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Cracking China's market

Asian conference exposes long, hard march ahead for B.C. business

If a lesson was learned from the recent Business Council of British Columbia conference on Asian opportunities, it is that B.C. exporters are playing catch up on a long march to become a player in the ?Asian century.?

And luck, apparently, has a lot to do with any success so far, the audience was told at the September 13 British Columbia?s Gateway: Realizing Canada?s Asia Pacific Opportunities conference.

A telling indication of the potential and the shortcomings of B.C. trade with Asia was an address by Hank Ketchum, president and CEO of West Fraser Timber Co. Ltd. (TSE:WFT), who told conference delegates that West Fraser shipments of B.C. timber to China were up 100% in the past five years – from near zero – while exports to the U.S. had fallen 40% the same period. Today, he said, more than one-third of West Fraser?s lumber and plywood production was being shipped to China. In the first five months of this year, total B.C. softwood exports to Asia – $776 million – surpassed those to the United States – $661 million – for the first time. ?The emergence of the Chinese market has saved roughly 6,000 British Columbia jobs,? Ketchum said. But it could be so much more.

China is building 12 to 14 million homes per year, but only about 20,000 (about the same number of annual housing starts in British Columbia) are made of wood.

?The Chinese build out of concrete and steel, not wood,? Ketchum said. ?Our lumber is currently used for low-value applications, like concrete forming, not home building.?

Ketchum said B.C. has had some good luck combined with hard work in increasing Asian lumber exports. Part of the luck was the hefty 25% export tax that Russia has slapped on its lumber shipments to China, and the fact that B.C. has a huge surplus of softwood due to the collapse of the U.S. housing market. The hard work is seen in B.C. government investments in promoting B.C. lumber to architects and builders in China, led by a 60-person trade office in Beijing. ?We have to move up the value chain,? Ketchum said.

It costs about the same to ship lumber from B.C. to China as to most U.S. markets, and Ketchum said improved port and rail services in China could open the country?s expansive interior to more B.C. lumber by next year. ?That is a market we?re not reaching yet,? he said.


The experience of computer chip and broadband technology supplier PMC-Sierrra Inc. (Nasdaq:PMCS) with Asia proved one of the true bright points at the conference. Company co-founder and CEO Colin Harris said that a startling 83% of its $635 million in annual sales are into Asia, where PMC-Sierra has a network of offices, including a 120-person design office in Shanghai, China, and a 300-person technology and sales facility in Bangalore, India.

PMC-Sierra did not enter Asia in a big way until a decade ago, Harris said, and ?we fumbled the ball a bit getting started? by trying to offload older technology onto the savvy Chinese market. Those trying to do business with China, he said, have to be ?on the ground? and realize the demographic differences in the world?s second-biggest consumer market.

?When I hire a 25-year-old in China, his plan is to become company president in seven years,? Harris said. ?In Vancouver, he just wants to be able to meet his mortgage payment.?

Foreign students

An announcement by B.C. Premier Christy Clark that B.C. is aiming to increase foreign student enrolment in B.C. universities by 50% within four years was welcome news for Arvind Gupta, CEO and scientific director of Vancouver-based Mitacs Inc., a company involved in attracting top academic talent to Canada. According to Clark, the 22,000 post-secondary foreign students in B.C. generate $1.25 billion to the B.C. economy.

Gurpa said B.C., and Canada, should get set to brand Canada as the ?Julliard? of international education and work harder to attract the top university students in the world.

More education needed

Yeon Pau Woo, president and CEO of the Asia-Pacific Foundation of Canada, revealed just how far education must go in B.C. to even reach an understanding of the importance of Asia to future prosperity.

A foundation survey found that only half of British Columbians agree that the province is part of the Pacific Rim and 60% don?t want Asian studies or language in their schools.

This is despite the fact it is estimated that Asia will account for half of the world?s GDP by 2030, and trade with China is the main reason B.C. was able to pull out of the recent recession, Woo said. ?Vancouver is the most Asian city outside of Asia,? he said, ?so these survey results are extraordinary, and disappointing.? ?