As Chinese Economy Shifts, Canadian Firms Need to Capitalize

April 28, 2017

Services and consumption, and not investment, will drive new China’s economy going forward, and Canadian firms will need to respond to this shift, according to a report, Shifting Chinese Demand: New Opportunities for Canadian Companies, by the Conference Board of Canada for HSBC Bank Canada. While exports of manufactured goods and resource-intensive investment have driven China’s growth for the past three decades, firms with time and capital may find it in their best interests to reposition themselves in preparation for this new, services and consumption-based economy.

The middle class in China is still growing rapidly, which is almost sure to drive up China’s portion of the world economy from its 17% share in 2015. In the Canadian context, the report begins by noting that Canada should be globally competitive, given its over 50 trade and investment agreements, but Canadian firms have been slow to expand abroad, which would do no favours to capturing parts of China’s middle class market.

Yet, even with their slow start, the report also forecasts that companies from Canada will be presented with more opportunities for foreign investment in China, as Canada’s relatively more mature professional market services expertise gives Canadian firms an advantage as they enter China’s market. Capital investments in the architectural, engineering, and other technical services sector have also positioned Canadian firms in a good spot in terms of capacity and profit generating potential, although capacity is still lacking in the auto and aerospace manufacturing industries. In the other direction, a potential target for China’s outbound investment as a result of shifts in Chinese consumption is Canada’s seafood market, with interviewed firms flagging support for said investment as part of their overall growth strategies.