Canada's Trade with China: 1997 to 2006
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By Jafar Khondaker, International Trade Division, Statistics Canada
Canada's total merchandise trade with China has soared in the last decade, reaching $42.1 billion in 2006 and accounting for 5.0% of Canada's world trade.1 In 1997, China was Canada's fourth largest trading partner with total merchandise trade of $8.7 billion. By 2003, the country had emerged as Canada's second largest trading partner surpassing the U.K. and Japan.2 Imports from China were five times higher in 2006 than in 1997 while exports to the country tripled.
The growth in Canada's merchandise trade with China reflects the emergence of China as a global economic force over the past decade. In 1997 the country ranked as the 7th largest economy in the world in terms of GDP. By 2005 it had become the world's fourth-largest economy, smaller than the United States, Japan and Germany but soaring past France, Britain and Italy. Since it joined the World Trade Organization in 2001, China has doubled its share of global manufacturing output, creating enormous demand for commodities and raw materials. According to the latest revised data released by China's National Bureau of Statistics, the Chinese economy expanded by 11.1% in 2006, the fastest growth since 1995.3The growth has been fuelled primarily by huge investments, and a boom in exports that generated a trade surplus of $177.5 billion (US Dollars) in 2006 creating a foreign exchange reserve reaching over $1 trillion (US Dollars).
Two-way trade within the same commodity groups accounts for a large share of the Canada-China trade
A significant part of Canada-China trade can be related to the globalization of production. In 1997, 34.3% of Canada's exports to and 37.6% of imports from China involved two-way trade within the same commodity groups.4 By 2006, as exports increased to four-fold the level in 1997 and imports soared to over eight-fold the 1997 level, the two-way trade accounted for over 45% of exports and 57% of imports. Leading commodities in the two-way trade include organic and inorganic chemicals, plastic and rubber materials, iron and steel and articles made of iron and steel, industrial and agricultural machinery and equipment, electronics, automotive equipment and parts, optical, photo, medical and surgical instruments, wood products, paper and paperboard and fish products.
In addition to the leading commodities involved in the two-way trade, Canada experienced over the last decade a rapid growth in the exports of nickel articles, copper and metal ores. At the same time, imports from China of furniture, apparel articles and accessories, and aluminum articles skyrocketed.
The commodity-mix of exports to China has changed little in the last decade
As the commodity-mix has changed little, a number of commodities have become more important in the Canadian export to China. Indeed, of the 30 leading commodities exported in 1997, 25 remained in the list of 30 leading commodities exported to China in 2006. In recent years, wood pulp, organic chemicals, nickel articles, copper and articles have become increasingly important in Canadian exports to China.
Diminishing importance of wheat in exports to China
During the period 1995 to 1997 wheat was Canada's largest export to China averaging over 30% of the value of our total exports to the country. However, over the last decade, the importance of this commodity has declined in terms of its total value and its share in Canada's exports to China. In fact, during the three-year period 2004 to 2006 the share of wheat in Canada's total exports to China averaged only about 6.0%.5
Growing importance of China as a source for machinery and equipment
In 1997 China accounted for 1.8% of Canada's total imports of machinery and equipment (in HS classes 84 and 85) from the world. Imports of machinery and equipment from China accelerated over the last decade and by 2006, the country's share in Canada's total imports in that category grew to 13.6%. Our imports from China over 1997-2006 also became more intensive in machinery and equipment. The share of the commodity group in Canada's total imports from China advanced from 23.6% in 1997 to 40.5% in 2006. Dominant among these commodities are computers and computer parts, auto parts, cell phones and parts, TV, audio and video equipment, hand tools, and household appliances.
Canada's rising trade deficit with China
The growth in Canada's imports from China during the past decade has outpaced the growth in our exports to the country.6 As a result, our trade deficit with China has expanded from $3.9 billion in 1997 to $26.8 billion in 2006. Canada's overall trade surplus was $43.6 billion in 2006.
- See About the data.
- China has remained Canada's second largest trading partner since 2003 followed by Japan and the U.K. in the third and the fourth places, respectively.
- According to the latest data, China's GDP reached $2.6 trillion (US Dollars) in 2006. In comparison, Canada's GDP was estimated at $1.3 trillion (US Dollars) in 2006.
- The commodity groups here refer to two digits HS classification.
- Because wheat exports to China show large annual variations, three-year averages have been used.
- In the first eight months of the current year, however, exports to China grew 36% while imports increased 16% over the same period in 2006.
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