by Mike Darch, Shenzhen – April 13 and 14, 2010

Ottawa has experienced a series of economic tremors since the mid 90’s. The reduction of our government employment during the years that created a zero deficit for Canada, the technology downturn of this century that permanently altered the global supply chains and the recent global financial crisis that was made worse in our region by the bankruptcy of our major technology anchor, Nortel.

One lesson that is repeatedly taught over time, I guess not enough study history, is that you survive change by embracing it. Fighting a new global economic order will only mean, that when you finally adjust, the transition is more painful. For Ottawa, the swing to low cost production in the technology sector resulted in record job losses for our region. 

On this trip, we visited two companies, Breconridge and Huawei. Breconridge is Ottawa-based and our largest advanced manufacturing company. It has its headquarters in Ottawa, but here in Shenzhen it employs over 500 people in its Chinese operation. In Ottawa, the company does its engineering, new product manufacturing development and its high value manufacturing. In Shenzhen, it does its high volume manufacturing. It remains competitive by moving its manufacturing asset to the most cost efficient global location.

Huawei is Shenzhen-based, with 50,000 employees in the region and 95,000 worldwide. It has 17 R&D facilities around the world, and yet in September of 2008, it began building a R&D capability in the Ottawa area. The official opening of its facility is next week. So why open a facility in Ottawa when you already have 95,000 employees. I can only speculate, but in a single world, talent.

Huawei is a new company, with just over a decade history. The Ottawa region has been building ICT companies for over five decades, with an exceptional track record in innovation, large scale integration, software/hardware integration and market adaptation. As Huawei moves farther up the integration chain, Ottawa represents a major talent pool.

These two companies and their operations in Shenzhen and Ottawa illustrate the direction of sustainable economic development. We are in a world of global supply chains and you have to evaluate your strengths and weaknesses to compete in those supply chains. Breconridge is competing by executing its low end manufacturing in Shenzhen and Huawei is competing by utilizing the telecommunications R&D capability in Ottawa. Both cities and both companies are winners.

These company visits in Shenzhen have also brought home to me the practical side of other global trends. In my former company, Lansdowne Technologies, we did proposals for many large government projects. These often involved teams from many countries (and time zones) and tight deadlines. We often joked about bringing in the cots and throwing the pizza under the door as we worked 16 hour days to meet deadlines.

Our visit to both Breconridge and Huawei put a different meaning to bringing in the cots and tossing the pizza under the door. A global reality is that cities are now our economic driver and will be into the future. The jobs are there and the cities will only get larger.

I see China as a practical country. If the jobs are in the city, that is where people will go to find them. We had a free ranging discussion with Alec Hart the General Manager of Breconridge’s Asia operation. We received a briefing on the facility in Shenzhen, its manufacturing capability, its integration into Breconridge’s operations, its types of clients, the usual. Then we noticed on the site plan that there were two dormitories, several canteens and some sport fields. I recall in my first trip to China in 1995 that the factory we visited had a farm out back which produced the vegetables for the lunch that the company provided all employees.

Things do change. Shenzhen was a fishing village of 30,000 people 30 years ago. Today, it is a modern, even by Western standards, city of over 15 million. Alec tells us that the average age of his employees is 28 and few were either born or live in Shenzhen. The jobs are in the city, but the families are back home. Most employees live on the factory grounds, sending the bulk of their wages home to the family. Wages are relatively standard, so competition for labour is more based on the housing and living conditions provided. I was surprised to learn that Breconridge serves four meals a day. A major recruiting tool is your employees telling their friends that you have great living quarters!

I keep seeing China as a practical country. You could debate the direction of change, but it is happening so fast that any conclusions would be far surpassed by reality.

It is fortunate to be travelling with our Mayor Larry O’Brien because the cities that we are visiting put the entire management of the City in perspective before dealing with the question of sustainable economic development, my specific interest area.

Urban planning in Chongqing must not only deal with the challenge of population, it must also accept the geographic realities of a mountainous terrain and two major river systems. We are also not talking of a new city but a city first settled over 3,000 years ago. The development of a nice symmetric grid system with a gently sloping underground infrastructure is definitely not an option.

Chongqing refers to itself as a phoenix. Its geographic area does resemble the mythical bird rising into the air and the City is in the midst of a major renewal as it becomes China’s western gateway. It has developed a planning strategy of a circle with two wings. The circle represents the reconstruction of the urban core and the two wings, the development of the new regions that stretch northeast and southeast.

The redevelopment of the core is not being done as one massive project, but as a series of smaller districts, each with its own designation for concentration. For example, in the west is a large area that will house over a dozen universities.

Several of the rookies on this trip had a negative impression as we drove in from the airport to our hotel in the city’s downtown. We passed through older areas of the city, many in various stages of reconstruction. The fog and drizzle did not help.

Grey fog and mist in Chongqing

Vision for the future ....

Then came our trip to and briefing on the New North Zone. This area was farmland a few short few years ago. The region could be planned from scratch and did not face the challenges of the river gorges in the city centre.

