterprises of yesterday are being toppled by competition, efficiency and privatization. In short, innovation and globalization are making the world a smaller and often better place ¼¼ and significantly reshaping our social, economic and political landscape in the process.

For business, this translates into exponential opportunities for foreign investment, global partnerships, joint ventures, trade. But there's also the human element something often forgotten which, in the bigger picture, is even more important. Allow me, for a minute, to challenge each of you to try to see things from a global but human perspective.

Beyond the Bottom Line

Please don't fall into the trap of thinking only of profits, return on investment or the bottom line. As I mentioned when I was in China, regardless of where we live, we're all in this together -- all six billion of us. Whether we're from Edmonton, Shanghai, Saskatchewan, Guangzhou, Islamabad, Tokyo, New York or Rome, when it comes down to it, most of us want the same things happiness; health; good education for our children; to be appreciated for who we are; to be treated with dignity and respect. I encourage you, as key business leaders, to watch for the opportunities to help your sisters and brothers around the globe.

In China, this could mean taking investment west to help jumpstart the region that needs it most. It could mean creating "people to people" links, particularly in the areas of education and the arts. Consider, for example, building educational bridges anything that brings our youth here and China's young people to our home. Lend support to organizations like Junior Team Canada to bring a Junior Team China to Canada. Be creative. Think outside the box!

A young pianist from Western Canada, Martin Mayer, recently finished a 15 city tour of China. Next year, theatres across China will open to "Dracula," courtesy of the outstanding Royal Winnipeg Ballet. Cultural exchanges like these inject life into our relations and corporate sponsorship and support are often key

In Closing

The Canada-China relationship is strong. The challenge is how to build on this strength. That’s where all of you come in – each of you and the companies you represent. Each of you have your own experiences and views on how best to succeed in Canada and China. If our hosts will permit it, I would like to take this opportunity to open the floor and listen to you.

Permit me to end, though, by assuring you that I am personally committed, as a friend, to helping Canadians help China. China is incredibly important to each of you here. It is also enormously important to Canada.

Thank you, again, for the opportunity to address you today. I’m looking forward to hearing about some of your own experiences and views.

Thank you.

 
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