2014-15 Canada-China Business Forum Magazine | Page 10
POLICY
rapidly growing and highly competitive tennis
environment. Tennis is a sport that barely
existed in China prior to 1988, when Li was
six years old. In 1988, tennis was reinstated as
an Olympic sport, and China began to invest
heavily in its promotion and development.
China’s economic
re-orientation
& rebalancing
continues
apace
•
•
•
Urban population expanded by
over 200 million from about 525
million in 2003 (41 per cent of total
population) to 731 million in 2013
(54 per cent of total population).
This growth represents a massive
deepening of the domestic market
since urban populations consume
goods and services more intensively
than rural populations. Current
projections suggest that China’s
urban population will expand by
100-150 million people by 2020.
The share of trade in China’s GDP fell
from 51.6 per cent in 2003 to 45.3 per
cent in 2013, reflecting the deepening
of China’s domestic market. The
share of trade in China’s GDP will
continue to decline until 2020.
China has managed to reduce its
current account surplus through
a gradual real appreciation of its
currency. Since China de-coupled the
Renminbi from the U.S. dollar, China’s
economy has grown at a compound
annual growth rate of 18 per cent.
China is shifting from flat-out growth to
sustainability. It is establishing the framework
for deepening its ties with the global economy.
The big story in recent years is the emergence
of the Renminbi as a means of global payments
and settlement – “Redback rising” is the tagline.
Multinationals doing business in China are
transacting in Renminbi because it gives them
a competitive edge. Chinese abroad will help
the Renminbi’s internationalization. And on
the trade front, China is expanding its network
of free trade agreements (FTA). These FTAs
give partners important advantages in the
Chinese market, because China’s Most-Favoured
Nation (MFN) tariffs are still relatively high.
If you connect the dots, China will look very
different politically in 2020 than the China that we
came to know in the BRIC era. The once low-cost
assembly economy highly dependent on foreign
value chains is fast becoming a knowledge-based
economy that is urban, young, well-educated and
fiercely competitive, backed by a single national
focus on technological advancement supported
by an enabling institutional framework.
POLICY
•
Air transport agreements:
Canada and China upgraded
the bilateral air services
agreement in 2012, expanding
code share services between
Air Canada and Air China.
•
Science and technology
agreements: Canada and China
signed an agreement in 2012.
•
Patent office cooperation:
China’s State Intellectual
Property Office (SIPO) and
the Canadian Intellectual
Property Office (CIPO) have
launched a Patent Prosecution
Highway (PPH) pilot program
that fast-tracks examination
of eligible patent applications
between Canada and China.
•
Nuclear cooperation agreements: Canada and
China signed a new protocol in 2012 which
supplements the 1994 agreement between the
Canadian and Chinese governments for cooperation in the peaceful uses of nuclear energy.
•
Trade offices: Canada has announced the opening
of four new trade offices in China that will expand
the network to 15 points of service and raise the
number of trade commissioners in China to 100.
•
High-level visits: Prime Minister Stephen
Harper visited China in 2012. This was
followed by a state visit by Governor General
David Johnston in 2013 and a planned visit
by the prime minister on the margins of the
APEC Summit in Beijing in November 2014.
THE FRONT STORY
In its Global Markets Action Plan (GMAP), the
Government of Canada states that it will
ensure that “all the diplomatic assets of the
Government of Canada are harnessed to
support the pursuit of commercial success by
Canadian companies and investors in key foreign
markets.” What does this mean for China?
•
Free trade agreement: Canada is dancing
around the edges of a bilateral agreement with
a complementarities study, but China is not
party to Trans-Pacific Partnership negotiations.
Canada’s withdrawal from developing
generalized system of preferences with China
means tariffs on Chinese goods and services
will rise to MFN levels as of January 1, 2015.
•
WTO agreements: Canada is in the WTObased Trade in Services Agreement (TISA)
negotiations, but China is not at the table.
•
Double taxation agreements: Canada and
China upgraded the 1986 agreement in
2012, but the 1986 agreement remains
in force (the updated tax treaty with
Hong Kong took effect in 2013).
9
element matters. In Chinese,
that translates into guanxi at the
government level. Similarly, trade
agreements appear to be very
important, perhaps more important
than we can reasonably account
for based on directly quantifiable
aspects of FTAs such as tariff
cuts. The signals that FTAs send
are very important as well.
“Paul Evans, in his
recent review
of Canada-China
relations, argues
that Canada lacks a
compelling narrative
for its relationship
with China.”
At the same time, Canada needs to put in place the
institutional framework for its companies to succeed
in China. President Xi Jinping has called for an early
conclusion to the FTA negotiations with Australia.
Meanwhile, Canada will raise its tariffs as China’s
eligibility for GTP preferences expires on January
1, 2015. That is not where Canada wants to be.
The challenge for Canada is straightforward:
put in place the trade, investment and financial
platforms for Canadian business to succeed in
China – and to accommodate a dynamic presence
of Chinese global firms in Canada. \\ DC
Dan Ciuriak is director and principal at Ciuriak
Consulting Inc., research fellow with the CD Howe
Institute and associate with BKP Development Research
& Consulting GmbH. He sits on the industrial policy
expert review panel in the lead-up to the WTO’s 20th
anniversary in 2015. The panel is an E-15 initiative
sponsored by the International Centr