The rookies went from wondering why we had chosen Chongqing as an area of focus, to “are we in China or in Silicon Valley?” The streetscapes, the buildings, the landscaping and even the BMW’s and Audi’s all could have been in Palo Alto. OK, the Chinese characters on the buildings and the distinct lack of sun did let you know this was China, but our Starbucks addicts never had a problem!

I have commented in the past on the Chinese commitment to the low carbon environment, and it was clearly seen in two of our meetings. Some of our delegation had visited the China Energy Conservation Investment Corporation (CECIC) in Beijing and we visited their office in Chongqing. The City is a major industrial location and does face significant challenges as it struggles to meet China’s new low carbon goals. Chongqing has been chosen by the Chinese government as the pilot large city to identify the major obstacles to meeting the low carbon targets. A major question that they are trying to address is how to identify technology solutions and link them to the market needs. CECIC is developing a platform that links market need, technology and funding. This is exactly the type of vehicle that will allow our emerging companies like Plasco, Clearford and Thermal Energy to better partner in China.

Mayor of Ottawa, Larry O'Brien makes ceremonial presentation in Chongqing

Our meeting with Chongqing Energy Investment Group also proved to be fruitful. They are one of the largest power suppliers in the region with over 2.3 million households on their grid. If you look at their challenge, they are in a market in which demand is growing both from increasing population and the movement to a new level of economic importance, and yet new standards of carbon footprint must be met. They are experimenting with a variety of clean energy alternatives, including options for energy reduction. We in Ottawa are looking at many of the same challenges, albeit at a different scale, so once again there is the enormous potential for partnership in finding and implementing solutions.

As we progress through China, it is becoming increasingly evident that we are in a global economy, with nobody having all the problems and nobody having all the solutions. Partnership and cooperation are the keys to building sustainable economies.

April 11, 2010 – Beijing

It is early Sunday morning in Beijing, early Saturday evening back home in Ottawa, and I am having one of those goose bump moments that are rare in the world of economic development. In my business, it is seldom that you are able to see immediate cause and effect to your actions. Our job is to develop strategies and tactics that often take years to pay off and particularly in today’s world of global supply chains and global competitiveness. But as I sit here this Sunday morning, watching Phil Mickelson make his charge for the lead in the third round of the 2010 Masters (remember the 12 hour time difference), I am feeling that years of hard work are paying off.

In September of 2006, OCRI launched its China program with a trip to Shenzhen, Xiamen, Shanghai and Beijing. OCRI had focussed programs in the United States and Europe. It was increasingly evident that the world was changing and any true global strategy would have to address the increasing influence of the BRIC (Brazil, Russia, India and China) economies. Our analysis showed clearly that China was likely to be our strategic third option (after our domestic and the US markets) but that Ottawa was like a grain of sand on the beach of China’s economic awakening.

How do you start? We had been warned that it would be a long journey. We were looking at a country with well over a billion people. It was half way around the world and 12 time zones away. Few of our companies had been successful there. Many of our companies looked at the challenges of culture and IP enforcement and said that it wasn’t worth the battle. This wasn’t the United States - an excellent product with a solid value proposition would not get you in the game. This was a land of relationships.

And the journey did prove long, we are now 3 ½ years later and I am making my eighth visit. Relationship building takes commitment and time. It is the first visit for our new CEO Claude Haw. The staff that we dealt with at the Canadian Embassy in Beijing have completely turned over. One of our earliest friends at the Z-Park in Beijing, Dr. Xia, retired this winter and it is our first meeting with his replacement Zhou Yunfan.  Three years ago, Mayor Larry O’Brien, accompanying us on this trip, was still a businessman in a seemingly impossible campaign for Mayor. China was a place on the map, for the companies with us, not yet considered a strategic market. Accredited Destination Status looked like a distant dream putting our tourism sector at a distinct disadvantage. My China Project Manager, Sophie Chen was just getting married, never mind preparing to return after maternity leave. Joan Sun, doing a tremendous job of replacing Sophie during her maternity leave, was still busy raising her daughter with only vague ideas of setting up her Canada China consulting company.

So why the goose bumps this morning? Our early research proved that we needed a competitive advantage and an entry point. Consequently, our emphasis on ICT and Ottawa’s emerging cleantech sector. Ottawa had a Sister City agreement signed in 1999 with Beijing making Beijing our obvious city of concentration.

What has been achieved in the last three days? Our Mayors have recommitted to the agreement signed in 1999, moving our cities to a new level of cooperation. Our Mayor met with members of the team of artisans that will travel to Ottawa next week to begin construction of the Chinese Arch that will be placed at the entrance to Ottawa’s Chinatown. It has been presented to Ottawa and Canada by Beijing and China to celebrate the 40^th anniversary of the modern Canada China diplomatic relationship. Our tourism organization signed an agreement with their sister organization here linking the UNESCO World Heritage sites of the Great Wall and the Rideau Canal. OCRI signed an MOU with the Beijing Investment and Promotion Bureau to increase cooperation in investment between the two cities.

