Canada Dropping the Ball on China

The growing importance of China in the world economy continues unabated. All the world, it seems, is beating a path to the Chinese door, though Canada seems unsure of whether it really wants to be there.

We still seem overly fixated on the United States, ignoring the fact that the U.S. is much more fixated on China than us.

Yuen Pau Woo, president of the Asia Pacific Foundation, said in a recent Toronto speech that Canadians are not paying enough attention to the importance of China for the U.S.

"On current trends, China will displace our prized role as the United States' number one source of imports next year, and will overtake us as the most important overall trading partner for the United States in five years," he said.

Moreover, "at a time when our government is hesitating about our so-called `strategic partnership' with China, the United States is aggressively pursuing a deeper level of engagement with Beijing."

U.S. Secretary of the Treasury Hank Paulson says he is taking a "generational view" of relations with China — which means he is taking a long-term view.

"I would suggest that this shift in the relative importance of Canada for the United States is much more important than any shift in the relative importance of the United States for Canada," Woo said. While the United States will want our oil, its eyes are focused across the Pacific to Asia.

China is clearly becoming a new force on the world stage. That was dramatically underlined recently when more than 40 African heads of state traveled to Beijing for a China-Africa summit and the development of a China-Africa strategic partnership.

China clearly wants to access the African continent's vast and underdeveloped oil, gas and mineral resources. But it also wants the support of Africa in the United Nations and other multilateral bodies in pursuing its agenda.

With more than $1 trillion (U.S.) in foreign exchange reserves, China can afford to start playing a more active global role. And at the summit, China lavished the Africans with aid, technology and scholarships as well as launching a $5 billion fund to encourage Chinese companies to invest in Africa.

Just before the African leaders arrived in Beijing, China hosted a two-day summit with leaders of the 10 ASEAN nations, which include the Philippines, Malaysia, Indonesia, Thailand, Vietnam and Singapore.

At the summit China signed a $25 billion contract to import liquefied natural gas from Malaysia and reached an agreement to invest $1 billion in a Philippines nickel mine. China and ASEAN have agreed to establish a free trade zone by 2010.

Later this month the Chinese president, Hu Jintao, will make a state visit to India, where the two countries will explore the possibility of a bilateral or regional free trade agreement. While the two are economic rivals, they are increasing trade and other economic relationships.

Major corporations from the Western world are also looking to China in a big way.

Novartis, a leading pharmaceutical company, has unveiled plans for a $100 million research laboratory in China to develop new drugs and Siemens has announced plans to construct the Siemens Centre Shanghai and invest more than $100 million in R&D in China next year.

In the auto sector alone, General Motors Corp. has just announced it will start building hybrid vehicles in China in 2008, following the examples of Toyota and Volkswagen. DaimlerChrysler is looking for a Chinese joint venture to build Dodge cars for the world market. Ford Motor Co. has announced it will nearly double the purchase of auto parts from China for use elsewhere in the world. China is becoming much more competitive in auto parts.

Where is Canada in all of this? Some corporations take the Chinese opportunity seriously. BMO Financial and Manulife Financial were early trailblazers. Sun Life, Scotiabank and RBC Financial are all boosting their Chinese presence now. CAE, Magna International, Nortel, Bombardier, Power Corp. and Alcan are there in a serious way. And the Toronto Stock Exchange currently has a mission in China to get more Chinese companies on the TSX.

But if Canada is to be taken seriously in China, it will need to build on the efforts of past governments and make the Canada-China relationship a top priority.

China isn't there today, but 20 years from now we may be paying a big price for the current neglect.

David Crane's column usually appears on Sunday.  （Source:Toronto Star ,by DAVID CRANE)