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The China Challenge

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Huhua Cao
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Vivienne Poy

Canada-China: the growing interdependence

Chapter 10. Hong Kong: Canada’s Partner in Prosperity

A Speech to the Hong Kong–Canada Business Association’s Parliamentary Breakfast in Ottawa, May 18, 2006

Perrin Beatty

Texte intégral

1I am very grateful for the invitation to join you for this meeting of the Hong Kong Canadian Business Association. Hong Kong is a true symbol of the new global economy and the key location where East meets West. It boasts an impressive resume: the world’s eleventh largest trading economy, the world’s sixth largest foreign exchange market, the world’s thirteenth largest banking centre, and Asia’s second biggest stock market. Hong Kong is one of the world’s top exporters of garments, watches and clocks, toys, games, electronic products and certain light industrial products. Hong Kong was the world’s tenth largest exporter of services in 2004. Civil aviation, shipping, travel and tourism, trade-related services and financial and banking services are the main components of its trade in services. The prices of many services are among the lowest in the world. More than 3,800 international corporations have established regional headquarters or offices in Hong Kong. The major types of business include the wholesale/retail and import/export trades, other business services such as accounting, advertising and legal services, finance and banking, manufacturing and transport and related services.

2Hong Kong advocates and practises free trade—a free and liberal investment regime, the absence of trade barriers, no discrimination against overseas investors, freedom of capital movements, a well-established rule of law, transparent regulations, and low and predictable taxation. In 2002, it was ranked the world’s freest economy in the Heritage Foundation’s Index of Economic Freedom as well as the Cato Institute’s Annual Report on Economic Freedom of the World.

3My first trip there was twenty years ago, when I was the first minister in the newly elected Mulroney government to visit Hong Kong. I saw many things during my short visit, but the impression that lasted was of millions of people living in an area not much larger than my constituency whose only resources were geography and ingenuity, but who had become world leaders in a wide range of areas. It left me feeling that, if Canadians could combine the advantages that come from our natural bounty and diverse population with the creativity and work ethic that typify Hong Kong, the result would be a world-beater. Fast forward to 2006, and still, for many of us, the fourteen-hour flight makes it seem that Canada and Hong Kong are worlds apart, when in fact, the exact opposite is true. Canadians are well aware that many of our citizens have come from Hong Kong, but we are less conscious of the fact that there are about 250,000 Canadians living and working there today, and more than 150 Canadian companies operating in Hong Kong, ranging from Canada’s big banks and insurance companies to locally incorporated service companies. Direct investment from Canada reached CA$ 2.9 billion last year.

4Hong Kong offers excellent commercial opportunities to Canadian firms. Last year Canada exported almost CA$ 2 billion in goods to Hong Kong, making it our fourteenth largest export destination for goods and likely higher in terms of services. Hong Kong companies have cumulative investments in Canada of CA$ 5 billion. The Canadian presence can be felt almost everywhere. As you drive in from the airport, you cross the magnificent Tsing Ma Bridge. That state-of-the-art engineering marvel was built with the help of Canadian expertise. Similarly, it is impressive to walk into the Hong Kong Convention and Exhibition Centre where last December’s WTO meetings were held, and see where the University of Western Ontario’s Richard Ivey School of Business became the first business school in North America to establish a campus in Asia, the Cheng Yu Tung Management Institute. When you look at the windows and glasswork in the magnificent Convention Centre, you should know that much of it was done by Fulton Windows, an SME and CME member from Mississauga.

5I believe that the Canada–Hong Kong relationship today symbolizes business around the globe in the 21st century. Geography is no longer a barrier. Technology, much of it Canadian, like the BlackBerry in my pocket, has bridged that gap. It is great to see that made-in-Canada technology for sale in the shops there. Technology has created a 21st-century reality with a world of new opportunities at your fingertips, where your customer can be found with just the click of a mouse.

6However, this new opportunity has also spawned a host of new challenges. For my organization, Canada’s largest trade and industry organization, we live it every day. No other sector has weathered as many storms over the past few years as Canada’s manufacturing and exporting sector, and it does not look as if it is going to get any easier in the future. Industry is changing at a relentless pace in Canada, in North America and around the industrialized world. Business practices employed only five years ago will not work today. New, emerging Asian economic and industrial powerhouses like China and India are fuelling this “next-generation industrial revolution” and rewriting the rules of the game. Simply put, business as usual is not an option.

