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Canada must embrace the growing economic opportunities with China if the country wants to maintain a thriving economy and keep pace globally, said Dr. Sherry Cooper, Chief Economist, BMO Capital Markets in a report released today on the powerful shifting forces in China and the global economy.

In her analysis, Dr. Cooper states China's re-emergence in the economic world has the potential of being an enormous boon to long-term Canadian growth and prosperity. “Canada could benefit disproportionately. But this takes a willingness to change on the part of individuals, business and government,” she said.

“While China could soon become the most important trading partner of the U.S., we remain fixated on yesterday's strategy – bolstering economic activity with the U.S. to the exclusion of almost all others. Rather, we should be diversifying our foreign markets and developing economic ties with Asia, the fastest-growing region in the world,” said Dr. Cooper.

Dr. Cooper views the Canadian government's mission to China last week as a positive development. However, she emphasized  Canada must continue to foster a Sino-Canadian economic relationship, much the same as the United States did with the recent groundbreaking trip of a half dozen U.S. Cabinet Ministers and the Fed Chairman to Beijing. “The EU is planning a similar process. Canada should waste no time in developing a more comprehensive strategic approach to China as well,” she said. China's economy has nearly doubled since it joined the World Trade Organization just over five years ago.

Dr. Cooper also noted Canada was a global leader in opening relations with China in 1970, well ahead of the U.S. and Europe. “Today, the U.S. and the EU are committed to engagement with China, while Canada is struggling to determine a response,” she said.

While the Canadian economy is still very closely tied to the U.S., developments in China are increasingly having profound long-term reverberations on Canada. Dr. Cooper pointed to the manufacturing sector as being particularly problematic. In this regard, she says it is paramount that we improve Canada's competitiveness, productivity and capacity to innovate. “This requires, among other things, a change in the corporate tax system to encourage investment in capacity, technology and training,” she said.

The report mentions Canadian tourism, the hospitality industry and financial services among those sectors that stand to benefit from China's economic expansion. In particular, Dr. Cooper highlights British Columbia as having distinct advantages. B.C. ports are significantly closer to Asia than are many of the U.S. Pacific ports. As well, more than 85 per cent of the volume of B.C. port traffic involves two-way traffic. In contrast, more than 45 per cent of the containers returning from Los Angeles to Asia are empty. “These advantages provide the scope for Canadian west coast ports and ancillary sectors, such as trucking and railways, to disproportionately benefit from growing China trade, but they must be sufficiently nimble – growing much more rapidly than planned – to take full advantage of this opportunity,” she said.

In conclusion, Dr. Cooper states the speed of change will only accelerate, leaving those that stagnate behind. To that end, both private and public sectors must find ways to adjust to this reality. “Either we rise to the challenge and ensure Canadian prosperity for the long term, or we continue with yesterday's U.S.-centric strategy and watch our relative income per capita continue to decline.”

For a full copy of the report please visit the following web link.

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