How Canada’s Exports to China Grew Despite Pandemic and Political Tensions
Canada’s exports to China reached a record high of $22.5 billion in 2021, according to Statistics Canada. This was a 14% increase from 2020, and a 23.85% increase from 2019, the year before the pandemic hit. How did Canada manage to boost its trade with China despite the challenges posed by COVID-19 and the diplomatic disputes over Huawei and the two Michaels?
1. Demand For Canadian Coal
One of the main factors behind this growth was the surge in demand for Canadian coal, especially bituminous coal, which is used for steelmaking. China imported $2.79 billion worth of coal from Canada in 2021, a whopping 379.18% increase from 2020. This was partly due to China’s ban on Australian coal, which created an opportunity for other suppliers like Canada. China also increased its steel production to support its economic recovery and infrastructure projects.
2. Rise In Commodity Prices
Another factor was the rise in commodity prices, which benefited Canadian exporters of copper ore, canola seeds, chemical wood pulp, and other products. Copper ore exports to China more than doubled in 2021, reaching $2.17 billion. Canola seeds exports grew by 21.11%, reaching $1.75 billion. Chemical wood pulp exports increased by 20.38%, reaching $2.04 billion. These products are used for various purposes, such as manufacturing, food processing, and paper making.
3. Resilience Of Some Sectors
A third factor was the resilience of some sectors that have maintained a steady presence in the Chinese market, such as iron ore, fish and seafood, pharmaceutical products, and aircraft and spacecraft. Iron ore exports to China declined slightly by 7.29% in 2021, but still amounted to $2.16 billion. Fish and seafood exports grew by 9%, reaching $975 million. Pharmaceutical products exports increased by 18%, reaching $203 million. Aircraft and spacecraft exports rose by 23%, reaching $206 million.
Canada’s trade with China has defied the pandemic trends and the political tensions that have strained the bilateral relations in recent years. However, there are also challenges and risks that Canadian exporters face, such as trade barriers, human rights concerns, environmental issues, and geopolitical uncertainties. Canada needs to diversify its export markets and products, as well as enhance its competitiveness and innovation, to ensure its long-term trade success with China and other countries.
Canada’s Exports to China: Trends and Challenges
Canada and China have a complex trade relationship that has been affected by various factors in recent years, such as the COVID-19 pandemic, political tensions, environmental concerns, and changing consumer preferences. In this blog post, we will examine some of the trends and challenges of Canada’s exports of goods to China, based on the latest statistics from Statistics Canada and other sources.
The Growth of Canada’s Exports to China
According to Statistics Canada, Canada’s exports of goods to China grew by 14% year-over-year in 2021, reaching a record high of $28.5 billion CAD. This was the largest growth rate seen since 2018, when Canada exported $27.7 billion CAD worth of goods to China. The growth in 2021 was driven by strong demand for Canadian products such as bituminous coal, copper ore, chemical wood pulp, canola seeds, and potassic fertilizers. These products accounted for the top five export categories to China in 2021, representing 46% of the total value of exports.
The growth of Canada’s exports to China in 2021 was remarkable considering the challenges posed by the COVID-19 pandemic, which disrupted global trade and supply chains. Moreover, the growth defied the political tensions between the two countries over issues such as human rights, cybersecurity, and the detention of two Canadians in China since 2018. Despite these difficulties, Canada-China trade has shown resilience and continued to expand.
However, the growth of Canada’s exports to China in 2021 was not consistent throughout the year. In fact, for most of the year, exports were expected to shrink due to various factors such as China’s COVID-Zero policy, which imposed strict lockdowns and border controls to prevent the spread of the virus; China’s export restrictions on Canadian canola, which were imposed in 2019 over alleged quality issues; and China’s efforts to reduce its reliance on coal and other fossil fuels to meet its carbon emission targets. These factors resulted in a sharp decline in exports in the first half of the year, especially in January and February.
The recovery of exports in the second half of the year was largely due to the easing of COVID-Zero restrictions in China and the lifting of export restrictions on Canadian canola. These developments boosted the demand for Canadian products and led to a surge in exports in the last quarter of the year. In particular, October and November recorded strong export growth compared to the same months in 2020 (+24.7% and +14.7% YoY, respectively). December also saw a significant increase in exports compared to December 2020 (+24.2% YoY), although it was lower than the previous two months.
The Challenges of Canada’s Exports to China
Despite the impressive growth of Canada’s exports to China in 2021, there are still many challenges and uncertainties facing this trade relationship. Some of these challenges include:
The dependence on a few products
As mentioned earlier, five products accounted for almost half of Canada’s exports to China in 2021. This means that Canada’s export performance is highly vulnerable to changes in demand or supply for these products, which can be influenced by various factors such as market conditions, environmental policies, quality standards, or political interventions. For example, China’s ban on Australian coal imports in 2020 created an opportunity for Canadian coal exporters to fill the gap, but this could change if China decides to resume its trade with Australia or reduce its coal consumption altogether.
The competition from other countries
Canada is not the only country that exports goods to China. In fact, Canada ranked as the 18th largest exporter to China in 2020, according to the World Bank. This means that Canada faces fierce competition from other countries that offer similar or better products at lower prices or with faster delivery times. For example, Brazil is a major competitor for Canada in exporting iron ore and soybeans to China; Australia is a major competitor for Canada in exporting coal and barley to China; and the United States is a major competitor for Canada in exporting pork and lobster to China.
The diversification of markets
While China is an important market for Canada’s exports, it is not the only one. In fact, China accounted for only 6% of Canada’s total exports of goods in 2020, according to Statistics Canada. This means that Canada has many other potential markets that could offer more opportunities or less risks for its exporters. For example, Canada has recently signed free trade agreements with several countries or regions such as the European Union (CETA), Japan (CPTPP), and Mexico (CUSMA), which could open up new avenues for trade and investment. Moreover, Canada has a strong trade relationship with the United States, which is its largest and closest trading partner, accounting for 75% of its total exports of goods in 2020.
Canada’s exports of goods to China have shown remarkable growth and resilience in 2021, despite the challenges posed by the COVID-19 pandemic and the political tensions between the two countries. However, there are still many challenges and uncertainties facing this trade relationship, such as the dependence on a few products, the competition from other countries, and the diversification of markets. Therefore, Canada’s exporters need to be aware of these factors and adapt their strategies accordingly to maintain and enhance their competitiveness in the Chinese market.
References:
https://web.archive.org/web/20200614160030/https://www.asiapacific.ca/statistics-not-available
https://web.archive.org/web/20200410010704/https://www.asiapacific.ca/statistics/trade/bilateral-trade-asia-product/canadas-merchandise-trade-china
https://www.reuters.com/article/us-china-canada-idUSKBN2A92VH/
https://www.ic.gc.ca/eic/site/tdo-dcd.nsf/eng/Home
https://wits.worldbank.org/
https://tradingeconomics.com/canada/exports/china
https://oec.world/en/profile/bilateral-country/chn/partner/can
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