CITY WIDE IMPLICATIONS

CITY OF HAMILTON

OFFICE OF THE MAYOR

Report to: Chair and Members Submitted by: Larry DiIanni Strategic Planning & Mayor Budget Committee

Date: July 25, 2005 Prepared by: Neil Everson x 2359 File:

SUBJECT: Business Development Mission to (MAY05002) (City Wide)

RECOMMENDATION:

That Report MAY05002 respecting the Business Development Mission to China be received for information.

______Larry DiIanni, Mayor City of Hamilton

EXECUTIVE SUMMARY:

A Hamilton delegation led by Mayor DiIanni visited northeast China as part of a Canadian International Development Agency (CIDA) project. In cooperation with the University of Waterloo and the University of Technology, the Hamilton delegation provided expertise on both sustainable development practises and cooperative business development activities between municipalities and port authorities. During the visit, a partnership agreement was formally signed between the Port of City and the Hamilton Port Authority. The Mayor also signed an agreement with Yingkou City to pursue “sister city” status between the two municipalities. This agreement will be forwarded to the Hamilton Mundialization Committee.

SUBJECT: Business Development Mission to China (MAY05002) (City Wide) - Page 2 of 5

A number of meetings were held with City officials, investors and Chinese companies in Yingkou City, Gaizhou City, Dalian, and . The purpose of these meetings was to identify business opportunities for Hamilton companies and explore interest in Chinese investment in Hamilton. The Hamilton delegation also met with senior Canadian Consulate staff in Shanghai to review and discuss the City’s strategy for doing business in and with China.

BACKGROUND:

China is Canada’s second largest trading partner with over $30 Billion in trade recorded in 2004. Canada imports from China cover the entire spectrum of consumer goods while its exports are primarily natural resource based such as wood, pulp and paper, fertilizer (potash), grains and agricultural products and some secondary manufactured products like iron and steel. Projected economic growth for China will “slow down” to a staggering 9% for the remainder of 2005 and all of 2006. This is incomprehensible compared to Canada’s 3.0% growth which is considered respectable by most economists and financial institutions.

China’s growth rate has catapulted the country’s status as one of the most powerful economic engines in the global economy. And China continues to “rack up” huge trade surpluses and now has an estimated $600 Billion (US$) in foreign reserves. However, this pace of growth has not been achieved without sacrifice – and in China’s case it has been the depletion of its natural resources and degradation of its environment.

Consequently, China must now deal with these environmental legacies and also begin incorporating sustainable development practises into its regional/national growth strategies. In order to accomplish this, the Chinese looked to the international community for knowledge and assistance. Through the Canadian International Development Agency (CIDA), the University of Waterloo which is renowned for their expertise in environmental studies and specifically water resource management were selected to lead an ECOPLAN project in China.

The ECOPLAN project was primarily focused on northeast China but also addressed problem areas in other parts of the country. To deliver this massive project, the University of Waterloo had to develop partnerships both in Canada and in China. In China, the Waterloo faculty selected the Dalian University of Technology (DUT) and in Canada they chose the City of Hamilton. Hamilton was identified for two reasons: 1) the City’s international reputation for sustainable development practises, and 2) the presence of a well established port/port economy which is a dominant sector in northeast China.

CIDA funding for the implementation of the ECOPLAN includes financial reimbursement to municipalities and universities that contribute resources and staff to the project. Representatives from both Hamilton’s Long Range Planning Division and Public Works Department have already been in China working on this project. In April 2005, staff from the city’s Economic Development Department and the Hamilton Port Authority SUBJECT: Business Development Mission to China (MAY05002) (City Wide) - Page 3 of 5

were requested by the University of Waterloo to visit Dalian as well as the cities of Yingkou and Gaizhou in northeast China. All expenses associated with this consulting work would be covered by the ECOPLAN program.

In May of 2005, a delegation from the Port of Yingkou and Dalian University visited Hamilton and the Port. Discussions and negotiations regarding formalizing a relationship between the two cities (Hamilton & Yingkou) and the two ports dominated the visit. Approximately a month later, the Mayor of Hamilton received a formal invitation to visit Yingkou City to sign a relationship agreement to pursue a “sister city” arrangement and also to attend the formal signing of a partnership agreement between the Port of Yingkou and the Port of Hamilton. In conversation with University of Waterloo faculty involved in the ECOPLAN project, they advised that the Mayor’s presence would significantly increase the profile of their efforts thereby creating greater participation from municipalities in China.

