According to Jeff Sherman, Chief Executive Officer, Hudson’s Bay Trading Company, the consolidation of the company’s global sourcing requirements and activities into one North American shared services group with a best-in-class partner will accelerate the company’s overall business strategy to integrate and improve operating effectiveness of each of the retail brand merchandising entities.

“The signing of buying agency agreement with Li & Fung complements our shared services strategy to consolidate and align global sourcing needs into one group for all of our banners. By partnering with the world’s leading consumer goods sourcing company, we will be able to leverage Li & Fung’s scale and expertise,” said Mr. Sherman.

Mr. Bruce Rockowitz, President of Li & Fung (Trading) Company, said, “We are delighted to see the execution of this outsourcing deal with one of the oldest companies and one of the leading retail groups in North America. We are very excited about this strategic relationship as the four main retail banners are well-established and we see great potential in them. With our strong network of offices in over 40 economies, we are confident that we will be able to contribute to the long term success of Hudson’s Bay Trading Company in North America.”

The new buying agency arrangement with Li & Fung will go into effect in 2010.

For a country where the state plays a large role in business, this kind of high level mission is very important.  Canadian businesses have made successful inroads in China and have a very significant presence in Hong Kong, due in large part to a long and prosperous history between the two nations.  However, diplomatic efforts are necessary as well if we are to grow Canada-China trade.

This fact was made loud and clear by Dr. William Yip, a Hong Kong businessman with whom I met while in Hong Kong in January.  Dr. Yip chronicled a number of Canadian companies who have successfully leveraged connections to party officials into business success.  He explained that party opinions are very important.  What they think and what they know about your project carries a lot of weight.  Hence his statement that,

 ”in Western culture, all roads can lead to the room.  In China, there are lots of dead end roads – they tell you all roads lead to the room.”

Liberal International Trade Critic, Scott Brison, argues in today’s National Post that not enough has been done to strengthen diplomatic relations with China. 

Regardless of your thoughts on the past three years, a visit planned by Prime Minister Harper to China in November will be welcomed by the Canadian business community as a step in the right direction.

Scheduled for completion in 2014-2015, Hong Kong SAR’s Executive Council has given the go ahead for a HK$39.5 billion ($5.2 billion CAD), 26 km underground high-speed railway link.  It will fully connect with mainland China’s rail network.   Travel between Hong Kong and Guangzhou, on the mainland, will be halved to just under 50 minutes.  In essence, Guangzhou will become a regional railway hub, linking the express rail network, and billed as a gateway into mainland China.

The Hong Kong government will pay for the initial construction cost, but the Mass Transit Railway Corporation Limited (MTRCL) will operate the line for 50 years with annual concession fees under a build-operate-transfer arrangement.  A similar arrangement was reached for the Shatin to Central link (SCL).  Guangzhou already boasts the terminus at Shibi, one of the four biggest passenger transport centers in China.

Along with the new link and transportation hub in West Kowloon, Eva Cheng Yu-wah, Secretary for Transport and Housing said the area would also be built into a commercial center.  Expecting to facilitate 10 trains in both directions, Cheng expects that 37 percent of travelers would be new transit passengers and the other 63 percent would be from commuters who already using either the train, cross-boundary coaches or other means of transport.  Although funding approval from the Legislative Council is still required before any work can begin, the project is expected to break ground next year.  A total of 15,000 jobs, which includes 5,000 construction jobs are expected to be created.  It is estimated that the project will boast around 100,000 passengers a day in 2020 and 120,000 in 2030.  In the next 50 years, this is expected to bring a $83 billion ($10 billion CAD) economic benefit in terms of travel time saved.

The Executive Council approved planning for the previously mentioned SCL and the Kwun Tong Line Extension, also by MTRCL in March of this year.  The former will have nine stations linking existing railway lines, and thereby creating east-west and north-south train corridors.  It is expected to facilitate one million passengers a day by 2021 and produce $4 billion ($500 million CAD) in time saving economic benefit.  Construction costs for SCL is HK$37.4 billion ($4.9 billion CAD)

Ever had a craving for Fotiaoqiang (Buddha jumps over a wall), oolong tea from WuYi Mountain, lychees, or Longans?  If so, Fujian province should come to mind. 

