Beyond Natural Resources, Canada's Best Prospects for Trade With China are in Food and Agricultural Products and Some Services

OTTAWA, Feb. 1, 2017 /CNW/ - Canada's best prospects for trade with China include mineral and agricultural products, services in the technical, financial, recreational and entertainment industries, and food manufacturing, according to new Conference Board of Canada research for the Global Commerce Centre.

"Over the past decade, Canada's economy and living standards have benefited from China's seemingly insatiable demand for natural resources. Although growth is now easing and China is becoming more consumer-oriented, it continues to be one of the fastest-growing economies in the world," said Julie Ades, Senior Economist, Global Commerce Centre.

"Chinese demand is projected to rise for many of the goods and services in which Canada holds a global comparative advantage. Natural resources, some services industries, and food manufacturing are best prepared to increase production to meet rising Chinese demand. And with the possibility of future trade strife between the U.S. and China, this could create an even greater opportunity for Canada."

HIGHLIGHTS

• China's growth is now easing from the average annual pace recorded from 1991 to 2011, but it continues to be one of the fastest-growing economies in the world.
• Oversupplies of housing and excess capacity in some sectors are weighing on growth in the Chinese imports of some commodities. This trend will likely persist as economic growth continues to moderate.
• Services opportunities are currently small, but are growing in a number of sectors, which could translate into more opportunities for Canadian firms.

The value of Canadian exports to China has grown at a double-digit pace from 2006 to 2015, making China our second-largest export market. The five largest categories of Canadian goods exported to China are natural resources, and account for close to 50 per cent of all Canadian merchandise exports to China. However, the average annual growth in these export categories slowed during the 2013–15 period.

China's "hottest" sectors for Canada are those that fall in the "sweet spot" of:

• high growth potential for Chinese demand;
• openness to foreign commercial activities;
• competitiveness of the Canadian industries producing the identified goods and services;
• capacity of these Canadian industries to increase production.

In the goods segment facing rising Chinese demand, Canada's global commercial strengths include:

• non-agricultural commodities—such as mineral fuels and oils, precious stones, and precious metals;
• agricultural products—such as cereals, oil seeds, seafood, and vegetables;
• processed food products—such as meat and cereal products.

Demand for some advanced manufacturing products, such as vehicles and aircrafts, will continue to increase as the Chinese middle class expands. However, the Canadian vehicles and parts industries have been struggling to remain competitive in the face of growing competition and will need to find the right product mix to secure a market niche in China's market. Furthermore, wood product manufacturing and the aerospace industries will need to expand their capacity in order to benefit from rising demand from China.

Opportunities to sell services to China are currently small, but they are growing in a number of sectors. This could translate into more opportunities for Canadian firms if China opens its services sectors to foreign direct investment.

Canada has global commercial strengths for a number of services for which Chinese demand is expected to rise. The sectors with the most promise include:

• personal, cultural, and recreational services;
• scientific research, architectural, engineering, and other technical services;
• financial services; and
• computer and information services.

This research is presented in two publications. The report, Chinese Demand: What's Growing and Open to Canadian Companies, identified promising goods and services based on demand and China's openness to foreign engagement. The briefing, Responding to Chinese Demand: Canadian Industries' Competitiveness and Capacity, determines which areas in which Canada is likely to be competitive in China and which areas have the capacity to respond to rising Chinese demand.

Join Julie Ades on March 13, 2017 at 02:00 PM EDT for a live webinar on this topic.

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SOURCE Conference Board of Canada

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