Building on China's growth
China is in the midst of unparalleled economic expansion and Canadian companies are struggling to get a piece of the action.

Beijing -Endless construction cranes have long been a feature of the Chinese capital's skyline. But lately their purpose can be summarized in a single number; 2008, the year the Olympics will be coming to town.

China's growth is often characterized by catchy phrases such as "world's largest producer of coal, steel and cement," "or world's largest economy by 2020." But the 2008 Olympics will bring the Middle Kingdom into collective consciousness of billions of television viewers, as never before. The Chinese government is pulling no stops to put its best face forward.

Measures include massive infrastructure programs ranging from building or renovating 36 stadiums, doubling the mileage of Beijing's rail and subway systems and overhauling water delivery. With all that growth, it's not surprising that construction contracts are among the many opportunities that Canadian businesses are seeking to exploit as a result of China's immense growth.

"I know it sounds funny, a Quebec company wanting to be involved in the Olympics," said Serge Tremblay, Fraco (Shenyang) Construction Machine's director of China operations with a laugh. "But we have expertise that the Chinese really need."

Fraco provides heavy-duty, mobile, mast-climbing platforms used by construction workers for a variety of purposes particularly bricklaying. The company is one of the largest of its kind in North America and with all the building going on in China, it was inevitable Fraco would eager to cross the Pacific.

Among Fraco's most promising projects are tests the company is conducting for use of its products to assist in building a divider wall for the Olympic pool. Although Fraco has 18 scaffold installations in China, Tremblay wants more.

"The experience you get in China is incredible," said the Quebec native. "There might be one or two major building projects a year in all of Montreal. In China, they put them up 20 at a time."

Tremblay is the prototype for a new breed of Canadian entrepreneurs who are flocking to take advantage of China's growth. A bit of a free spirit, Tremblay has a wealth of international experience, including a stint as a foreign aid worker and a decade of running a shrimp farm in Ecuador.

Unlike the many Canadian expats who rarely venture far from their China offices and cocktail parties in and around Beijing's Sanlitun foreigners' ghetto, Tremblay isn't afraid to get his hands dirty. He spends his days touring job sites and overseeing the Fraco's Shenyang production facility, which is located one hour's flight from Beijing, near the North Korean border.

When I visited him there, Tremblay was in the midst of an extended "discussion," with one of the company's clients, who wanted extensive design changes to a product he had ordered - at no extra cost. Most businessmen would have panicked. Not Tremblay. Unlike many Canadians working in China, Tremblay quickly picked up Mandarin, which gives him an unparalleled advantage in dealing with the local population.

"The Chinese believe that negotiations begin after the contract is signed," said Tremblay, with a laugh. "In North America, our contracts are more specific. The important thing is to bridge the gap diplomatically."

Fraco isn't the only Canadian company rushing to take advantage of China's growth. According to Statistics Canada, Canadian exports to mainland China have more than doubled to $6.6 billion in 2004, compared to $2.7 billion just five years earlier.

But it's not all just a bed of roses. Apologies to Churchill, but China is a riddle wrapped in a mystery inside an enigma. Experts disagree about almost every key aspect of doing business there, ranging from the size of its economy, to whether companies should approach it as a single or a series of regional markets. But almost everyone agrees that there are risks involved.

"As in many other countries, you have to do your due diligence carefully," said Mark Bolger, regional director (Asia and Pacific), at Export Development Canada. EDC provides credit protection for between 20 and 25 per cent of the dollar value of all of Canada's exports to China, so Bolger knows the challenges. "The rule of law is not always implemented as well there as you might expect."

One example: some Chinese importers have been known to use their guanxi (connections) with banks to have letters of credit revoked, often based on minor technicalities, in order to renegotiate contracts. That said, according to Bolger most Chinese businesses are surprisingly good credit risks.

But for Quebec companies the biggest risk of all might be getting left behind. In a recent speech to the Canada China Business Council, Quebec premier Jean Charest bemoaned the fact that the dollar value of province's imports from China is eight times higher than its exports.

Charest will be leading a delegation of Quebec business leaders to Beijing and Shanghai this September to try and change that. But flag waving trips aren't enough. It also takes entrepreneurs like Tremblay on the ground.

"They should come," said the grizzled veteran. "There are so many opportunities here it's unbelievable. But many businessmen can't seem to get their little minds around that fact."

 

Photo caption: Serge Tremblay, director Chinese operations, Fraco Construction Machine Co. Ltd.

 

(How to play China: This article is the first of a three part series on how Canadian companies are profiting from exporting, investing and importing opportunities created by China's unprecedented growth).

peter@peterdiekmeyer.com

 

 

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