Companies
Canada eyes China as new growth engine
By Ding Qingfen and Lan Lan (China Daily)
Updated: 2010-10-28 13:59
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Jim Flaherty, Canada's finance minister, speaks at the opening of a Bank of Montreal branch in Beijing on Aug 10, 2009. [Photo / Agencies] |
BEIJING - Thanks to its ballooning consumption capacity and comparatively lower labor costs, China has replaced the United States and European Union as the most attractive destination for Canadian investors over the past two years.
"China has become our most important overseas market," said Albert Yu, president of Bank of Montreal (China) Co Ltd and also Asia chief executive officer of the Bank of Montreal (BMO).
The US and Canada have long been BMO's top two markets. One year ago, the Canada-based banking group decided to identify Beijing as its Asian headquarters, and this July, BMO China got official approval from the Chinese government on starting its local business.
"The timing (of the decision) is very interesting," Yu said.
During the recession, many companies retreated, but BMO is advancing its business in China, he added.
BMO's presence in China dates back to 1982, when the group set up a representative office. During the past few years, local business has been "consistently very profitable", Yu said. The bank plans to expand to the second-tier cities in China. It expects a "profitable and progressive profile" for the future and that business in China will "make (a) significant contribution" to the BMO's global business.
Not only are Canadian service sector businesses closely eyeing the Chinese market, but so are those in the manufacturing sector. Agrium, Canada's second-largest fertilizer producer and seller by sales, is considering making a foray into China in the near future.
While the developed markets are still undergoing economic recovery, Agrium is "diversifying its overseas markets and shifting focus to especially China, the largest fertilizer consuming nation", said Mark Wong, president of Agrium (China) Inc.
"China has the largest population worldwide, and more than that, the nation has rich resources and the raw materials for making fertilizer," Wong said.
Two years ago, Agrium appointed a team to investigate and research the Chinese market. The team recently sent a proposal to the head office that recommends a "large volume of investment here (in China) on building up or cooperating with local partners on factories".
Wong and his team are confident the proposal will get the nod from Canada for the simple reason that the Chinese market is "huge enough to surpass North America some day".
From 2004 to 2009, Canadian investment in China increased by an average annual rate of 25 percent. In 2009, Canada's direct investment into China was $959 million, ranking it the 10th largest source of foreign direct investment (FDI).
Canadian investment in China still accounts for less than 1 percent of China's total FDI, but the momentum of future growth is expected to be striking.
"There will definitely be more organic investment," said Duane McMullen, commercial minister at the Canadian Embassy in Beijing.
It could cover a wide range of sectors, including "auto, high tech, pharmaceuticals, manufacturing and education", McMullen said.
He said investors are motivated by cost advantage and the fast economic growth of the huge Chinese market.
Despite the slowdown of GDP growth during the second quarter, the Chinese economy has grown much faster than the majority of economies worldwide.
From April to June, China's GDP growth eased to 10.3 percent, from 11.9 percent in the first quarter. The World Bank predicted China's GDP growth will stand at 9.5 percent this year, and the Chinese government is strengthening efforts to stimulating domestic consumption and imports.