Canada’s Farm Progress Show Canada China Business Council Doing Business with China Workshop April 24, 2013

Canada-China Commercial Relations Canada has a long-standing and comprehensive relationship with China. In the Canada-China Joint Statement issued by Prime Minister Harper and Prime Wen Jiabao in 2009, both leaders set out a forward-looking plan emphasizing increased cooperation in five strategic areas. Trade and investment Energy and the Environment Health Governance, including Human Rights; and Education (added in February 2012) Canada is privileged to enjoy an active relationship with China. We have important shared interests in promoting peace, security and sustainable development regionally and globally and will continue to promote Canadian values and culture through principled diplomacy. It is incumbent on us to capitalize on the link that we developed through CIDA’s bilateral program over the last 30 years in priorities areas for China: agriculture, transportation, energy, education, health, environment and poverty reduction.

Emerging exports drive performance China became Canada’s second-largest export market in 2012 with exports valued at $19 billion, an increase of 15 percent year-over-year (and almost 150 percent since 2006). Canada-China bilateral merchandise trade reached $70 billion in 2012, an 8 percent increase, replacing the UK as Canada’s second largest export destinationamid a challenging year for Canadian exporters in the rest of the world. Canada’s imports from China in 2012 grew by 5 percent to $51 billion. The bilateral trade deficit remained largely unchanged at $31 billion. Four categories of goods have been responsible for the growth of Canada’s exports to China. These “emerging exports” have increased at an average annual rate of 47 percent since 2006, while the growth of “traditional” exports has only been 6 percent. Exports of ores, wood, fuels and vegetable oils and seed were only $1 billion in 2006, but in 2012 they were just under $10 billion, a ten-fold increase over 6 years. Most of the fuel is coal and is both steel- and energy-related. Canada also exports some crude oil to China. Most of the oil/oilseed is canola. Canada also exports some soybeans. China has a strong demand for edible oils.

- absent growth in our exports to China, Canada's exports would have shrunk from 2006 to 2011   - the center of gravity of Canada's trade is shifting across the Pacific - increasingly, our prosperity depends on these economic relationships; China in particular

Germany France Brazil Russia Spain Vietnam This graph illustrates the importance of the China market by comparing Canadian exports to China by sector to our total exports to other countries. For example: - our mining & metals exports to China exceed Canada's total exports to Germany - our wood and wood pulp exports to China exceed our exports to France - Canada's agri-food exports to China roughly equal our entire exports to Brazil Spain Vietnam Source: World Trade Atlas

Canada-China FDI Key Investments by Canada: Bombardier has investments in China for both aircraft parts and high-speed train production Several Canadian banks including BMO and Scotiabank have investments in China. Other sectors with significant Canadian investments include: clean technology, ICT, mining, automotive Key challenges to increasing Canada’s FDI in China: investment restrictions in areas of Canadian strength (such as mining), lack of transparency and predictability in the regulatory environment, and  poor protection of intellectual property rights. These are among the issues Canada has sought to address via the FIPA with China. Note: FDI China into Canada in 2006 and 2007 are estimates Source: Office of the Chief Economist of Canada

Sectoral distribution of Chinese investment in Canada These numbers will be further influenced once the CNOOC Nexen deal is added. Key Investments by China: PetroChina – MacKay River Project [Athabasca Oil Sands] $680 mln (Jan 2012), total transaction $2.6 bn Sinopec – Daylight Energy $2.2 bn (Oct 2011) CNOOC – Opti Canada $2.1 bn (Jul 2011) Sinopec – Syncrude $ 4.7 bn (Apr 2010) China Investment Corporation – Penn West Energy $ 1.3 bn (May 2010) China Investment Corporation – Teck Resources $ 1.3 bn (Jul 2009) Source: Public sources Note: Does not include Nexen acquisition

Strategies and considerations for Canadian Companies China is not one market Be cognizant of cultural differences Do not underestimate the importance of guanxi and face Do not overestimate the importance of guanxi and face The government matters Find the gaps Scoping and FEED Local competition is beginning to ramp up sub-surface services are still very much in demand Water management offers huge potential What can you localize? Protect your IP and trade secrets Patience Culture and language differ across the country; Urban vs. rural, south vs. north, east vs. west, 1st tier city vs. 2nd/3rd tier city, rich vs. poor, old vs. young are all major divides. Business is done over food and drink; Beware of cookie-cutter transplants; Setting up a WOFE means you are legally a Chinese company, with all that that entails; Your contracts from home won’t cut it. Not rocket science, but it is all the more important here. Remember that you are in China but you are not Chinese. Do not necessarily rely on the one China-hand you know; Comply with the full letter of the law because you will be brought under closer scrutiny; Sometimes it is okay to be a “foreigner”. Chinese companies are getting more sophisticated and they will cut you slack. A lot of your counterparts will be educated abroad. Due diligence is key everywhere, but all the more so in China. Who really holds the power? Is your partner really who they say they are?; Be on the ground – make sure you appoint someone you trust to be your representative; Build systems that you can trust. The state has a far reaching presence in China - foreign investment catalogue, strategic sectors, subsidies, SOEs, etc.; You need to cultivate these relationships; You need to map out who matters. Navigate through the bureaucratic tangle. China wants your technology; China’s IP laws are there but enforcement is an issue; Best to protect your IP with both formal rights and informal rights; Watch out for Chinese patents.

