Feeding the Dragon: Niche Canadian exports fueled by China trade

OTTAWA — Canadian resource exporters have helped turn China into the world’s sixth largest economy, says a new study by Statistics Canada.

Although Canadian firms do not specialize in manufacturing machinery or the kinds of components that Chinese factories assemble into finished products, they have not been significant sources of Chinese imports from Canada. However, businesses have achieved strong sales growth in high-demand natural resources, with niche resource industries like oil, wood pulp, metals and fertilizer, benefiting the most.

Chinese imports of Canadian crude materials have more than tripled since 1998 (rising at an average annual rate of 21%), accounting for nearly one-third of total growth in Canadian exports to Communist China, the study found. The fastest growth of all commodities exported has been organic chemicals, used in China to make polyester.

Chemicals have become the fastest rising export to China

At the same time, Canadian firms have profited from rising Chinese imports of iron ore and nickel, key ingredients in steel production. Also, Canadian wheat exports to China rebounded in 2004 after a long period of decline.

While over four-fifths of our exports head south to the U.S. each year, China has become the fourth largest market for Canadian exports, equaling more than one-third of our gross domestic product.

Still, China has a big enough appetite for others to feed. The country’s total imports of Canadian goods, worth US $7 billion, accounted for only 1.3 percent of China’s total imports.

China’s scorching economic growth during the past decade has helped to shore up other economies by sparking a huge demand for commodities, thereby driving up prices, says the study.

And some Canadian exporters are seizing the opportunity. As mentioned, organic chemicals have been the fastest growing Canadian export commodity to China, responsible for 17 percent of total export growth since 1998. By 2004, Canadian exports of these chemicals had grown to 30 times the levels in 1998.

While chemicals have been Canada’s fastest-growing export commodity to China, wood pulp is the country’s leading export product — centred in the burgeoning Chinese paper industry. Canadian pulp exports have shot up from US $251 million in 1998 to US $965 million in 2004, accounting for nearly 13 percent of total exports to China in 2004 and making the country Canada’s number two export market for wood pulp behind the United States.

Canada has also overtaken Russia to become the leading exporter of nickel to China. Exports quadrupled between 2002 and 2004 to US $326 million, accounting for 28 percent of total Chinese nickel imports.