Nestled between China’s most economically developed areas with the Yangtze River Delta to the north and the Pearl River Delta to the south, is Fujian province.  Fujian has an area of 121,400 square kilometers (46,355 square miles) and a population of more than 35 million people.  It is situated in southeast China, opposite Taiwan across the 180 kilomete-wide Taiwan Strait.  Zhejiang province lies to the North, Jiangxi to the west and Guangdong lies to the south (see map).  The capital city is Fuzhou, as well as its largest city.

Fujian is governed by both China (People’s Republic of China) and Taiwan (Republic of China).  China administers all but the archipelagos of Kinmen and Matsu, which are under Taiwan’s domain. 

Most of the province is mountainous with the Wuyi Mountains creating the border with Jiangxi province.  Huanggang Peak is the highest point in this mountain range with an altitude of 2157 meters (7077 feet).  It has a subtropical climate, with January averaging seven to 10 degrees Celsius.  Summers have high temperatures and typhoons are common, usually occurring from July to September.  Sitting on several small fault lines, Fujian is also prone to minor earthquakes. Annual precipitation ranges from 1.4 to 1.2 meters (3.94 to 4.59 feet), on average.  

The province’s major cities include:

Fuzhou (Foochow)

• The capital city with 1.2 million people
• Main industries include machine, electrical, food, chemical, leather goods, electrical and industrial art, plastic machinery, tea
• Agricultural/farm production includes rice, rope, peanut, sugarcane, straw and fruit

Xiamen (Amoy)

• Population of 1.3 million
• A major port city
• Special economic Zone
• Also known as the “Garden of the Sea”
• Main industries include machinery, electronics/appliances, textiles, clothes, food, chemicals

Quanzhou

• Population of 6.5 million
• A historic port city with many scenic areas
• Mineral deposits of granite, coal and kaolin
• Main industries include machinery, chemical, textile, food processing, ceramic production
• Agricultural/farm production includes rice, soybeans, fruit, tea, jute, timber, bamboo, and aquatic products
• Road the primary mode of transportation, however shipping routes link the city with Hong Kong and other parts of the country

Nanping

• Population of 3 million
• Shipping center along the Min River
• Main industries include wood processing, papermaking, machinery, textiles, and electronics
• Agricultural/farm production include fir and paper (among the highest for China), timber, bamboo, grain, and tea.

Zhangzhou

• Population of 4.5 million
• Southwest of Xiamen

Putian

• Population of 3.2 million
• Between Fuzhou and Quanzhou

Fujian is divided into nine prefecture-level cities (level of division between the province and county level; second level of administrative hierarchy):

• Fuzhou (Simplified Chinese: 福州市; Hanyu Pinyin: Fúzhōu Shì)
• Zhangzhou (漳州市 Zhāngzhōu Shì)
• Quanzhou (泉州市 Quánzhōu Shì)
• Sanming (三明市 Sānmíng Shì)
• Putian (莆田市 Pútián Shì)
• Nanping (南平市 Nánpíng Shì)
• Longyan (龙岩市 Lóngyán Shì)
• Ningde (宁德市 Níngdé Shì)

The sub-province-level city:

• Xiamen (厦门市 Xiàmén Shì)

It also has 85 county levels cities (third level of the administrative hierarchy) and 1107 township division (forth level of administrative hierarchy). 

Travel To and Fro

Fujian’s main airports are in Xiamen and Fuzhou, with flights to Hong Kong and many mainland cities.  Xiamen boasts discount international flights to Manila, Philippines; Singapore; and Bangkok, Thailand. 

Bus is the main mode of travel in the province, the rail network is picking up, but the mountainous terrain is a challenge.  However rail and road are the most used ways to travel to other provinces. 