Dalian is located at the southern tip of China’s facing the Yellow Sea on the east and the on the west. Dalian has a population of seven million people and has developed into one of the most important industrial locations (country’s largest shipyards) in all of China. As well, it serves as the technology and financial capital for the entire region of northeast China. Dalian has recently outgrown its current port and now is in the process of constructing a new port/free trade zone that will be over 21 square kilometres in area and will be the largest container, petro- chemical and agricultural products terminus for north-east Asia surpassing Seoul, South Korea.

Yingkou City is the second largest Port City in northeast China and is much smaller than Dalian with a population of just over two million people. It has a large container port and also handles agricultural products and steel (inputs and finished product) from one of China’s largest steel mills located in the region.

As part of the ECOPLAN program and as a result of the intensive pace while working in China, participating Canadian staff were provided with the opportunity to spend several days in Beijing before returning to Canada. To better utilize this available time, the Hamilton delegation (led by the Mayor and included Neil Everson, Executive Director of Economic Development and the Chairman of the Port Authority’s Board of Directors and their V.P. of Operations) arranged a number of meetings with companies and investors in both Beijing and also added two days in Shanghai. These meetings included:

• two large engineering firms (both with the potential for equity investments) that work internationally on major infrastructure projects; • Hope Full Grain & Oil Group - the largest processor of oil seeds and soya beans in China looking for joint venture opportunities in Canada; • Separate meetings with four private investors wanting to make large investments in southern Ontario and preferably in the Hamilton area; • Hamilton businessman Joe Ng and two of his joint venture companies (with Hamilton firms) located in China; SUBJECT: Business Development Mission to China (MAY05002) (City Wide) - Page 4 of 5

• COSCO Logistics (Chinese Overseas Shipping Company), the second largest shipping company in the world that recently opened an office in New York and are looking for a Canadian location.

In the meeting with shipping giant COSCO Logistics, it was surprising to see the company’s interest in Hamilton’s 24/7 airport but understandable in light of the May 15th new Canada - China bilateral air services agreement. This agreement will not only increase passenger frequency but is aimed directly at strengthening cargo/courier links between the two countries. As a result, Air Canada has just initiated a direct air cargo service between Shanghai and Toronto (Pearson) and with Air Canada’s presence at the John C. Munro Hamilton International Airport there appears to be a great opportunity to capitalize on China’s “booming” growth.

Similarly, Shanghai (now the third largest port in the world) will be the recipient of $86 Billion (US$) in new infrastructure investment. The Chinese government has specifically targeted Shanghai and the Yangtze River Delta as the new focal point for Chinese industrial development. The Canadian government has identified this area as holding great potential for Canadian companies and ports.

Finally, the Hamilton delegation spent an afternoon with the Canadian Trade Office in Shanghai. Canada’s Consul General, Mr. Robert Mackenzie, led the meeting and was accompanied by the Vice-Consul and the post’s Senior Trade Commissioner. Hamilton was applauded for its approach to China by conducting research, learning the marketplace, forging relationships and partnering with local educational institutions (i.e. McMaster, Waterloo and Dalian University of Technology). Mr. Mackenzie stated that the post receives close to 300 trade missions a year with many of them being led with municipalities that have no experience or knowledge of China. Becoming ‘China literate’ helps ensure future success.

The Consulate agreed to work with Hamilton and provide resources if the city was considering a trade mission but strongly recommended having a local agent work on the city’s behalf for a minimum of 9 -15 months in advance of the trade mission’s arrival in China. From the two week business development mission, there are significant opportunities in China for Hamilton-based companies but the City of Hamilton would have to commit some financial resources for outbound trade missions and to accommodate/host incoming delegations from China as well.

ANALYSIS OF ALTERNATIVES:

• Do not pursue China as a business market for Hamilton companies. • Pursue a China strategy in co-operation with local businesses, cultural and educational institutions.

SUBJECT: Business Development Mission to China (MAY05002) (City Wide) - Page 5 of 5

FINANCIAL/STAFFING/LEGAL IMPLICATIONS:

Financial: Additional financial resources would have to be added to the Economic Development Division budget to accommodate a China program.

Staffing: N/A

Legal: N/A

POLICIES AFFECTING PROPOSAL:

The Hamilton Mundialization Committee regarding any sister city agreements.

CONSULTATION WITH RELEVANT DEPARTMENTS/AGENCIES:

N/A

CITY STRATEGIC COMMITMENT:

This report advances the City’s goal of “Growing the local economy”.

LD/nce