Ventures Dialogue

Primer Minister Stephen Harper has chalked up some important accomplishments during his mission to China.  Chief among them is the announcement that Canada has approved destination status in China.  The tourism industry has been seeking this status for many years.  Here is the Canadian government’s release and a story from the Niagara region with reaction from the tourism industry.

Canadian beef producers will be pleased that Hong Kong is once again open to their products.  Hong Kong represents a sizable market for beef producers as was emphasized in January when the Minister of Agriculture spent some time in Hong Kong. 

Also on the Prime Minister’s agenda, an address to the Canada China Business Council where he spoke about investments in clean technology and new Canadian commercial offices,

The Prime Minister emphasized in today’s speech the importance of Canada and China working together on energy and clean technology and working with other G-20 partners to help ensure global economic recovery. He stressed the need to remain committed to sustained economic stimulus, coordinated exit strategies and to fighting protectionism given the role trade plays in creating new opportunities for both countries.

“Pacific nations like Canada and China have much to gain by increased cooperation as the centre of gravity of the world economy swings toward the Pacific,” said the Prime Minister. “Now is the time to enhance and expand our relationship, to build upon our mutual successes, and to use the authority those successes have afforded us to set an example for others in the world.”

Read more about the Prime Minister’s mission.

Could China become the next big car manufacturer?  Well, quite possibly if you ask Geely, China’s biggest privately owned car manufacturer.  It is currently developing six model platforms, dedicated to launching nine new cars over the next year and a half, and by 2015, the company cites 42 new models will be on the market.   In the recent article, The ambition of Geely, from The Economist, it highlights Geely’s aspirations, but also raises some concerns.  Namely, its dependence on government tax breaks, which is likely to be a main reason of its increased sales in the first half of the year.  There are also concerns surrounding the safety of its cars and not being on par with Western levels.  In a crash test by a Russian car magazine of the Geely CK, the driver and passenger were given a 10 percent survival rate.

Nevertheless, this is not stopping Geely.  The company aims at selling 1.3 million cars abroad by 2015 (30,000 foreign cars were sold in 2008).  Geely has not only increased employment levels, but has created its own university, the Zhejiang Automotive Engineering Institute, and has assets abroad as well.  It also plans to build factories in South Africa and Mexico.  And, according to the article, Geely might be in the game to buy a European car company. 

So Geely has big plans, we’ll just have to wait and see what develops.

Click here to read the full article from The Economist.

You might also want to visit Geely’s website and view some of their videos.

This past Monday, Hong Kong and Mainland China agreed on a pilot program for the settlement of cross-border trade transactions using the renminbi.  This is one step forward for allowing the renminbi to be used for international payments.  The supplementary Memorandum of Cooperation, signed by Zhou Xiaocuan, Governor of the People’s Bank of China (PBoC), and Joseph Yam, Chief Executive of the Hong Kong Monetary Authority (HKMA) sets in motion the  preparations for the implementation of a pilot project,  arrangements for the cross-border settlement and clearing of renminbi funds, and amendments to current legal documents.

Using the renimbi is expected to bolster trade transactions between Hong Kong and China, as well as promote economic development, provide flexibility in their operations, and enhance Hong Kong’s financial system.  John Tsang, Hong Kong’s Financial Secretary was quoted in a HKMA press release: 

“Allowing trade transactions between the Mainland and Hong Kong to be settled in renminbi will not only strengthen the role of Hong Kong as a testing ground for the use of renminbi outside the Mainland, but is also conducive to trade activities and economic development in the two places.” 

This move can be seen as one stage in a long-term goal to make the renminbi convertible into other currencies, and as an alternative to western currencies, especially the US dollar.  The business community will need to take time to adjust.  For now, however, they will start small and aim for its dominance in Asia.  This is a lofty goal and will not happen over night of course.  An article from the New York Times has hinted that China might want convertibility to coincide with the government’s goal to make Shanghai a financial center by 2020.

Photo by  amy-wong.com

Stockwell Day, Canada’s Minister of International Trade and Minister of Asia-Pacific Gateway, has just concluded a 10 day trade mission to China and Japan where he got quite a lot accomplished.  The mission’s purpose was to promote Canadian businesses in building systems (wood frame and light steel construction), and energy-efficient construction (building products, technologies and design, including retrofitting, energy and water conservation, heating and cooling equipment, new building materials, cold climate building technologies, and architectural services).  While there, he also participated in four separate trade missions covering a variety of sectors: 1) transportation firms and organizations promoting the Asia-Pacific Gateway as a key North American corridor; 2) information and communications technology companies; 3) construction companies with expertise in energy-efficient products and building designs; and 4) a medical devices delegation. 

