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Monday, November 26, 2007

Spotlight: Canada-China trade

Strong demand for natural resources

EXPORTS to China have grown at more than twice the pace of imports on the strength of the Asian giant's demand for Canada's natural resources.

Between January and July 2007, Canada's exports to China surged 43% from the same period in 2006, while its imports from China rose only 17%.

This and other aspects of international trade are explored in the feature article, "Trading with a giant: An update on Canada-China trade", found in the November 2007 internet edition of the Canadian Economic Observer.

Rate of growth surpasses other nations

The rate of growth in exports in 2007 surpassed that of any other G7 country, and put China neck-and-neck with Japan as Canada's third largest export market.

Canada's exports to China rose sharply between 2002 and 2006, from $4 billion to nearly $8 billion. In 2005 and 2006, gains were subdued after a surge in 2004.

Chinese demand for raw materials and energy

The sharp rise in exports during the first seven months of 2007 was the result of several factors.

Accelerating Chinese demand, combined with higher world prices for metals, potash and canola, boosted industrial goods and agricultural exports.

China also became Canada's number two export market for crude oil.

Benefits for Canada

Canada is clearly benefiting from the magnitude of China's demand for natural resources.

The nation of more than 1.3 billion people, China is expanding its manufacturing base and building massive infrastructure projects, from ports and bridges to facilities for the 2008 Olympic Games.

This demand has propelled world commodity prices to unprecedented levels. By pushing prices higher, China has boosted Canada's natural resource exports to other countries.

China opens market for Canadian crude oil

In the first seven months of 2007, the value of crude oil exports to China surpassed $150 million, as China and Canada tested out the logistics of shipping Alberta oil through the Port of Vancouver.

While still not a significant share of all of Canada's oil exports, China opened up a potentially large market for Canadian crude oil.

Trade diversification

Nearly one-quarter of Canada's exports headed to non-US destinations in 2007, compared with less than one-fifth just five years earlier.

Given higher commodity prices pushed up by Chinese demand, exports of industrial goods to several European countries and China accounted for the major part of the shift in exports.

As a result of this sharp gain in exports overseas, Canada's exports have become increasingly diversified. Between 2002 and 2006, the United States' share of Canadian exports fell from its peak of 84% to 79%. During the first seven months of 2007, this share declined to 76%.

Canada weathers US slowdown

The recent shift to increased trade with the rest of the world was well-timed, given the onset of the housing-induced slowdown south of the border. All regions of Canada have benefited from this shift in exports toward non-US countries.

Alberta was the only province not to show an increased share of its exports shipped to countries other than the United States. This is because Alberta's exports south of the border are growing as fast as those to non-US countries, thanks to crude oil, Alberta's main export to the United States.

For more information, contact Diana Wyman (613-951-4181), Current Economic Analysis Division, or Media Relations.

See also
Restrained growth in imports THE DAILY -- Study: Trading with a giant: An update on Canada-China trade