A bid to consolidate

Canadian exports

In 1992, China received 1.4 per cent of Canada's world exports. Although this is almost the same percentage as in 1991, China became Canada's fifth-largest export destination, taking over South Korea's position. The bulk of Canadian exports to China came from 14 major categories, each with a minimum value of over C$10 million (US$7.8m). Valued at C$2.1 billion (US$1.64bn), they accounted for 97 per cent of the total exports to China.

Cereals continue to be the most important Canadian exports to China. Due to China's stagnant agricultural production, the Chinese demand for Canadian cereals rose. In 1992, China produced 443 million tonnes of grain. Although the harvest was the second-highest in Chinese history, the 1.7 per cent growth rate barely exceeded the population increase. In 1992, Canada sold C$1.3 billion worth of cereals to China, 36 per cent more than ,the year before. This growth consisted of a 20 per cent increase in the unit price of the exports and a 16 per cent increase in quantity.

China now places 25 per cent of the world's order of Canadian cereals, compared to 21 per cent a year ago. Sixty per cent of Canadian exports to China were cereals, up from 50 per cent in 1991.

The dominant share of cereals has somewhat distorted the overall trend of Canada-China trade. If they are excluded, Canadian exports to China in 1992 were down 9 per cent from 1991. In particular, fertilizers suffered the most serious decline. It was the second-largest export category in 1991. In 1992, it dropped to sixth position, as a result of a 55 per cent reduction in sales.

Pulp of wood and other fibrous cellulosic materials has moved from third place to second, although its export value shrank by 16 per cent. The export value of organic chemicals and plastics and plastic articles also fell, by r1 per cent and 18 per cent respectively.

On the other hand, a 10 per cent growth in the exports of machinery, boilers, mechanical appliances, engines, and their parts has made this category the third-largest. The major items within this category include parts of hydraulic turbines and water wheels, machines and mechanical appliances, and turbo-propellers.

One of the most notable developments in 1992 was the 33 per cent increase in the exports of electrical machinery equipment parts and sound recorders, which raised this category's position from fifth to fourth place. Parts of electrical apparatus for line telephone or line telegraphy made up of 41 per cent of this category.

The export value of aircraft, space-craft, and their parts increased 19 times in 1992. However, since this extraordinary increase was due to the sales of one single item, flight simulators and their parts, it remains to be seen whether it can be sustained.

Other export categories that demonstrated impressive increases in 1992 include mineral fuels, oils and products of their distillation, and optical, photographic, cinematographic, measuring, checking and precision instruments.

Canadian imports

In 1992, 1.7 per cent of Canada's imports were from China, compared to 1.4 per cent in 1991. As a result, China has become Canada's ninth largest import source up from eighth position, surpassing South Korea.

Imports from China are more diversified than exports. There are 33 import categories with a minimum value of over C$10 million (US$7.81m). Valued at C$2.3 billion (US$1.8bn) in 1992, they made up 93 per cent of the total imports.

In 1992, imports of non-knitted or non-crocheted articles of apparel and clothing accessories increased by 39 per cent, keeping it the largest import category. Its share in the Canadian market also expanded from 20 per cent to 24 per cent.

Toys, games, sports requisites, and their parts and accessories grew by an impressive 46 per cent, expanding its share in the Canadian market from 18 per cent to 21 per cent. It has now become the second-largest import category.

Electrical machinery equipment and parts and sound recorders, the second-largest category in 1991, fell to third place in 1992, even though its import value rew by 24 per cent, and its market share from 1.5 per cent to 1.7 per cent.

Vehicles other than railway/tramway rolling-stocks and their parts and accessories and inorganic chemicals were the fastest-growing categories in 1992, increasing by 165 per cent and 113 per cent respectively. On the other hand, the import of oil seed and oleagi fruits decreased by 54 per cent, the most serious drop reported.

Discrepancies

According to Chinese customs, Canadian exports to China in 1992 totalled C$2.3 billion (US$1.9 billion), representing an annual growth of 17 per cent. Imports amounted to C$784 million (US$653 million), an 18 per cent increase over 1991. Canada remains China's fifteenth-largest export destination: but went from seventh to eighth-largest import source, surpassed by South Korea.