7China is fast becoming the world’s manufacturing and exporting giant. China’s gross domestic product now exceeds US$ 1.3 trillion, about forty percent more than Canada’s. After discounting for price changes, it is thirteen times larger today than it was thirty years ago. China’s official economic growth rate last year was nine percent and economic growth has exceeded seven percent annual rates since 1999. The growth in actual economic activity is probably much higher than that. In 2003, China accounted for sixteen percent of the growth in the world economy, second only to the United States. The Asian giant’s exports are now eight times larger than they were only ten years ago. They amounted to US$ 380 billion in 2003, giving China six percent of the global export market as compared to 3.9 percent only three years before. But China is also a key source of demand for goods and services from around the world. China is now Canada’s third largest trading partner and Canada is China’s tenth. Two-way trade totalled more than $8 billion last year, fifty times higher than it was in 1970.

8Many Canadian businesses see China as a huge challenge, the land of outsourced Canadian production, but with a population of more than 1.3 billion, the Asian giant represents a potentially colossal market for Canadian companies. It all depends on whether you consider the glass half-full or half empty. CME believes that it is half-full and, with some imagination and hard work on our part, we can fill it the rest of the way. China is a land of opportunity for Canadian companies, and Hong Kong is positioned as the gateway to this emerging economic powerhouse. We speak the same language, have a better appreciation for the Western-influenced culture and share similar values.

9The Asian tiger has a voracious appetite for almost everything. China absorbed more than two fifths of the world’s cement output last year and overtook Japan as the world’s second largest importer of oil after the United States, partly due to a boom in car sales. Additionally, in 2003 it bought over eight percent of global oil supplies. In 2004 there was an eighty-seven percent surge in commodity prices. Foreign direct investment in China totalled US$ 65 billion, while outward investment in China topped US$ 85 billion. One of China’s largest trading partners is not a country, but a company, Wal-Mart, which accounted for fourteen percent of all exports in 2004. China now has a whopping thirty-eight percent of the world’s electronics production and chances are that the refrigerator in your home has a “Made in China” sticker on it.

10China’s nine percent per annum compounding growth over the past two decades has already had a profound effect on Hong Kong, where people now talk not about goods being “made in Hong Kong,” but about goods being “made for Hong Kong.” While the actual production of goods may be taking place across the border, in the Pearl River Delta or beyond, Hong Kong manufacturers have focused on high-value-added elements of their business, such as design, distribution, promotion, sales, financing, service and brand management. Hong Kong’s manufacturing community, which once saw China’s growth as a threat, now sees it as the key to prosperity.

11Here in North America businesspeople and policy-makers are less certain of the impact. For many, the threat of China obscures the opportunities the country presents. It would be foolish to pretend that China is not already a powerful competitor, one that will become even more formidable in the future. But forward-looking manufacturers believe that it is possible to see China as a competitor, as a partner and as a customer. Here is how Jim Owens, the CEO of Caterpillar, recently described what American businesses need to do:

We have work to do to compete with the world’s best. There are steps we must take to get our own house in order. For starters, American manufacturers must focus on designing and producing the highest-quality products, incorporating the most up-to-date technology. We have to stay aggressive with our product development programmes, and ensure that the goods we manufacture are desired the world over.
Second, we must continue to embrace lean manufacturing principles, increase the use of robotics and automation, and focus on just-in-time delivery. These tools will enable us to keep costs low and productivity high.
Third, we must invest in our people, providing the education and workforce development training they need to help us succeed. Over time, our international competitors will work to produce better products and adopt world-class processes, but they cannot replicate our market size and proximity. The ideas and competitive spirit that our people bring to the workplace must be nurtured.
Fourth, we must believe that we can compete on the world stage. We must look at globalization and international competition as an opportunity to make ourselves stronger and more efficient, and not, as some are proposing, as a reason to turn inward, and put up barriers to trade and investment.

12The formula for success is no different for Canadian manufacturers. During our Manufacturing 20/20 initiative, the largest public consultation in history on the future of Canadian industry, more than 3,000 Canadian manufacturers told us that today their industry is heavily dependent on technological knowledge and skills, ever more customized and service-oriented, and increasingly integrated into international markets and global supply chains. The future for manufacturers is one of global customers, global supply chains and business networks, and the potential to source from the best companies, the best technologies, and the best skills, not just from across the continent, but from around the world.

13Our customer base must be global. As a result, our trade agreements must reflect the changing needs of Canadian companies in this new international reality, and ensure that Canadian industrial and services companies can enjoy more secure and open access to major global markets. As a parent who worries about the society our children will inherit, it is clear that their standard of living will depend on how well we perform in the global economy.