Culture and Tourism

Although Fujian has many historical areas and natural beauty, it is not yet a tourist hot spot.  In 2006, the province hosted 67.8 million domestic tourists spending RMB 69.4 billion ($9.8 billion CAD), a 20 per cent increase from 2005.  International tourists numbers 2.3 million, a growth of 16.5 per cent (Hong Kong tourists accounted for 680,000 thousand in 2006). 

When coming to Fujian, many seek out a bowl of Fotiaoqiang.  Derived from the native cooking style of theprovince, it is a famous dish not only in China, but throughout the world for having a unique taste and also a unique story behind the dish.  According to one version, during the Tang Dynasty (618-907), a monk came to Fujian to spread Buddhism.  At a restaurant near the temple, he could smell the this dish cooking.  After a while, his craving became too much to control and he jumped over the wall the separated the restaurant from the table. 

Demographics

Fujian’s official language is Standard Mandarin.  The vast majority of the population is Han Chinese (98 per cent).  The She, mostly found in the north represents one percent of the people and the Hui Chinese are 0.3 per cent. 

Many ethnic Chinese around the world, especially Southeast Asia, can trace their ancestry to Fujian. Descendants of Fujian emigrants make up the majority of the majority ethnic Chinese population of Malaysia, the Philippines, Taiwan, Singapore and Indonesia. Fujian, especially Fuzhou, is also the major source of undocumented Chinese immigrants in the United States.

Professional sports teams in Fujian include:

• Chinese Basketball Association
• Fujian Xunxing
• Chinese Football Association Jia League
• Xiamen Lanshi

Colleges and universities

National

• Huaqiao University (华侨大学) (Quanzhou)
• Xiamen University (厦门大学) (founded 1921) (Xiamen)

Public

• Fujian Agriculture and Forestry University (Fuzhou)
• Fujian College of Traditional Chinese Medicine (Fuzhou)
• Fujian Medical University (Fuzhou)
• Fujian Normal University, founded 1907 (Fuzhou)
• Fujian University of Technology (Fuzhou)
• Fuzhou University (Fuzhou)
• Jimei University (Xiamen)
• Minjiang University (Fuzhou)
• Putian University (Putian)
• Quanzhou Normal College (Quanzhou)
• Zhangzhou Normal College (Zhangzhou)

Private

• Yang-en University (Quanzhou)

Economy

Fujian is considered one of China’s wealthier provinces.  Its southeastern region of Fuzhou, Xiamen (one of China’s first cities to be classified as a Special Economic Zone (SEZ)), Putian, Quanzhou and Zhangzou comprises the economic center of the province.  Together this area accounts for 77 per cent of the province’s Gross Domestic Product (GDP).  In 2004, Fujian embarked on the Westbank Economic Zone for socio-economic development.  This is a zone along the east coast of the includes sections of Guangdong and Zhejiang provinces.  It effectively links those provinces along with Jiangxi, Anhui and Hunan in regional economic cooperation.  By strengthening the three direct links between mainland China and Taiwan, mail, transport and trade, Fujian is also positioning itself as the distribution and transfer hub for Taiwan commodities.

Overall trade has increased in recent years, with foreign trade increasing from 43.6 per cent in 2004 to 52 per cent in 2006. 

GDP was 750.2 billion Renminbi (RMB) ($107 billion USD/$94 billion USD) in 2006, this represents a 13 per cent increase from 2005 and 2.7 per cent higher than the national average.  Per Capita GDP was 21,471 RMB ($3053) CAD in 2006.

Special Economic Zones

A Special Economic Zone (SEZ) allows a region to have economic laws and management systems that are more liberal than the typical economic laws of China.  Xiamen in Fujian received SEZ status in 1980.  Shenzhen in Guangdong province is considered the most successful SEZ.  It received its status in 1980 and has since developed into a city with over 10 million people, this from starting out as a small village.  Along with 14 other coastal cities, China opened Fuzhou for greater foreign investment in 1984. 

