In late February, we welcomed Ambassador Dominic Barton for a private hour to speak to members and guests about the evolving Canada-China relationship. With its undeniable growth and global impact, China plays a major role in Canadian business, whether or not you are in the market.
The country has become more assertive and more authoritarian, and at the same time, more important and innovative. China is less dependent on the rest of the world and conducts itself accordingly. President Xi has consolidated power and is expected to go beyond two terms. China now has the world’s second-largest equity and debt markets, with private sector R&D investment that is double that of Canada (% of GDP). Canada can’t afford to ignore this massive market and global player. While there are fundamental differences in how China and Canada operate and act, we must find a balance between challenging fundamental issues and concerns while cooperating to best serve our own interests – as we do with all our trade partners. As always, businesses need to be thoughtful in selecting a partner. Finding the right partner in cross-border trade can help navigate and overcome potential internal conflicts and supply issues.
Scale and size of market: China’s consumer consumption is massive and growing. Pandemic recovery has been rapid, and in 2020 China overtook the US for the first time as the world’s largest retail sales market. China’s rapidly growing middle class will drive consumption trends over the long-term.
Digitization and e-commerce: The pandemic further propelled the digitization of China’s market. The value of China’s overall e-commerce transactions, including B2B, B2C and C2C, was U$5 trillion in 2019, and is estimated to grow to U$6.8 trillion in 2022. The increased shift to e-commerce will enable additional opportunity for Canadian businesses (particularly in retail, healthcare, financial services, and education), while reducing the need to travel to China to participate in the market.
Megacities/Clusters: With its immense population, China can be considered more a continent than a country. China is building 19 city clusters, and while three stand out (Beijing/Tianjin/Hebei, Yangtze River Delta and Pearl River Delta/Greater Bay Area) it’s important to note that the mainland is a collection of regional markets and foreign firms need to consider regional strategies.
14th Five Year Plan (FYP): China’s FYPs identify priorities for economic, social, and environmental development, and foster national alignment. These are historically ambitious plans, and China delivers on its goals. Expected priorities for the 2021 – 2026 plan include: 5% annual GDP growth target each year, intensified urbanization, growing the consumption and services sectors, and improving the social safety net.
IMPLICATIONS FOR CANADIAN BUSINESS
Canadian products are known as high-end quality products, especially in China. The demand is high for brands such as Tim Hortons, Canada Goose, Arc’teryx, Jamieson Vitamins and more. From canola to pork, to coffee to coats, it’s a good time to leverage the Canadian brand. Canadian businesses would be wise to make Asia – and especially China – a priority market. It’s also important to diversify and work in 2 to 3 regions, leveraging China’s large population and growing middle class. By embracing e-commerce and investing time in building the right relationships, there is immense opportunity for Canadian businesses in China’s changing and growing market.