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China, Canada Bilateral Investment Booms, Trade Lags

Aug. 15, 2012
China investment in Canada up 36-fold in 10 years Canada ranks 13th among China's trading partners China is Canada's second-largest trading partner  

Chinese foreign investment in Canada has boomed over the last decade but trade lags, according to a study by both governments that was released on Wednesday and outlined "room for much growth."

The joint study to evaluate the potential for deeper trade ties was undertaken following a June 2010 meeting between Canadian Prime Minister Stephen Harper and Chinese President Hu Jintao in Canada.

Concluding that "growth opportunities appear to be strong," it sets the stage for discussions on a possible free-trade pact sought by Beijing.

Investment in Canada from China increased 36-fold in 10 years, reaching US$10.7 billion at the end of 2011, while Canadian investment in China topped $8.3 billion, according to government figures.

"Notwithstanding these impressive gains, bilateral trade and investment represent a surprisingly small proportion of each country's total international activity," the study said. "There is room for much growth."

Second-largest Trading Partner

China is currently Canada's second-largest trading partner while Canada ranks 13th among China's trading partners.

The study outlined tariff and regulatory challenges, as well as few areas of their economies that are complementary. In many, the two nations actually compete for third-market sales but the study suggests they could partner up.

Chinese domestic demand for clean technologies could give a boost to small Canadian firms and even help these sell to third markets.

Potential Collaboration in Transportation

Similarly, opportunities exist for Canada and China to collaborate on building transportation infrastructure networks in China and elsewhere.

And Canada's engineered textiles could be incorporated into China's value chains, while Canadian branded and technical apparel might appeal to China's "increasingly discerning customers."

Over the last decade, Canada has increased sales of machinery and equipment to China, and there are further needs, especially in the areas of agricultural and mining equipment.

Intellectual Property Concerns Remain

But Canadian concerns about intellectual property protection, standards and certification requirements, and remaining tariffs are hindering growth in bilateral trade in this sector.

In the agriculture sector itself, bureaucratic delays in resolving Chinese market access persist.

The scope of services trade between the two countries is also significant, and there is potential for this relationship to grow even further.

China's growing interest in natural resources, meanwhile, is seen by the report's authors as a boon, "adding to the diversity of investment sources available to develop capital-intensive Canadian natural resources projects."

Copyright Agence France-Presse 2012

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