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The second largest country in the world in area, Canada is a primarily affluent, high-tech industrial society in the trillion-dollar class, with a market-oriented economy and a pattern of production that resembles that of the United States. Manufacturing, mining, and service sectors have grown substantially in the last 60 years, shifting the country from a rural economy into an industrial and urban one.

Canada has tremendous natural resources, including richness both in variety and in quantity of many minerals and metals, a large skilled labor force, and a modern capital plant. Until 2007, it enjoyed solid economic growth and balanced budgets. With the economic downturn in 2008, business growth and development have been restrained; however, conservative lending practices and strong capitalization maintain Canada's major banks as among the most stable in the world. And Canada ranks towards the top
of the list of countries that are easy to do business with: 8th of 181, according to the World Bank.

Canada’s national GDP in 2008 was an estimated $1.303US trillion, placing it 15th in the world; per capita GDP was $39,200, placing it 22nd.

The primary Canadian industries include transportation equipment, chemicals, processed and unprocessed minerals, food products, wood and paper products, fish products, petroleum, and natural gas. Natural resources make up 12.6% of Canada’s industrial output with energy accounting for 7.0%, minerals 3.4%,
and forest products 2.2%.

Canada is the world’s second largest exporter of natural gas and the world’s fifth largest exporter of oil. Recent developments in technology are also allowing the development of Canada’s extensive oil sands in Northern Alberta. For example, Athabasca Oil Sands Company has recently signed a $2 billion USD deal with PetroChina to develop one of the largest reserves, a move that indicates Canada’s openness to foreign investors. Mining of metals and minerals is also a leading industry in Canada, and the experience and expertise of its explorers and developers are helping to set global standards for accuracy and profitability.

Canada exports motor vehicles and parts, industrial machinery, aircraft, telecommunications equipment; chemicals, plastics, fertilizers; wood pulp, timber, crude petroleum, natural gas, electricity, and aluminum.
Its main export partners are the United States (nearly 80%) followed by the United Kingdom and Japan. Canada enjoys a substantial trade surplus with the U.S., which mainly imports Canadian energy in the forms of oil, gas, uranium, and electric power.

The Toronto Stock Exchange (TSX), established in 1852, is Canada’s largest stock exchange and the world’s eighth largest by market capitalization. In January 2010, there were 34 Chinese companies listed on the TSX Venture Exchange and 16 on the Toronto Stock Exchange with a $7.97 billion market cap.

The TSX is the leader in the mining and oil & gas sector; more mining (1,428—41% of these are gold mining operations) and oil & gas companies (365) are listed on the TSX than any other exchange in the world. In addition, 57%of the world’s public mining companies list on Toronto Stock Exchange and TSX Venture Exchange, and 36.5 billion mining shares were traded on Toronto Stock Exchange and TSX Venture Exchange in the first half of 2009. TSX has more than 200 analysts covering the mining industry.

Canadian banks have fared surprisingly well in the current economic downturn, leading the World Economic Forum to rate the Canadian banking system as “the most sound on the planet” in October 2009 .

Canada has few small banks; its large banks operate in all 10 provinces and are highly diversified with commercial banks and investment banks in one bank financial group; investment banks are anchored by solid, deposit-taking banking operations. What’s more, there is a strong, centralized regulatory framework; bank financial groups in Canada are federally regulated by the Office of the Superintendent of Financial Institutions (OSFI) for prudential purposes and by the Financial Consumer Agency of Canada (FCAC) for market conduct purposes.

Rick Waugh, CEO of Scotiabank, which has offices in 50 countries, attributes the success of Canadian banks to that “good governance,” both in terms of the government’s monetary and fiscal policies and its regulation, which he says has been both “prudent and collaborative.” Canada is a G7 country, he notes, and leads in almost every metric of the G7s. “At our own bank, we’ve got excellent governance as relates to risk management and capital management and liquidity. On the public side, our balance sheet and our income statement in Canada are one of the best in the world. Canada is a young country but with an old and well-developed banking system that has been based on very long-term and conservative principles.”

Gord Nixon, CEO of the Royal Bank of Canada, would agree. In addition, he says that the home mortgage structure in Canada is stronger and more conservative in terms of loan to value, thus helping Canada avert the kind of crisis experienced by the United States. “We’re also more conservative in terms of leverage on our balance sheet and, very importantly, the Canadian economy itself has continued to perform reasonably well. That has made a big difference in helping us pull out of the recession.”

