As Chinese economy shifts focus, Canadian firms can capitalize
by Canadian Manufacturing.com Staff
According to a new report, China's economy is shifting from resource investment and manufacturing exports to consumer goods and services; Canadian firms in a variety of industries are in a position to take advantage
TORONTO—Change is happening in Asia’s massive economy, and many Canadian businesses are in a position to take advantage.
China’s voracious growth over the last three decades has been driven by resource-intensive investment and manufacturing exports.
But times are changing.
Growth has slowed and priorities are shifting. To meet the demands of a growing middle class, China is transitioning from an investment-led economy to one based on consumption and services. For producers of these goods and services, opportunities abound. This is according to a new report from the Conference Board of Canada, which was commissioned by HSBC Bank Canada.
While commodities are expected to keep a large share of Chinese imports, the report forecasts demand will increase for consumer goods and services, and Canada holds a global competitive advantage in several of the areas expected to experience growth.
The report points to Canadian industries that could make a big splash in a Chinese economy that will be tailored around the needs, desires and purchasing attitudes of Chinese consumers.
Natural resource industries, including mining, agriculture, and animal production; business services; and the food-manufacturing industry are identified as the most promising based on four factors:
- High growth potential for demand of these goods or services in China
- The Chinese have shown openness to foreign activities in these sectors
- The Canadian industries producing these goods or services are highly competitive
- These industries have the capacity to increase production
These industries meet what the Conference Board report calls the “sweet spot” between capacity, competitiveness, demand and openness.
Industries like aerospace, automotive and wood product manufacturing could benefit from Chinese demand, but the report says these areas need to boost capacity and increase competitiveness to maximize opportunities in the country.
Finding the Sweet Spot
For “sweet spot” sectors, the opportunities in China look to be lucrative, as evidenced by a Canadian company cashing in on China’s love of shellfish.
Nova Scotia-based Clearwater Seafoods is one of North America’s largest producers and distributors of shellfish, and has been doing business in China since 1994. Currently, 20 per cent of the firm’s $500 million in annual revenues come from China.
High seafood consumption, a large population and a growing middle class have made China a rewarding market for Clearwater, and through three sales offices in Beijing, Shanghai and Guangzhou, the company has been capitalizing. CBoC says live lobsters are particularly hot sellers, as they are used for celebratory meals in China, and Clearwater’s lobster has been a “natural fit.”
According to Clearwater’s head of global markets, Greg Morency, Chinese consumers value brands, high-quality products and food safety. All three factors have played a role in the company’s growth, he added.
Clearwater has relied on distributors in China for 20 years and Morency says strong partnerships have been key to Clearwater’s success.
“Distributors do the selling while we invest heavily in marketing and promote the products and benefits by focusing on the value chain,” he said.
Canadian engineering services firm Hatch, meanwhile, has been in China since 1999. Managing Director of Metals Joe Lombard says business in the country is based on having a local presence and forging personal relationships.
“You can go to a million trade shows but, if you don’t make friends in China, you’ll get nowhere,” Lombard said.
For companies in “sweet spot” industries, getting a piece of the action in the new consumer-centric Chinese economy isn’t a simple proposition. It requires a significant investment in capital, manpower and time. But for those willing to commit, the opportunities can be incredibly attractive, Linda Seymour, executive vice president and head of commercial banking for HSBC Bank Canada said.
“China’s economic growth may have slowed in recent years, but it remains one of the largest and fastest-growing economies in the world and is forecast to grow at 6.5 per cent compared to Canada’s two per cent through 2017, and that’s a clear opportunity for Canadian companies,” she said.