Since the 1980s, China has expanded its SEZ by adding the coastal areas of the Liaodong Peninsula, Hebei Province (which surrounds Beijing and Tianjin), Shandong Peninsula, Yangtze River Delta, Xiamen-Zhangzhou-Quanzhou Triangle in southern Fujian Province, Pearl River Delta, and Guangxi.

In addition, 15 free-trade zones, 32 state-level economic and technological development zones, and 53 new and high-tech industrial development zones have been established in large and medium-sized cities. As a result, a multilevel diversified pattern of opening and integrating coastal areas with river, border, and inland areas was been formed.

Economic policies of SEZs include:

1. Special tax incentives for foreign investments in the SEZs.

2. Greater independence on international trade activities.

3. Economic characteristics are represented as “4 principles”:

Construction primarily relies on attracting and utilizing foreign capital

Primary economic forms are sino-foreign joint ventures and partnerships as well as wholly foreign-owned enterprises

Products are primarily export-oriented

Economic activities are primarily driven by market forces

SEZs are listed separately in the national planning (including financial planning) and have province-level authority on economic administration. SEZs local congress and government have legislation authority. 

The Xiamen Export Processing Zone (announced in 2000, but officially came into play in September 2002) is a special area under supervision of the Customs.  This allows 24 hour service with single declaration, single examination of documents and single inspection of cargoes.  The Export Processing Zone also allows for special preferential policies for export processing zones and special economic zones.  The Zone encourages export-oriented growth in high tech industries such as electronic information, biomedicine, chemicals and precision machinery.  It also has access by road, port and air facilities.

Special/preferential policies include:

• Exemption of Import Duties on certain products
• Duty-Bonded for certain Import Materials
• Exemption of Export Duties
• Drawback of Export Duties for specific cargo movements
• Water, electricity and gas used for export goods can be have their value-added tax refunded
• Foreign Exchange Management
• Management of Quota and License
• Transference of products for downstream processing
• Processing Entrustment outside the Export Processing Zone
• Plus additions policies included under the state Haicang Investment Zone.

Source: http://knows.jongo.com/res/article/6697 

For further information please visit http://www.amoyepz.com.

Industries

Agriculture is a dominant industry in Fujian, rice is the main crop, but sweet potatoes and wheat are also mainstays.  Sugarcane, peanuts, tea, tobacco, rubber and rapeseed are among the main cash crops.  Fujian is known for its production of fruit, oranges, longan (the most in China), lychee, pineapples, and bananas are major items.   

Heavy industry (generally defined as ‘construction’ for big projects) is also a major component.  Heavy industry tallied 49 percent of the total industrial value-added in 2006.  Light industry (generally defined as manufacturing activity that uses moderate amounts of partially processed materials to produce items of relatively high value per unit weight) accounted for the remainder.  Natural resources, coal, iron, limestone, hydroelectricity, forestry and fishing and the more common rice, sugar, tea and fruit round out this category.  Only Guangdong province has a more developed light industry.     

Imports and Exports

In total, imports and exports were $63 billion USD ($ 71 billion CAD) in 2006, increasing 15.1 percent from 2005 ranking it number eight ranked in China.  Total imports tallied $21 billion USD ($23 billion CAD) in 2006, up 9.3 per cent.  Hong Kong, Japan, the US and Germany are Fujian’s principle import markets.  Imports from Hong Kong were $149 million USD ($168 million CAD) in 2006.  Major import products included automatic data processing equipment and its auxiliary parts and components, mechanical equipment and devises, mechanical and electrical products, plane and helicopter parts and components, and electrical appliances.

Total exports for 2006 accounted for $41 billion USD ($46.3 billion CAD), up 18.4 per cent (sixth in the country).  Hong Kong, Japan, and the U.S. are Fujian’s major export markets.  Exports to Hong Kong were up 6.4 per cent in 2006 to $3.1 billion USD ($3.5 billion CAD).  Major exports included mechanical and electrical products, automatic data processing equipment, garments and related parts and footwear.     

