The Chi­nese are Here!

In­ter­na­tional trade isn’t just about ex­ports. It’s about the two-way flow of goods, ser­vices and in­vest­ments, and China rep­re­sents a huge op­por­tu­nity for Al­ber­tan com­pa­nies

Alberta Venture - - Contents - By Michael Gan­ley

In­ter­na­tional trade isn’t just about ex­ports. It’s about the two-way flow of goods, ser­vices and in­vest­ments, and China rep­re­sents a huge op­por­tu­nity for Al­ber­tan com­pa­nies

AT SI­WIN FOODS’ FOURyear-

old, $ 20- mil­lion food pro­cess­ing plant in south­east Ed­mon­ton, vice-pres­i­dent Gord De­Jong points to the dumpling­mak­ing ma­chines. One wraps the pork and veg­etable mix­ture in thin dough. A se­ries of con­veyor belts carry the dumplings through the steam cooker, a wa­ter bath and the flash-freezer, even­tu­ally drop­ping them into 500-gram bags, which are boxed and pre­pared for ship­ment across the coun­try.

The ma­chines – with the help of the com­pany’s 65 em­ploy­ees – can pump out 20,000 pieces an hour, but it’s not enough. Si­win sup­plies dumplings – along with pot­stick­ers, gy­oza and sausages – to Sobeys, Safe­way, Costco and T&T Su­per­mar­kets across the coun­try, and busi­ness is boom­ing. De­Jong says the com­pany plans to dou­ble the plant’s 35,000-square-foot ex­panse in the next year or two. “When we opened this fa­cil­ity I thought we’d need an­other build­ing in maybe 10 years,” he says. “We need it now.”

And the com­pany is dipping its toes into in­ter­na­tional mar­kets. In Jan­uary, Si­win sent a 20-foot ship­ping con­tainer filled with three kinds of sausage to Costco Ja­pan for the first time. It’s also close to en­ter­ing the U.S. mar­ket, and De­Jong has spent time in South Korea, although that op­por­tu­nity is stymied by one of the many reg­u­la­tions that come into play. “The sausage cas­ing has to be made in ei­ther Korea or Canada, and a lot of ours are made in the U.S.,” he says. “If we use that, we can’t ex­port it to Korea.”

Si­win’s suc­cess has come about without yet tap­ping into the mas­sive Chi­nese mar­ket, which re­mains off lim­its to vir­tu­ally all pro­cessed foods from Canada. It’s an ironic dilemma for Si­win, con­sid­er­ing that its par­ent com­pany is Chi­nese gi­ant Xi­wang Food­stuffs, which has 14,000 re­tail out­lets through­out the north­east Shan­dong prov­ince, and the Ed­mon­ton plant was built with Chi­nese money. Si­win is look­ing to get into the mar­ket – with the help of the fed­eral and pro­vin­cial gov­ern­ments – but De­Jong knows de­vel­op­ing an ex­port mar­ket can take time. “I’ve been work­ing with Costco Ja­pan longer than I’ve been work­ing with Costco Canada,” he says. “I al­most gave up on it, then all of a sud­den things got rolling again. I guess that’s a les­son that peo­ple need to learn: Don’t give up. It was hot and cold, hot and cold, but in March last year I was in Costco’s of­fice and they handed me the list­ing forms and said, ‘Yes, we’re go­ing to do this.’” Even then, it took al­most an­other year for that first sale. “Some­times you just have to keep go­ing,” he says.

WHILE THE U.S. RE­MAINS

Al­berta’s largest trad­ing part­ner by far — re­ceiv­ing 87 per cent of the prov­ince’s ex­ports from 2011 to 2015 — and oil and gas re­mains the prov­ince’s pri­mary ex­port, other mar­kets and eco­nomic sec­tors have strong po­ten­tial for growth. China, in par­tic­u­lar, is an in­trigu­ing pos­si­bil­ity for many Al­ber­tan com­pa­nies. It is ex­pected to sur­pass the U. S. as the world’s largest econ­omy any time now, if it hasn’t al­ready, and its fast-grow­ing mid­dle class is de­mand­ing con­sumer goods, in­clud­ing safe, nu­tri­tious food. In light of Pres­i­dent Don­ald Trump’s pro­tec­tion­ist stance, China is also pitch­ing it­self as a de­fender of lib­eral trade regimes. The Trans-Pa­cific Part­ner­ship may be dead, but Chi­nese Pres­i­dent Xi Jin­ping com­pared pro­tec­tion­ism to “lock­ing one­self in a dark room” to avoid dan­ger. Canada, in con­trast to the U.S., is a will­ing part­ner. Prime Min­is­ter Justin Trudeau has made deep­en­ing trade ­re­la­tions with China a key for­eign pol­icy ob­jec­tive and has dis­patched vet­eran

­politi­cian John McCal­lum to Bei­jing as am­bas­sador to help smooth the process. At the same time, Ot­tawa is loos­en­ing re­stric­tions on for­eign in­vest­ment, rais­ing the thresh­old for au­to­matic re­views of for­eign takeovers to $1 bil­lion.

Win­dows of op­por­tu­nity into China open and close, and there is one open now. Ev­ery five years, the Com­mu­nist Party of China launches a se­ries of so­cial and eco­nomic ini­tia­tives de­signed to map strate­gies for eco­nomic de­vel­op­ment and set growth tar­gets. The 13th five-year plan, launched last De­cem­ber, pays par­tic­u­lar in­ter­est to sup­port­ing “strate­gic emerg­ing in­dus­tries,” which is code for “all the things China knows it needs to get good at that it isn’t re­ally good at yet,” says Sarah Ku­tu­lakos, ex­ec­u­tive di­rec­tor of the Canada China Busi­ness Coun­cil. Those strate­gic in­dus­tries in­clude en­ergy-sav­ing and en­vi­ron­men­tal pro­tec­tion, IT, biotech, high- end man­u­fac­tur­ing, new en­ergy and new ma­te­ri­als. “Right now, in those strate­gic emerg­ing in­dus­tries, the win­dow is wide open,” she says. “The gov­ern­ment says it has money it wants to in­vest and that it wants for­eign help.”

In ad­di­tion, over the last five years, China has made a con­certed ef­fort to change its eco­nomic struc­ture so it doesn’t fall into the mid­dle- in­come trap that has bur­dened many other Asian economies, whereby a coun­try’s growth stalls af­ter reach­ing mid­dle in­come lev­els. In­stead of pour­ing money into in­fra­struc­ture and capital in­vest­ments that sup­port ex­port-led growth, the Chi­nese gov­ern­ment is sup­port­ing do­mes­tic con­sump­tion. “There’s no more growth left in ex­port,” Ku­tu­lakos says. “The gov­ern­ment said, ‘If we try to keep do­ing more of this, we’re go­ing to stall, our peo­ple aren’t go­ing to be happy, there will be too much un­em­ploy­ment, in­comes won’t rise.’ It’s a recipe for dis­as­ter.”

So Chi­nese con­sumers have more money in their hands and an in­creas­ingly strong so­cial safety net that en­cour­ages them to spend on other things. They are spend­ing on travel, food and bev­er­age, and high qual­ity im­ported con­sumer goods. “There is a sales op­por­tu­nity on both the busi­ness-to-busi­ness side and the busi­ness- to- con­sumer side that didn’t ex­ist a decade ago,” Ku­tu­lakos says.

At the same time, China wants to move off the low-tech, cheap man­u­fac­tur­ing that has sup­ported

JOHN YAO, TC SCI­EN­TIFIC

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