It is important to note that the Chinese figure for Canadian imports is less than one-third of the Canadian figure. This is due largely to the Chinese practice of classifying goods destined for foreign countries via Hong Kong as exports to the entrepot, whereas Canada, like most Western countries, regards these as imports from China. Other causes of the discrepancy include margins between FOB (free on board) and CIF (cost, insurance, and freight) prices, and time lags between shipment departures and arrivals.

Conclusion

The year 1992 witnessed a further expansion of bilateral trade between Canada and China. The 23 per cent in more than twice Canada's overall 10 per cent trade growth. This has further raised the importance of China to Canada's international trade sector.

However, Canada has lagged behind other countries in developing the China market. According to Chinese figures, in 1992 China's foreign trade grew by 22 per cent with the world, but only by 17 per cent with Canada. More specifically, the 17 per cent rate of increase on Chinese imports of Canadian products was significantly lower than the 26 per cent rate of increase of Chinese imports overall. This has reduced the Canadian share in China's total imports from 2.6 per cent in 1991 to 2.4 per cent in 1992.

Further concerted effort is therefore necessary for Canada to consolidate its position in the quickly emerging, but increasingly competitive China market. *

The Canada China Trade Council:
Toronto office: Citibank Place, PO Box 16,123 Front Street West, Suite 702, Toronto, Ontario M5J 2M2. Tel: +1 414 954 3800, Fax: +1 416 954 3806. Beijing office: Suite 18-2, CITIC Building, 19 Jianguomenwai Street, Beijing 100004, China. Tel: +861 512 6120, 500 2255 ext 1820, Fax: +861512 6125.

Canada brief

* The Canadian company, Spar Communications Group of Spar Aerospace Ltd has been awarded a US$6.6m contract with China's Ministry of Communications to supply an independent, nationwide, long-distance communications network. Operating on the Chinasat satellite, the ground station network will interconnect more than 70 Chinese transportation centres in such cities as Beijing, Shanghai and Chengdu, and throughout the western region of the country. The first portion of the system will be completed and operational by the end of 1993.
* Harris Farinon Canada Inc of Canada, and Shenzhen Telecom Equipment Company (TEC) of China have formed a joint venture to expand their presence in China's telecommunications market. The Shenzhen Harris Telecom Company was established in an industrial park near the centre of Shenzhen. Manufacturing, developing, selling and servicing digital microwave radios in China, the company also plans to integrate them with other systems with the aim of providing complete telecommunications solutions.
* A delegation from the Ministry of Foreign Trade and Economic Cooperation (MOFTEC) visited Toronto last May with the aim of broadening its knowledge of import/export banks. The mission was led by Mr. Miao Fuchun, director of the General
Administration Office. Meetings took place with Bank of Nova Scotia, where discussions were said to focus on Export Credit Agency (ECA) functions/programmes, major ECAs around the world, and ECA programmes from an exporter and commercial bank's point of view.
* A senior delegation from the province of British Columbia, led by premier Mike Harcourt, visited China in late April. The delegation comprised senior business executives from the province, involved in hydro power, ports and shipping and financial communities.
*Ontario Hydro will participate in the construction of a hydro-power station in China's Gansu province. Total investment will amount to 1.2bn yuan, so far the largest China project for the company. Part of the funds will be supplied by the Chinese government; the remainder will be raised in Canada. The entire project is expected to completed in 2002.
*A consortium of Canadian companies led by Lockheed Air Terminal of Canada Inc has won an international design competition for a new terminal building at Beijing Capital International Airport. It has also formed a joint venture with Beijing Capital Airport Corp to conduct a US$1.17m feasibility study for the third terminal. The project is partly financed by a grant of about US$390,000 from the Canadian International Development Agency.
*Canada will donate C$9m (US$7m) to China over the next five years for development of its lean pork production industry. Under a recent contract signed between the Chinese Ministry of Agriculture and the Canadian International Development Agency, the project has been launched in Hebei, Zhejiang, and Sichuan provinces.