Foreign Direct Investment

In 2006, 39,940 foreign companies were in Fujian.  The province has representation from Fortune 500 companies such as:

• ABB
• Alcatel
• Boeing
• BP
• Cendant.
• Cisco
• Daimler-Chrysler
• Danone
• Dell
• Deutsche Post
• Emerson
• Exxon Mobil
• Fedex
• Fuji Xerox
• Fujitsu
• GE
• HP Metro
• HSBC
• Itochu
• Kodak
• MacDonald’s
• Maersk
• Marubeni
• Mitsubishi
• Morgan Stanley
• NEC
• Nokia
• Panasonic
• Pepsi
• Philips
• Siemens
• Sumitomo Corporation
• TDK
• Toshiba
• Toyota
• Wal-mart

In 2006, 54 per cent of FDI was in the manufacturing industries, 37.5 per cent are in real estate.  Hong Kong is the largest source of FDI for the province, with 41 per cent of the total foreign investment in 2006.  Infrastructure, agriculture, capital and technology-intensive projects have been attracting more FDI in recent years.  Due to China’s WTO commitments, it is expected FDI in services will gain in predominance as well. 

The main industries for attracting investments from abroad are: plantation and cultivation of the primary industry; petrochemical, electronics, machinery, textile and light industry, energy, and medicine of the secondary industry; urban public facilities, transit and transportation, tourism, logistics, education, health care, and intermediary service of the tertiary industry.

http://www.fjfdi.com/cn/newmain.asp?yuyan=en&menuid=27&txtid=68

Retail/Consumers

As household disposable incomes have increased, so have retail sales.  What’s more, consumers spending habits are changing as well.  Services such as transportation, communications, recreation culture and education have all increased.  The growth of chain stores, supermarkets, warehouse type hypermarkets and convenience stores are also signs of the changing retail landscape.

For more information about Fujian investment, its economy and culture please visit the following websites:

www.fjfdi.com

www.amoyepz.com

www.chinaculture.org/gb/en_map/2003-09/24/content_21584.htm

www.orientaltravel.com/province/Fujian.htm

However, the numerous Provinces, Autonomous Regions, Municipalities and Special Administration Regions in China, with different market characteristics, represent often very different markets within the same country with different languages, cultures, business practices, and rules and regulations. This could present a challenge to prospective companies especially those which have no China trade experience.

Canadian companies, with limited resources, have to be rigorously strategic when devising their China business plans – not spreading their resources too thinly or wasting them. For starters, it may make sense for them to identify the best possible entry point into this huge and diverse market.

This best possible entry point “in China” should be able to provide the Canadian company with the right business partners, international legal system such as Common Law, and Intellectual Property (IP) security. It should also enable the Canadian company to make money and get paid.

This best possible entry point in China for Canadian companies is Hong Kong.

Hong Kong is THE international city in China. Hong Kong offers Canadian companies many advantages including freedom of movement of people, goods, capital and information. Hong Kong understands the West and the East, and many Hong Kong companies have extensive China trade experience and connections to share with potential Canadian partners and associates.

If a Canadian company chooses Hong Kong as its bridgehead for the Mainland China market or regional target markets, it will probably need to:

1. Obtain market intelligence
2. Find a business partner
3. Go to the market

To proceed, the Canadian company can leverage on the services and initiatives provided by the Hong Kong Trade Development Council (HKTDC), Hong Kong’s statutory trade promotion agency. For more information, interested parties can contact Constance Leung, Business Development Officer, HKTDC Toronto Office, Tel: (416) 366-3594, email: constance.h.leung@tdc.org.hk or visit the portal site of HKTDC:http://www.tdctrade.com/

VENTURES is an online publication, designed to stimulate more business exchange between Ontario – Canada and Hong Kong – China, and comes as a result of the China Initiative, a partnership announced in November, 2006 by the OCC and the Hong Kong Economic & Trade Office (HKETO).  The China Initiative was borne from HKETO’s mandate to reach out to businesses in Ontario, and the OCC’s desire to help its members bridge the cultural and geographic gap to the Asia Pacific region. 中文版請按這裡

“The importance of the Chinese market to Canadian companies is often underestimated,” explains the Hong Kong Economic and Trade Office.

