Shanghai
and Canada: Opportunity and Promise
Remarks by
the Hon. David Kilgour
Secretary of State (Asia-Pacific) and M.P.
for Edmonton Southeast
to the Shanghai
Chapter of the Canada-China Business Council
Nikko Hotel Pudong, Shanghai, China,
August 12, 2002
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Vice-Chairman
Sollychin, CCBC Shanghai Chapter members,
young men and women of our Junior Team Canada
delegation, ladies and gentlemen. It is
an honour to be here with you today in Shanghai.
This city is becoming the epicentre of Canada’s
economic relations with China. Shanghai
has re-gained its place among the world’s
commercial capitals. The glittering skyline
which greeted us upon arrival was only a
wild dream ten years ago. In many ways,
the skyline was pre-destined; the very first
skyscrapers in Asia were here 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.
The 'Asianification'
of Canada
Recently,
I argued in a newspaper column that Canada
has undergone an ‘Asianification.’
This is a short-hand way of describing several
emerging dynamics. First, Canada’s
population is increasingly tied to Asia
through immigration and education. Second,
our economy, while closely integrated in
North America, now increasingly looks west
to Asia: every year since 1990, Canada’s
trans-Pacific trade has surpassed trade
across the Atlantic.
While the
currency crisis of the late 1990s tarnished
some of Asia’s allure, Canada’s
relations with Asia are maturing. If anything,
they are getting stronger. What was then
an ‘irrational exuberance’ is
now tempered by a more realistic understanding
of the region. The important lessons of
the crisis were not lost upon those of you
conducting business here; nor have they
been ignored by those of us in government.
The Government of Canada is committed to
more comprehensive and long-term relations
with Asia. I would be hard pressed to cite
better examples than the Junior Team Canada
trade mission to China and the Philippines
and the support of the CCBC by the Department
of Foreign Affairs and International Trade.
Everyone here today is working towards bringing
Canada and Asia closer together.
The
Current Situation
Your work,
however, is not always easy. While, to some,
Canada and China do not seem to be a natural
fit, we have crafted a strong and unique
connection based on trust. As business people,
you all know that success in China requires
a cool head, a strong business plan, good
“Guanxi” and perseverance. Canadian
companies are remarkably successful here,
and I am confident that they will continue
to succeed. More on this shortly, but first
I’ll return to the renaissance of Shanghai
and the raw potential of China.
The first
thing that strikes us is China’s size:
the sheer enormity of the numbers is awe
inspiring. From population to total GDP,
trade performance to land mass, the chronicling
of the poor and the newly rich, the cell
phone subscribers and Internet users –
regardless of the measure, one thing remains
clear: China’s potential as a market
is enormous.
Shanghai,
in particular, is a city of opportunity
and promise. Consider, as an example, the
stock exchange. After only twelve years,
the Shanghai stock exchange now has a total
market capitalization of US$360 billion
[2001] -- about 10% of the Tokyo exchange.
But numbers alone do not capture the energy
and dynamism of this city; many predict
much bigger things to come. Given Shanghai’s
record of economic growth, the city is expected
by some to overtake Hong Kong as the next
financial capital of China.
Of course,
some skeptics see China as a pending disaster,
pointing to a series of obstacles in need
of pressing reform - growing income disparities,
rising unemployment, and gaping holes in
the regulatory regime, to name a few. Granted,
the economy is in need of further reforms,
but the potential of China remains unchanged.
China and
the WTO
World media
and business leaders have made much of China’s
entry into the WTO. By most accounts, it
will revolutionize commerce and trade with
and within China. Shanghai will continue
to play a special role as a testing ground
for further innovation and reform. For example,
earlier this year Mayor Chen told the Shanghai
People’s Congress that Shanghai will
take full advantage of the new WTO liberalizations
to attract foreign investment in the financial
sector to promote the establishment of Sino-foreign
financial companies.
As Canadian
businesses, you are well-positioned to take
advantage of this new openness. Consider,
as an example, the financial sector and
the companies active in the region. Manulife
is highly active here. The Bank of Montreal
has recently established a presence. Several
other Canadian banks and life insurance
companies are also poised to enter the fray.
With access, though, there comes competition.
There are 11,000 insurance agents in this
city alone! I would be interested in hearing
your views on the situation. Is this an
opportunity for us - or a threat?
While the
WTO accession has stimulated renewed business
interest in China, the impact of accession
is still not fully understood. Let me to
offer some cautionary points. John Curtis,
a long-time Asia watcher and the senior
economist at the Department of Foreign Affairs
and International Trade, argued that China’s
accession may be less important than many
observers suggest. First, he believes the
changes will only add to growth at the margins
rather than fundamentally reform the economy
as a whole. Many of the structural adjustments
and economic reforms necessary for compliance
are already in place. Second, China’s
entry into the WTO may reduce the effectiveness
of the organization itself. When Russia
eventually joins, the once clubby WTO will
look much more like the UN. As a result,
it may shift from being a proactive force
felling protectionism and liberating trade
to a more reactionary body committed to
maintaining the status quo.
I’m
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 accounting
scandals show, strong economies require
confidence and trust. Will the lack of transparency
in China be a stumbling block to sustained
economic growth?
Sino-Canadian
Relations
You, as business
leaders, will help to shape Canadian trade
policy towards China. Let me outline a few
key components of our trade, investment
and development policy.
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
here. 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 short-term exchanges
form a ‘human-bridge’ 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 short-term 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.
In particular,
much of the credit for kick-starting the
trade relationship must go to the CCBC for
co-sponsoring the hugely successful 1994
Team Canada trade mission. Every year since
then there have been senior Canadian visitors.
(The Prime Minister has visited China five
times since 1994!)
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. The interest
is clear: with DFAIT’s support, the
CCBC recently opened three new offices in
China to support further growth.
Unequal Development:
What About Western China?
With the
most poverty and unemployment concentrated
in the Western provinces, some predict the
West will be a source of many problems in
the coming years. Canada, through CIDA,
vigorously supports the stated goal of Western
development. Canadian development efforts
are shifting to the West in areas such as
political and economic development, legal
assistance, and the environment. For instance,
the Environment China Council, led by Canadians,
brings together environmental experts around
the world to guide China toward sustainable
development. Canadian experts are also the
only international advisors in the National
People’s Congress. The Congress has
requested Canadian help in designing new
efforts to increase public participation
in law-making. I am curious to hear how
your companies view the opportunities in
the West? Are you interested in taking investment
and business westward? Why or why not? What
about your Chinese partners?
In Closing
The Sino-Canadian
relationship is strong. The challenge is
how to build on this strength. That’s
where all of you come in – each of
you, CCBC, and the companies you represent.
Each of you have your own experiences and
views on how best to succeed in Shanghai
and China. This morning is meant to be a
dialogue. I’ve gone long enough. Now
I’d like to hear from you. I’d
like to end, however, by assuring you that
I am personally committed, as a friend,
to helping Canadians help China. China is
incredibly important to Canada. I share
this vision with you and hope we can go
forward together.
Thank you,
again, for the opportunity to address you
this morning. I’m looking forward to
hearing about some of your own experiences
here in Shanghai and China.
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