For China specifically, Minister Day signed a new trade logistics agreement to further support trade and transportation between countries, an action plan for collaboration in the transportation sector, and also an agreement on cooperation in civil aviation industries.  He wasn’t done there however, as it was also announced that Canada will open two new trade offices in Chengdu and Shenzhen by July 1, with four others to be open by year’s end. These six new offices will complement Canada’s four existing offices in Beijing, Shanghai, Guangzhou and Chongqing.

Chengdu is a vital economic, transportation and communication center in the southwest, and according to the US Commerical Service, the most important commercial center in West China.  Its key manufacturing sectors are electronics, machinery, pharmaceuticals, chemicals, metallurgy and food processing industries.  Shenzhen on the other hand is noted as being China’s first and so far, most successful Special Economic Zone.  It attracts a lot of foreign investment, is the second busiest port in mainland China (following Shanghai), is where quite a few of China’s high-tech companies are headquartered, and is considered one of the fastest growing cities in the world.  The Shenzhen Stock Exchange as well is located there.

Photo from http://www.international.gc.ca/commerce/visit-visite/jap-chi-2009-photos2.aspx

With the opening of its $90 million (USD) technology center in Shanghai on March 6, The Coca-Cola Company (Coke) also announced it will invest $2 billion in China over the next three years on bottling plants and distribution infrastructure, sales and marketing, and research and development. 

Over the past 30 years, Coke has invested $1.6 billion in the Chinese Market and has good reasons for doing so.  China is Coca-Cola’s fastest growth market and its third biggest market (after the US and Mexico) says Muthar Kent, Coca-Cola’s chief executive officer in the article “Coca-Cola to invest more than $2 bln in China over next three years” from SINA English.  The article noted globally, Coke posted a five per cent growth in the fourth quarter of 2008 with both sparkling and still beverages, but in China, it posted a 29 per cent gain (19 per cent for the year as a whole).  This represents the largest percentage increase in more than five years (21 consecutive quarters).  Compared to Coke’s North American market, their annual report showed that sales declined by 1 per cent in 2008.  

This $2 billion investment is not the only big move Coke is pursuing in China.  Last September, Coke announced its intention to purchase China Huiyuan Juice Group Ltd, China’s leading pure juice maker. China Huiyuan captures about 42 per cent of China’s fruit juice market. The offer is not final, as according to Anti-Monopoly laws, the deal has to be approved by the Ministry of Commerce.  While there are some tensions rising due to nationalistic pride, because if this deal goes through, it would be the largest acquisition of a domestic company by a foreign firm, a decision is expected by the end of the month.

Coke is not the only beverage giant to show an interest in China. Continue reading ‘Chinese drinks market a big draw for Coke, Pepsi and other foreign firms’

This is the fourth in a series of stories about prominent Canadians in Hong Kong and their reflections on current and potential opportunities between Hong Kong and China, and Canada.  So far we’ve learned about the natural affinity between Hong Kong and Canada, and the reason why it is a successful gateway into the Asia Pacific region.

Many sectors offer opportunities for Canadian firms, in Hong Kong as well as mainland China, but perhaps none more exciting as the environmental technology sector.

Bruce Hicks was born in Canada but his career took him to Hong Kong in 1984.  Having experience in the telecom industry, Hicks is now Managing Director of TPIZ Resources, an environmental services and investment company.  Operating through two joint ventures, the company provides expertise to small and medium sized companies on how to maximize energy efficiency, indoor air quality and water resources among others, in a way that will improve their environmental record while maximizing the financial returns.  It also funds and develops large scale energy efficiency projects through Asia.

Hicks says that the green technology sector in China offers outstanding opportunities for Canadian firms who have good technology and extensive experience in the sector.  In China, he explains, the sector is fragmented with many small companies yet there is huge domestic demand for techology and services in China. 

Ironically, Hicks says that Canada was very helpful on the policy development side about five years ago.  China now has well developed policies which have created enormous demands for green technology solutions.  Canada was there to help develop the framework, but Canadian firms are nowhere in sight to reap the benefits.   Australians have been quick to capitalize on these opportunities by putting good people in China and spending time to develop relationships.

Canada is commonly compared to Australia in Hong Kong with Australians described as more aggressive and with greater staying power.

“Canadians should just get off the stick and go do it,” says Hicks.

In the next story in this series, find out what one Canadian professional hockey player is doing in Hong Kong to introduce inner city kids to Canada’s game.

This is the third in a series of stories about prominent Canadians in Hong Kong and their reflections on current and potential opportunities between Hong Kong and China, and Canada.  Parts 1 and 2 discussed some of the reasons for the vast connections between Hong Kong and Canada, history and education.

With the mutual fondness between Hong Kong and Canada as the foundation, Hong Kong provides fertile ground for Canadian business ventures.   

