The 4 trillion RMB (US$ 586 billion) stimulus package announced by the Chinese government in November 2008 involves a mammoth expenditure on basic construction and infrastructure projects. The stimulus package is aimed at accelerating infrastructure development even as it soaks up excess employment freed up by downsizing and closing of private factories in the wake of the current international economic crisis. Several sectors have been identified specifically, including transportation (road, rail, and airport construction) as well as energy and irrigation. While the current program places heavy emphasis on expanding employment, it also provides notable opportunities for foreign investment— particularly in sectors such as engineering services, environmental services, transportation and energy. These provide a number of important opportunities for Canadian business, not only in areas of product sales and technology transfer, but also in consultancy and service delivery agreements.
Requests for proposals on infrastructure development projects are already appearing in the local media. A key challenge for Canadian firms will be to gain access to provincial level project announcements. Sustained linkages with officials in local government departments responsible for infrastructure construction (primarily provincial counterparts to the National Development and Reform Commission, Ministry of Construction, Ministry of Transportation, and Ministry of Energy) will be essential. While internet searching is often helpful – Chinese language search engines must be used in order to maximize its potential – close monitoring of local newspapers is also important. Support from Canadian diplomatic posts, the Canada China Business Council and Canadian Chambers of Commerce can be invaluable, but securing basic information on project opportunities also requires an effective on-the-ground presence—either through independent agents or direct employees.
China’s economic stimulus package also contains significant funding for energy development. Alternative energy projects in areas of wind and thermal power generation have received particular attention of late. Chinese wind energy needs are growing sufficiently fast to allow opportunities for new market entrants, creating opportunities for Canadian firms with complementary technologies and experience. As well, pipeline construction and management will continue to play a significant role as China strives to link its western oil producing regions with industrial markets along the coast. The current East-West natural gas pipeline from Xinjiang to Shanghai began operations in 2004 and a second pipeline was begun in 2007. These, together with the oil pipeline linking China with Kazakhstan, seem but the start of construction of a significant network of oil and natural gas pipelines, to which the economic stimulus package will contribute significant funds. Canadian expertise in this sector can be leveraged into significant commercial opportunity. The stimulus package also devotes considerable attention to ecological construction. Service and consultancy services to strengthen the environmental sustainability dimensions of China’s agricultural and forest industries are likely to receive support not only from Chinese government units but also from local firms eager to capture appropriate technologies and experience.
China’s economic stimulus package bears marked similarity to the Western Development Strategy (WDS) enacted in 1999. Indeed, the influence of the National Development and Reform Commission (NDRC) is evident in both programs. Lessons on the opportunities created by the WDS effort can be useful in projecting opportunities under the economic stimulus package. Thus, the WDS’ emphasis on infrastructure investment – particularly transportation (road, rail, air port construction); energy development; and ecological construction find parallels in the current economic stimulus package. Attention to local development is another hallmark of the stimulus package – echoing the provisions of the WDS on coordination of local development in China’s western regions with economic and development conditions and priorities. Finally the WDS’ reliance on technology and education as basic conditions for development are repeated in the stimulus package.
Recent directives from the National Development and Reform Commission suggest that the economic stimulus package may well impose localization requirements akin to the "buy American" requirements in the US economic stimulus package. In fact, however, local procurement is mandated by pre-existing policies and regulations supporting priority for domestic goods and services. China's State Procurement Law (enacted in 2002 with amendments currently underway to ensure compatibility with the WTO Government Procurement Agreement) mandates the government to source goods and services locally unless these are not available or cannot be acquired on reasonable commercial terms; or where otherwise provided for in other laws and administrative regulations. These provisions allow the government to balance the needs of local procurement with the WTO principles of nondiscrimination against international firms.
Thus, the Chinese economic stimulus package provides a number of opportunities for Canadian firms to participate more fully in the China market. While subject to the usual caveats concerning corruption, institutional and governance capacity, and cross-cultural challenges to negotiation and business operations, the economic stimulus package offers significant opportunities at a time of global economic contraction. While the primary purpose of the stimulus package is increasing employment—hence Canadian participants should be attentive to this priority in their submissions—the package also creates opportunities for Canadian supplies of equipment, technology and services.