Changes in China open doors for Canada

Changes occurring to China’s demographics, and thus its role as the factory to the world, will open new opportunities for Canada, according to Jan De Silva, who heads the Richard Ivey School of Business’ Hong Kong campus.

“I believe the issue of China begging for workers is ‘new’ information for the West,” said the Ivey Asia dean, who recently authored The War for Talent in China for the Ivey Business Journal. “So the notion of shortages of workers is not highly recognized.”

This shortage of workers in China is the result of two conditions, she said. First, the country’s controversial One-Child Policy, which limits urban couples to one child by law, will result in fewer people entering the workforce, beginning in 2015. Second, China is shifting away from ‘Cheap China’ to a middle-class consumer market that requires new service sector skills, currently not widely available.

In her study, De Silva noted 7-8 per cent GDP growth is accepted as the new normal in China (versus Canada’s rate of 2.6 per cent in 2011), changing the country’s moniker from ‘Made in China’ to ‘Sales in China,’ as the country becomes an important consumer market opportunity for both domestic, Asian and Western companies alike.

“With increasing wages, China is no longer the source for cheap labour and cheap manufacturing. Cheap labour is now found in other markets in Asia, like Vietnam and Bangladesh,” De Silva said.

Many Western brands are doing well in China, she adds, such as General Motors, Wal-Mart, Four Seasons hotels and Yum Brands (KFC, Pizza Hut).

“To do well, brands need to have a competitive advantage as all the world’s best brands are making their way there. This advantage could be a recognized brand, a unique, sought-after feature for a strong China distribution.”

With numerous European and American brands active in China, fewer Canadian brands are found there, mostly because the U.S. market has been its preferred expansion market, De Silva said.

While more than 816 million workers make up China’s current labour force, it will start to shrink, intensifying competition for workers. By 2015, the United Nation projects new entrants will dip to 95 million, a 22 per cent decrease from 2005.

De Silva suggested by 2020, it is possible China may have 228 million fewer workers than required to operate effectively.

In addition to it draining rapidly, the talent pool also lacks business experience. Therefore, Chinese companies are investing heavily in training and executive education to shorten the timeframes for developing managers into senior leaders.  That opens the door for Canada, De Silva said.

For instance, Agricultural Bank of China sent 26 high-potential managers to Canada for a year to complete an Executive MBA at Ivey and obtain work experience. Since graduating, a year ago, more than half of these participants have been promoted to new roles in China and internationally.

“The opportunity to actively attract more international students, from China, to Canadian universities offers a number of economic and strategic benefits,” she said.

A 2011 report commissioned by Foreign Affairs and International Trade Canada found that, in 2010, international students contributed $8 billion to the Canadian economy in the form of tuition, accommodation, discretionary spending and tourism.

Earlier this year, Canada and China agreed to expand two-way academic mobility, aspiring to reach a combined goal of 100,000 students studying in each other’s countries within five years.

China is already Canada’s top source country for international students, but, Canada faces tremendous competition from bigger brand university markets in the United States, United Kingdom and Australia, added De Silva.

“To create an edge we should consider partnering with Canadian branches of global companies active in China,” she said. “If we could create internship opportunities at these firms we could create a talent pipeline for these companies. This holds high appeal to international students, enabling us to attract the best. We should also foster more exchange programs and China partnerships to build opportunities for Canadian grads and our faculty.”

De Silva adds teaching Mandarin in Canadian schools should also be a priority moving forward.

“Our children’s generation will need to be capable of operating in a world where both the U.S. and China are the dominant economies,” she said. “Developing Chinese language proficiency and cultural familiarity will enhance the mobility and future job opportunities for our children.”