Cruise ships, hydraulic excavators and the people themselves

Last week I went to a CCFS lecture on China's economic relations with Canada. The gist of the young speaker's message was that China is no longer seen as the source of cheap labour in the world and should be taken (is being taken) more seriously by Canadian policy makers; in fact more than 7% of our international trade is now with that country (the statistics quoted on this link must be out of date). Incidentally, 37% of Canada's trade with China deals with small businesses. Canada still imports more than it exports to Asia in general but is now exporting more than it used to in the way of oil, other minerals and agricultural products, especially to Japan and Korea. Aerospace products were mentioned too.

Meanwhile, Brazil's exports to China have increased by more than 40,000%!

A typical construction site in Hangzhou, summer 2011

Traditionally, western and Japanese companies were the ones who designed things (electronic products, say) the production of which typically took place in Taiwan using cheap assembly lines in China. Actually China has been importing its components from South East Asia lately and furthermore China itself is now competing worldwide in the production of cruise ships, threshing machines and construction equipment like cranes and excavators. The top firms in China (e.g. in the steel industry) are government backed and the demand for China's heavy industry products is largely domestic, though they are selling abroad as well. Huge government subsidies are on hand for renewable energy initiatives, so long as the equipment required for these projects is manufactured in China.

Some interesting points were made comparing the West with China:

• In the West, the markets are an end in themselves. In China, they are the means to an end; there's a great desire to catch up technically.
• The West has floating currencies. China has its currency fixed.
• In western countries, consumers tend to consume more than they save, generating a deficit. In China it's the other way round, with a surplus as the outcome.
• Western companies aim to "do what they're best at," whereas the Chinese deliberately invest in order to achieve a greater range of products.

Towards the end of the gathering I heard (from David Rothwell, an entrepreneur selling wastewater treatment technology to China) the recommendation that Canada should be using the Chinese expats now living here to set up "marriages" with more companies in China. The best import we have from China, he said, are the Chinese themselves.