Points of View

Trade in China or Made in China?

How will China’s future development affect the Canadian forest sector over the next decade?

• Trading with China Likely to Generate Longer-Term Gains for Canada—Russell E. Taylor
• Creating a Market for Wood Housing in China—Ian de la Roche
• Fibre, High-end Products, Strategic Services are Canada's Best Opportunities—David Cohen
• Pulp is Canada's Best Bet in China—Don Roberts

China’s impressive economic growth has helped fan the flames of foreign investment in China. Over the past 20 years, China’s economy has grown almost 10 percent annually, according to official Chinese statistics. While many experts express doubts about the accuracy of these figures, few question that China’s growth will continue.

Many expect a short-term lag in growth and subsequent job losses, as a result of the potential adjustment of the yuan to international pressures and the need to privatize inefficient state-owned enterprises and banks. Still, several experts feel that China will be able to generate a soft landing for its economy and eventually rebound. The thinking is that China will resume its growth with better fundamentals to play in global markets and a more robust domestic market for its products.

China is Canada’s second largest trading partner (after the United States) and both countries endorse the goal of doubling their bilateral trade and investment relationship between 2004 and 2010. This is a significant increase considering that, in 2004, alone two-way trade between the countries was valued at close to $31 billion.

While current trade between Canada and China is very active, questions remain. Will China’s expansion result in lowered imports from, and increased exports to, Canada? Will the real opportunity be in selling goods to China’s expanding population or in partnering with China to sell goods to the world, taking advantage of the low cost of labour in that country to become more competitive?

In particular, Canada is interested in whether China’s development provides opportunities, or poses a threat, for the Canadian forest sector over the next decade. While China’s per capita consumption of wood and paper is still low compared to North American consumption, it is expected to grow quickly with the country’s rapid economic growth and the development of a middle class. Will the Canadian industry be able to benefit from this increasing demand for wood and paper products? Or will the rapidly growing Chinese forest industry meet all of this new demand, or even become a real competitive threat in Canada’s traditional forest products export markets?

On the following pages, four Canadian experts on forest products and global markets tackle these questions and present their views. They generally agree that China will continue to require increasing amounts of fibre in the near future to feed its growing forest products sector. Some high-value Canadian wood products may also hold promise, although opportunities are limited. It is clear, however, that China’s demand and industrial growth will continue to have a dominating influence on forest products markets over the next 10 years.