 ”With an average growth rate of 9.6% since the late 1970s, China presents unparalleled opportunities and challenges.  Ontario companies need a China strategyin order to tap inot this lucrative market, as well as to fend off increasingly fierce competition in a global market.  The Chinese market is not just for big corporations.  Canadian SMEs can always share the pie if they have the right tools.”

HKETO has been providing outreach to SME’s, largely in the GTA, to help them learn more about opportunities in China, and to demonstrate the advantages of using Hong Kong as their launching point into the Chinese market.

“The primary mission of HKCBA, very much a national Canadian business association, continues to be to encourage Canadian business – particularly the small and medium business enterprises – to be take the opportunity and initiative to expand their activities, now, and increasingly in future, in the rapidly growing China marketplace,” says Robert Brown, an HKCBA Founding Director.  “We assist by providing advice and examples as to how they may do this, in confidence and safety, by using Hong Kong as their business platform to other parts of China and South East Asia.  VENTURES is a practical extension of our ongoing activities.”

“I suppose you could say we’re the new kids on the block here,” says Len Crispino, President & CEO of the Ontario Chamber of Commerce.  ”But many of our members see the enormous potential offered by the robust economy in Hong Kong and China, only they don’t know where to start.  VENTURES will help us provide valuable insight and information, while also positioning Ontario as an ideal location for investors from China.”

As a platform for dialogue about Sino-Canadian business exchange, VENTURES is just the beginning of the conversation.  Over time this publication will become more interactive and provide an unparalleled platform for discussing and promoting two-way trade.   Future activities are also planned to build on the momentum created by this initiative.

Letter of Congratulations from Consul General of the People’s Republic of China in Toronto

China promises "a shopping spree of historic proportions," Janet De Silva

China’s growing middle class is expected to transform the global consumer marketplace as we know it, according to the CEO of a Hong Kong based company called retailChina.

Speaking to The Hong Kong Canada Business Association, Janet De Silva, explained that by 2009, the number of middle-income consumer class households in China is expected to triple to 105 million and to reach 520 million by 2025.

In China, these households are much more youthful than other developed countries. According to De Silva, many of China’s emerging middle class consumers are young professionals between the ages of 25 and 40, with significant, discretionary spending power. More importantly to Canadians, they’re first generation consumers with no brand loyalty, and they value goods produced outside of China.

De Silva, a Canadian who was previously the Chairman and CEO of Sun Life Financial (Hong Kong) Limited, says China is unlike any other market. In order to successfully sell to China, companies must understand the geographic diversity and differences in consumer tastes and attitudes.

De Silva describes dramatic differences between consumer preferences in China’s largest four or Tier 1 cities, and the 11 cities labeled as Tier 2. In Beijing, Shanghai, Guangzhou and Shenzhen, consumers are looking for items that demonstrate their rising status; whereas in tier 2 cities like Nanjing and Xi’an, consumers focus more so on safety and hygiene. Successful companies adapt their marketing strategies accordingly.

Of course price point is vital. Retailers must be able to drive down costs in order to succeed in the market. And for retailers, the biggest barrier, according to De Silva is getting experienced people and keeping them.

Working directly with the property developers of international malls in China (200 new malls in the next 3-5 years), retailChina is looking to acquire international brands to market to this burgeoning middle class. Already the company is marketing Fruits & Passion in 12 stores in China and plans to grow that network to 80 stores by 2010.

China promises “a shopping spree of historic proportions,” says De Silva, with all international brands equal in the eyes of the Chinese consumers. While “Made in Canada” has no particular brand, Canadian retailers have an equally tremendous opportunity to sell to what will someday be, the world’s largest middle class consumer market.