Foreign Affairs and International Trade Canada (DFAIT) Represents Canada around the world through embassies, consulates and trade offices, participation in multilateral institutions, and international treaties and arrangements. The department's Foreign Service employees fall into three categories: political/economic officers, management/consular officers and trade commissioners. Canada's Representation Abroad 270 locations: These offices provide a variety of services, although not all offices provide every service. The offices include embassies, high commissions, permanent missions, consulates general, consulates, consulates headed by honorary consuls, and satellite offices. Except for consulates headed by honorary consuls, all of the offices have Canadian staff in addition to locally engaged staff members. *http://www.voyage.gc.ca/main/foreign/can_offices_desc-en.asp Canada has diplomatic and consular offices in over 270 locations in 180 countries.

The Canadian Trade Commissioner Service (TCS) Canada’s most comprehensive network of international trade professionals. In 2008, the TCS could count on: 1,052 employees work in our Trade Offices abroad, from which 399 are Canada-based staff 653 are locally engaged staffs, who provide extensive knowledge of local markets, legislation and the business environment. 1,038 employees work in Canada 938 at Headquarters 100 at Regional offices Located in more than 150 offices around the world

Building Canada’s economy The TCS promotes Canada’s economic interests in the global marketplace. The TCS facilitates Foreign-market access Trade leads Exports Business contacts Events Technology transfer Licensing agreements Joint-venture development Investment in Canada Research and development (R&D) partnerships

Delivering value to businesses We can help your company succeed globally and lower your costs of doing business through four key services: Preparation for international markets Market-potential assessment Qualified contacts Problem solving

Preparing for international markets Our trade commissioners in Canada help you: determine whether you are internationally competitive; decide on a target market; collect market and industry information; and enhance your international business strategies to export, invest and innovate. Regional offices connect clients to international commerce opportunities. This is realized by finding international ready clients, advising these clients and connecting them to our missions abroad, HQ, and our domestic partners. Regional Offices lead or play a major role in more than 320 international business development events per year. Events cover the full spectrum of global commerce activity related to trade, investment and science and technology. Events attract close to 10,000 participants per year and growing every year 10-20%.

Assessing market potential Trade commissioners in Canada and abroad can help you assess your business’ market potential with market intelligence, and advice on improving your market penetration strategy. Examples: Strategic advice on entering and doing business in the market, including branding and advice related to investing abroad and participating in global value chains. An indication of major barriers, regulations and certifications. Insight into emerging trends, regulations and policy issues. Notification of upcoming events (trade fairs, conferences, partnering seminars, trade missions). A brief assessment of the potential success for the client's product or service in the target market. An informed opinion that represents the post's best assessment of the current and future development of the market. Reasons for this assessment, sources of information, and the recommended next steps. Canadian clients must see value and a fit between the leads disseminated to them, and their exporting interests and capabilities.

Finding qualified contacts Global reach The TCS has contacts abroad that can bolster your business’ success and provide the local knowledge you need. Canadian presence The TCS can link you to the vast Canadian trade network, trade missions, and advise you on trade fairs in your sector. Qualified Contacts: Key and qualified contacts are individuals who are known to the Trade Commissioner in the ROs or at post. Affiliations and identification of key decision makers (executives, board of directors), along with their marketing strategy, policies, priorities and plans. Qualified contacts in a targeted market have the local knowledge to help the Canadian clients refine and implement their market entry strategy or investment strategy.

Resolving problems Issues abroad are bound to arise. As officials of the Government of Canada, trade commissioners have the necessary access, credibility and experience to open doors.

CANADIAN BUSINESS WOMEN IN INTERNATIONAL TRADE TCS on Social Media TCS TWITTER ACCOUNT   www.twitter.com/tcs_sdc TCS GROUP ON LINKEDIN http://linkd.in/TCS-SDC CANADIAN BUSINESS WOMEN IN INTERNATIONAL TRADE http://linkd.in/bwit-faci

TCS sub-groups on Linkdin Joining the main TCS group on LinkedIn also gives its members access to the following TCS sub-groups: Doing Business in China - A forum for Canadian companies seeking to gain a better understanding of the business practices, challenges and potential advantages associated with China’s growing market. Doing Business in Europe - This group provides Canadian companies interested in or actively doing business in Europe with a forum to discuss issues related to European commercial activities and opportunities. Doing Business in the Gulf Cooperation Council Region (GCC) - This group provides Canadian companies with a forum to advance their understanding of business practices in the GCC markets while demystifying the challenges and clarifying the advantages presented by this growing and vital market for Canadian business. Doing Business in the United States and Mexico – This group supports Canadian companies interested in or actively doing business in the United States and Mexico by providing a forum to discuss issues of interest to them. Doing Business in Global Aerospace Markets - This group provides Canadian stakeholders with a forum to track new developments and changing conditions in global markets, while connecting them to Canada’s network of global aerospace Trade Commissioners and other key stakeholders. Canadian Business Women in International Trade - A forum devoted to helping women succeed and advance their careers by building networks, discussing issues and sharing information. Both men and women are encouraged to join.

Visit the new TCS mobile website www.tradecommissioner.gc.ca   Subscribe to CanadExport: TCS e-magazine www.canadexport.gc.ca

The Canadian Government’s Presence in China Metro population of cities in millions (2010) - National Bureau of Statistic of China Shanghai: 22 Beijing: 19 Guangzhou: 11 Shenzhen: 10 Chengdu: 7 Hong Kong: 7 Nanjing: 7 Wuhan: 6 Shenyang: 6 Chongqing: 5 Qingdao: 3

For more information Contact us at www.china.gc.ca Mona Taylor Senior Trade Commissioner Regina, Saskatchewan Mona.Taylor@international.gc.ca The Trade Commissioner Service enquiries Line 1-888-306-9991 Info Centre in our offices in China Email: infocentrechina@international.gc.ca www.china.gc.ca