Canadian companies seek growth in China: survey

Almost three quarters of Canadian companies in China plan to expand their operations there, according to a report released this week in Toronto.

China is becoming an increasingly attractive market, at least for the Canada companies that responded to the survey. In particular, almost three quarters of respondents to the Canada China Business Survey indicated they plan to expand their operations in China, 49 percent indicating the planned expansions as substantial, and 24 percent as slight.

The report released by the Canada China Business Council and Rotman School of Management surveyed a cross-section of Canadian companies doing or considering doing business in China, as well as Chinese companies with the same intentions in Canada during 2016.

The modes of expansion are varied. Forty-eight percent of the respondents indicated that their plan is to increase their business activities in their current location or in other cities; 38 percent are seeking a joint venture partner; and 26 percent are seeking Chinese investment.

The survey's results also show increased favorability toward a potential Canada-China free trade agreement (FTA), compared with 2012. Respondents view a potential Canada-China FTA that would be negotiated in the next five years as having a positive impact on their companies' business.

FTA support was found among companies operating in the professional, scientific and technical services sector. Respondents stated that Canada should be open to greater trade and investment opportunities with China, given the importance of the Chinese market to the global economy.

A number of survey respondents indicated that an FTA would give Canada the opportunity to catch up with Australia and New Zealand, which have FTAs with China.

An FTA with China will ensure that Canadian goods would not be excluded from the Chinese market due to the application of arbitrary and discriminatory technical rules and standards. It also would help protect the rights of Canadian businesses in China, with commitments to treat them the same as domestic Chinese businesses.

The survey's executive summary also shows that China's Belt and Road Initiative is an opportunity for Canadian business.

The initiative would see transportation and shipping infrastructure put in place linking China to South, Southeast and Central Asia, and all the way to Europe. Models of international business show that such efforts, if successful, would reduce the costs significantly of doing business along this corridor and thus stimulate trade, investment and other kinds of business activity.

Despite the fact that Canada is not on the Belt and Road path, 44 percent of respondents see opportunities for their firm to participate in the initiative. That links positively to the "third country collaboration" priority established by Premier Li Keqiang and Prime Minister Justin Trudeau during their official visits in 2016.

China is now Canada's second-largest trading partner, and it is becoming increasingly important in terms of bilateral foreign direct investment. However, many obstacles to doing business remain in the respective markets.

As such, governments on both sides of this relationship should work to reduce government regulations and barriers that inhibit both profitability and business growth, the report's executive summary concluded.