TORONTO — Canada can benefit from China’s rapid emergence as an economic powerhouse, but must do a better job of forging a Sino-Canadian economic relationship, says Dr. Sherry Cooper, chief economist of BMO Capital Markets.

In a report released today on the powerful shifting forces in China and the global economy, 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, but Canada’s inability to adapt beyond U.S.-related trade is hurting us.

“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,” she wrote. “Rather, we should be diversifying our foreign markets and developing economic ties with Asia, the fastest-growing region in the world.”

It’s no secrete China is booming. But why is
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Dr. Cooper noted that the Canadian government’s mission to China last week as a positive development, but added the country needs a more “comprehensive strategic approach to China as well.”

China’s economy has nearly doubled since it joined the World Trade Organization just over five years ago and is now the World’s leading importer of oil and raw materials like steel and metals.

While Ottawa has begun exploring business trade relationships with China, the Stephen Harper government has also been vocal in opposition to the Communist country’s poor human rights record.

Although the Canadian economy is still very closely tied to the U.S., developments in China are increasingly having profound long-term reverberations on Canada, says Dr. Cooper, pointed to the manufacturing sector as being particularly problematic.

Therefore, she says it is paramount that Canada improve its 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.

Dr. Cooper highlights British Columbia as having distinct advantages since its ports are significantly closer to Asia than are many of the U.S. Pacific ports. Also, more than 85 percent of the volume of B.C. port traffic involves two-way traffic. In contrast, more than 45 percent 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.

Either Canada rises to this new global reality, or “we continue with yesterday’s U.S.-centric strategy and watch our relative income per capita continue to decline.”

A full copy of the report can be obtained at BMO Capital Markets website (link below).