14Future prosperity hinges on our business strategies and public policies moving beyond a model in which Canadian companies are simply exporting to, importing from, or investing in other countries. They must focus instead on the requirements of the global enterprise, on businesses, supply chains or business networks in which all aspects of commercial activity take place concurrently in a number of countries around the world, and on what is necessary to capture the highest economic benefits of that activity for Canadians. More markets, better access, freer trade: when you have a well-educated and highly motivated public, those are the key ingredients in the recipe for future success.

15Canada is the world’s fifth largest exporter and importer. It is the most trade-dependent nation in the developed world, with exports of goods and services representing about forty percent of gross domestic product, about four times as much, in percentage terms, as the United States or Japan. In that regard, the greatest difference between Canada and most other countries in the world is that we are even more trade-dependent. We are not a superpower that can dictate the terms on which the rest of the world must do business with us. That is why the rule of law is critical. Canadian prosperity hinges on the existence of an international regulatory framework that facilitates access to expanding world markets, and that can adapt to changes in technology, trade practices and social systems. The World Trade Organization provides the cornerstone of our nation’s trade policy and the foundation for Canada’s relations with its trading partners, including emerging markets and developing countries.

16In this uncertain and tumultuous economic era we must enhance our relationship with Hong Kong. For well over a century, Hong Kong has served as the gateway to mainland China. Obviously, there is nowhere better to obtain the expertise, information and facilities needed to tap into the Chinese market, especially as economic expansion is fuelled through trade due to its entry into the WTO.

17One project that CME has been championing has been the Pacific Gateway Initiative, which will have immense economic benefits and spin-off s for the whole of Canada. Many of you probably know that we like to boast that we are Hong Kong’s closest neighbour in North America in terms of nautical miles. Prince Rupert is approximately 5,286 miles across the Pacific, while Seattle and Los Angeles are 5,768 and 6,380 miles respectively. Constructing not only a state-of-the-art superport, but a high-tech intermodal logistics network that includes ships, trains and trucks, begins in Western Canada and unfolds all over North America, will benefit not only North America and China, but the entire global supply chain system as well.

18Looking to the future, it is a safe bet to say that Canada and Hong Kong will enhance their relationship as more and more of our businesses develop new business partnerships. Remember RIM? The company—a CME member, I may add—that revolutionized communication in the West has now headed East. Just yesterday China Mobile Communications Corporation began offering BlackBerry mobile e-mail service to some of its existing corporate clients in Asia. China is the world’s biggest mobile communications market, with more than 400 million cellphone users, most of whom are China Mobile customers. Hong Kong has a few thousand BlackBerry subscribers registered since the service was started in 2002. When I was in Hong Kong last December, my BlackBerry functioned as seamlessly as if I were in Ottawa. Some analysts are predicting that in three years’ time more than 3.9 million Chinese will be using the BlackBerry as the preferred mode of communication. Currently RIM has five million subscribers. That type of creativity, innovation, leadership and vision must stand as a model for success for all Canadian companies moving forward.

19We may be thousands of miles apart geographically, but Canada and China are just a mouse-click away, and Hong Kong remains the gateway to the opportunities that wait for us in the world’s fastest-growing economy.

Auteur

President and Chief Executive Officer of the Canadian Chamber of Commerce, since August 2007. Prior to joining the chamber Mr. Beatty was the President and Chief Executive Officer of Canadian Manufacturers & Exporters. He was elected to the House of Commons as a Progressive Conservative in 1972 and in 1979 he was appointed Minister of State (Treasury Board) in the government of Joe Clark, at the time the youngest person ever to serve in a federal Cabinet. He held six additional portfolios in subsequent Progressive Conservative governments, including Secretary of State for External Affairs in 1993. Following the 1993 federal election, he was an Honourary Visiting Professor with the Department of Political Science, University of Western Ontario, where he taught a course in Communications Technologies and Public Policy. Mr. Beatty was appointed President and CEO of the Canadian Broadcasting Corporation (CBC) in 1995. Mr. Beatty has served on a number of Canadian government advisory committees covering issues that include national security, border management, privacy and international trade. He is also a member of the Advisory Council of the Canadian Defence and Foreign Affairs Institute and served for five years as Business Co-Chair of the Canadian Labour and Business Centre

© Les Presses de l’Université d’Ottawa | University of Ottawa Press, 2011

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