Some Canadian banks are doing very well indeed. As Mr. Nixon notes, “At RBC, we’re in a position to grow our balance sheet, whether through acquisitions or investment at a time when many of our competitors, particularly in Europe and the United States, are having to shrink their balance sheet and withdraw from businesses. Certainly that has given us a strong relative position from a growth perspective.”

Having pulled through the crisis so well, Canadian banks are receiving a warm welcome in China and other areas of Asia. “We have a reputation,” says Mr. Waugh, “for good risk management, good internal control,
a strong system of checks and balances, and transparency. And we bring successful marketing services and products that can be adapted to local needs.” Scotiabank, for example, recently strengthened its position in China by boosting its stake in Xi’an City Bank.

Since 2006, there has been a very positive upswing in relations between Canada and China. And in 2009, Canadian Finance Minister James Flaherty and Prime Minister Stephen Harper traveled to China on two separate diplomatic missions to solidify those improved connections.

In August, Mr. Flaherty attended the Canadian Financial Forum in Beijing; it was his second ministerial trip to China. Included in his remarks was a recommendation that China be given a voice at the International Monetary Fund that was more commensurate with the importance of the burgeoning Chinese economy. Flaherty, who was accompanied by the heads of five major Canadian banks, had a number of very successful meetings with Chinese officials, in particular with Vice Premier Li Keqiang, and both parties related the importance of the China-Canada economic connection. “Canada and China have common interests, such as open trade, and global financial stability," Mr. Flaherty observed, adding that the two countries should work together to provide global leadership in these areas, in forums such as the G20.

Mr. Harper visited China for the first time in early December 2009 for a meeting with Chinese Premier Wen Jiabao. Canada has long been interested in securing the Chinese economy as a customer for oil, natural gas, uranium and other commodities.

In addition to government relations, China and Canada have long-standing business associations. The Canada China Business Council (CCBC) is the oldest bilateral business association that China has, and, says Peter Harder, President of CCBC, Canada will soon celebrate the 40th anniversary of diplomatic relations as Canada was one of earliest of Western countries to welcome relations with modern China. Canadian business leaders with encouragement from the Canadian government have been active in China for most of those
40 years.

Mr. Harder goes on to say, “Now is a great time for the strengthening of formal business relationships, whether it’s the approved destination status , which is very important for the tourism industry, or other economic gestures or agreements. It is in both countries’ interests to pursue these; I believe we are coming to the point where that is inevitable.”

The mining industry in Canada is a growth industry that holds significant promise for investors. In 2008, mining made a $40 billion contribution to the country’s GDP in 2008, including $9 billion in mineral extraction and $31 billion in mineral processing and manufacturing. An estimated 70% of Canadian port volumes and 55% of rail freight revenues are generated by the mining industry. As well, some 3140 suppliers provide expertise to the industry, including hundreds of engineering firms, environmental firms, and legal and financial firms.

Canadian mining companies have many promising international holdings as well; in fact, 50% of properties held by Canadian mining exploration groups are outside of Canada.

Mineral prices in Canada are driven by U.S. demand and, increasingly, by Chinese demand. Gold companies, in particular, are doing well as are uranium, iron ore, and rare earth element developers. Because of the high demand for energy and transportation in China, these hold promise as strong investment possibilities. And while exploration spending is down from 2008, the current Canadian tax structure is very conducive to exploration.

Gordon R. Peeling, President & CEO of the Mining Association of Canada, put it succinctly. “Canada has the geology for everything. There are exciting new discoveries in northern Ontario in what is called the Ring of Fire in base metals, nickel particularly, and possibly chromium. Other areas are showing indications of the rich resources in rare earths and other specialty metals, like tungsten. Canada has lots of potential.” Mr. Peeling also noted the government’s prioritizing of geological mapping, especially in northern Canada. “It’s not well mapped,” he says, and the federal and provincial governments are investing in more mapping to help explorers.”

Now may well be an excellent time for foreign investment into Canadian resource exploration, development, and production. China Investment Corporation seems to think so as it invested $1.7 billion in Teck Resources stock last July. Teck mines and develops copper, metallurgical coal, zinc and energy. In another deal, Wuhan Iron and Steel Corporation agreed to invest $240 million USD in Consolidated Thompson Iron Mines Ltd. These strategic investments show a clear understanding on the part of Chinese financial groups of the very real success that investing in Canadian resource development may hold.

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