Is China Taking Over the World?

1. Is China Taking Over the World? International Law of the American Bar Association 2006 Spring Meeting April 6, 2006 Shirley-Ann George, VP International Policy Canadian Chamber of Commerce sgeorge@chamber.ca DRAFT – Mar 1/06

2. Bottomline: China’s entry into the global marketplace fundamentally changes everything - and nothing about this is simple - US global domination may be over DRAFT – Mar 1/06

3. WHY? • History • Return to position held through out history • Size • 1.3B people • Doubling of global workforce – ½ from China • 125M middle class; moving to 300M by 2010 • Economic Might • GDP $1.8T (US$); PPP $8.1T • Political Structure to Make it Happen • Sheer Determination to Regain Dominance • Will not repeat Russia’s messy move to democracy • But Challenging Mid-term Cracks in the System DRAFT – Mar 1/06

4. Global Impact: A New Era • Not a new phenomenon • Impacting both domestic-China trade/investment & global trade/investment • Driving up prices they consume • Driving down prices they sell • Rapidly moving from low cost to high end • Manufacturing to R&D centres • Need Offensive and Defensive Strategies DRAFT – Mar 1/06

5. . • International Expansion • Branch plants - replicate domestic structure • Outsourcing of Production • Major manufacturing functions outsourced • Global Value-Chains • Both production and services located according to wherethey are most efficient 1960s 1970s 1980s 1950s 21st Century • International Specialization • Plants specialize in production • Outsourcing of Services • Service inputs now outsourced Integrative Trade • Core Business Decision • Where to locate business components • Changes Govt’s economic growth strategies • Need to understand full costs • Growth Opportunities • Commodities to feed the boom - Reducing supply chain costs • Attracting Chinese investment - New middle-class (Sales & Tourism) Source: International Trade Canada DRAFT – Mar 1/06

6. Foreign Investment is Key • Investment – Trade – Growth Linkages • Investment in China • $$ available for Chinese Investment • Need to aggressively pursue Chinese $’s • Need for reciprocal access DRAFT – Mar 1/06

7. Dealing with theChinese ‘weaknesses’ • Human Rights & the Environment • Different Roles for Government & Business • Multinationals bring higher voluntary standards • Need to coordination / standards • Emerging Role of Investment Funds • Removing Unfunded, Off-book Liabilities • Internet provides no place to hide • IP Protection & the Rule of Law • Chinese Stability & Regional Asian Stability • Other Issues • Currency Manipulation; Corruption; Bank Stability DRAFT – Mar 1/06

8. Chinese FDI in Canada • Minmetals – Noranda • Proposed Changes to Foreign Investment Protection Act (?? Name) • IP Protection • Need to attract investment • Competition for Chinese investment • Dealing with the fears • Stated Owned Enterprises • Major investors not driven by market principles • Where does Canada fit? • Energy: Oil Sands and Pipeline to B.C. DRAFT – Mar 1/06

9. Responding to the Threat • China is growing the global economy • Change = Winners & Losers • Adapt or Perish • Bigger ‘threat’ than Russians in space • Where’s your Strategy? • Govt / Business/ Personal • Not just China • Find your globally competitive niche • Essential to Move up the Value-Chain • Dramatic increase in Education & Research • Build business capacity DRAFT – Mar 1/06

10. Is China Taking Over the World? • No – Today we are gift wrapping and giving it to them • Time to wake up • Response must focus on moving Canada / US up the knowledge/innovation curve • China changes everything – up to us to determine if benefits North America. DRAFT – Mar 1/06