Business owner Bruce Hicks, a resident in Hong Kong since 1984, says the suggestion that Canadian companies use Hong Kong as their gateway into Asia, “makes absolute sense”.  Building on the strong affinity between Canada and Hong Kong, Hicks explains that it’s possible to get work done in Hong Kong quickly.  The labour force offers a key advantage.  Hicks is the managing director of a green technology company called TPIZ Resources but has had experience in other sectors as well.  Finding trained workers who speak English is much easier in Hong Kong than in Beijing where there is an intense demand on people with technical skills who speak English.   

Hicks also praises the service attitude in Hong Kong explaining that, “there’s still pride in doing a good job in Hong Kong.”   

In the environmental sector in particular, Hicks believes there is a great deal of opportunity for Canadian firms.  Read more about that in the next story in this series.

Canada’s Trade Commissioner in Hong Kong, John Zimmerman, agrees that setting up in Hong Kong can help Canadian firms accelerate the process of breaking into the market in mainland China.  “It’s not the only entry into China but it’s an easy one,” says Zimmerman. 

Continue reading ‘Canadian Reflections on Hong Kong – the stepping stone to Asia’

A positive economist might be an oxymoron, especially nowadays, but not according to Mark Mullins, Executive Director of the Fraser Institute, an international education and research organization.  Mullins was the keynote speaker at “Weathering Market Turmoil,” an event co-hosted by the Institute and the Hong Kong Canada Business Association.  Mullins gave an overview of world markets, starting 300 years ago in the 1700s all the way to today’s crisis.  While not saying that he can predict when the world’s economy will turn around, Mullins did note some areas of encouragement.  He highlighted that:

• Stock markets are cyclical by nature.
• Stock markets have shown signs of stabilizing since November.
• There is a need to watch for stock markets to hit bottom as they do so about four to six months before an upturn.
• Like the stock markets, interest rates have been volatile since late 2007, but are also leveling of and can be an indication of stability. Rates are still decreasing, but there is less “stress”, as he puts it.
• Interest rates and stock markets and linked and their stabilization are a positive sign.

His presentation was broken down into five main sections: lessons of history; market outlook; economic outlook; policy and politics; and implications for China.  For the latter, Mullins notes that China has promptly and aggressively taken steps to battle the financial crisis, which he believes lays a good foundation for future growth.  He also outlined from the Institute’s Economic Freedom of the World: 2008 Annual Report, the progress that China has made and needs to make, specifically in regards to their size of government, legal structure of property rights, access to sound money, freedom to trade, and regulation.

Photo by ArtemFinland

“As we strengthen our work on domestic intellectual property rights, we will continue to promote international exchanges and cooperation in order to encourage the healthy development of trade relations.” 

This was part of the statement made by Yao Jian from the Chinese Ministry of Commerce after the World Trade Organization (WTO) stated that China must institute more complex laws to battle copyright infringement.  This WTO ruling is the result of a United States suit brought against China in 2007 claiming that certain parts of China’s intellectual property rights (IPR) regime is not compliant with its Trade-Related Aspects of Intellectual Property Rights (TRIPS) arrangement.  This 2007 suit came after seven years of bilateral discussions between the US and China did not resolve the issues.  The International Intellectual Property Alliance (IIPA), a grouping of US music and movie producers, authors and other private sector groups, estimate that China’s IPR regime cost more than $3.7 billion (USD) in lost sales.  The IIPA was formed in 1984 in bilateral and multilateral efforts to improve international protection of copyrighted materials. Continue reading ‘WTO tells China it must do more to combat copyright infringement’

“Canada will lose out in the global quest for talent in the knowledge-based economy unless it updates some of its ideas and policies on immigration.“  This is the first line of a bulletin by the Asia Pacific Foundation of Canada, which speaks to two recently published studies about Canada and retaining international talent.  The first, “A Limited Engagement: Mainland Returnees from Canada,” delves into how international student exchanges and overseas education by people from mainland China contribute to the exchanges between Canada and China.  Three main questions were asked.  First, how do the returning students feel about Canada and how they feel about their Canadian educational and work experience?  Second, to what degree do returning students maintain contact with Canada and why?  Is there a pattern that explains this behavior?  Third, what importance is the Canadian experience to the returnee’s life?  

The second study, “Transnational Entrepreneurs as Agents of International Innovation Linkages,” focuses on brain drain or brain loss, the concept in which countries lose their smartest and best educated citizens to other countries which can offer better economic and political lifestyles.  Specifically researched were those innovation linkages of migrating internationally educated mainland Chinese professionals who do business in both Canada and China, but maintain Canada as their base. 

Both studies outline that there are tremendous advantages to engaging foreign talent. However, they also highlight that to benefit Canada as well as their home country, Canada as a whole should be doing more to retain connections with foreign students and entrepreneurs.  Suggestions range from creating a Canada-based innovation and entrepreneurship program to empowering Canadian consulates to better engage the returnees.

Photo by  noticelj