Our Mayor loves to show off Ottawa, a global example of a sustainable city. My count is that we have commitments of at least five organizations from Beijing to visit Ottawa this year to continue our discussions on building green cities, cross investment between our companies and encouraging science and technology cooperation. Not that I needed more work, but in a virtual world, it is still person to person contact that cements a relationship and moves it forward.

Mayor O’Brien is also a successful technology entrepreneur and that agenda was moved forward. Two of our cleantech companies significantly moved their Beijing agendas forward, Plasco and Clearford. Wesley Clover, a company owned by Ottawa’s most successful ICT entrepreneur, Terry Matthews, used the opportunity to build its network in Beijing and move forward its investment plans in China. Ottawa companies are being successful in China.

As a bonus, I received an invitation to the official opening of Huawei’s Ottawa R&D Centre on the same day that Huawei was presenting to a seminar in Beijing on the advantages of doing R&D in Ottawa and Canada. Chinese companies are discovering Ottawa.

I had a premonition that this trip would bring it all together for our China strategy when I was able to upgrade to Business Class on my entire Air Canada flight from Ottawa to Beijing, a rare event as any frequent flier knows. But I never dreamed that I would see a three and a half year journey, involving so many people, working against incredible odds, come together to produce the results of the last few days. It is a great feeling, even if I am half way around the world from home. Now Claude and Mayor O’Brien will probably expect an encore!

By Mayor Larry O’Brien

On April 6th, I embarked on a 10-day economic development mission to the Chinese cities of Beijing, Chongqing, Shenzhen and Hong Kong. The mission, coordinated by OCRI, aims to strengthen existing relationships between our cities and to further establish Ottawa as one of China’s strategic partners.

Friday evening marked the conclusion of our delegation’s visit to the City of Beijing. We spent two short but jam-packed days in back-to-back meetings with government officials and professionals from a number of hi tech industries.

As Mayor of the City of Ottawa, my first and most important responsibility is to ensure the safety and security of the City’s residents, which means ensuring access to clean drinking water, waste management, fire and police services. But I also recognize the role of the City in ensuring the prosperity of our citizens, which means creating the kind of environment in which our citizens and companies can prosper. With that focus in mind, I am pleased to report that our mission to Beijing to promote investment and partnership opportunities was extremely successful.

On Thursday of last week I announced that Beijing Mayor Guo Jinlong and I had signed a Memorandum of Understanding re-committing to the principles of our original 1999 sister-city agreement.  That was just the beginning of a waterfall of successes stemming from this mission.  OCRI has now signed a new agreement with the Beijing Investment Promotion Bureau, and the Ottawa companies who are participating in this mission have had a number of successful meetings with potential customers, investors and partners. I was very pleased to see Tourism Ottawa sign a collaboration agreement with Badaling Special Zone Administration, the managers of the Great Wall of China.

The goal of our visit to Beijing was to promote partnerships in the areas of Information Communication Technology (ICT) and Cleantech. For that reason, we were delighted to hear about Beijing’s commitment to building a world-class environmentally sustainable city when we visited the Beijing Urban Planning Exhibition. We met with the Beijing Energy-Saving and Environmental Protection Center where we were introduced to their impressive plans and programs for meeting the goals of the city.  During that meeting, we received confirmation that a delegation from Beijing will be traveling to Ottawa to meet with a broad range of our Cleantech companies.  This is important given the ongoing negotiations between the City of Beijing and Plasco regarding the  implementation of a waste-to-electricity facility in Beijing based on the leading-edge solution which has been developed and demonstrated in Ottawa.

Our delegation also had the privilege of attending and participating in the ICT and Cleantech Cross-Investment Seminar at Z-Park which included presentations by Canadian investment groups like Wesley Clover and Cleantech Capital. It was there that we learned of Huawei’s plans to significantly increase the number of people in their Ottawa R&D centre.

While the focus of our mission is clearly business development, it was a pleasure last evening to be hosted by Mayor Guo at a banquet where we were able to talk frankly about the role of Mayors in our two cultures and the tremendous opportunities of our bilateral relationship. As we begin to emerge from the global economic recession and move forward in a new economy, China has emerged as the key global market- 1.3 billion people, an impressive education system and strong economic growth.  Business partnerships with China will continue to become a more integral part of our economic progress both here in Ottawa and across the country.

My hope is that this mission will continue to provide opportunities to strengthen relationships, and that by working together we can further grow the prosperity of the people of both Ottawa and Beijing.

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OTTAWA, ON, Saturday April 10, 2010 – OCRI has signed a cooperation agreement with the Beijing Investment Promotion Bureau two days into a 10 day trade mission to China. This memorandum of understanding was signed with the privilege of being witnessed by the Mayor of Beijing Guo Jin Long and Mayor of Ottawa Larry O’Brien.

The agreement outlines the intent of both parties to work together to promote economic exchange and cooperation between Ottawa and Beijing.

“By signing this agreement, we confirm our intention to develop long term and beneficial working relationships with the city of Beijing,” says Claude Haw, President and CEO, OCRI. “We look forward to working with the Beijing Investment Promotion Bureau to promote trade, investment and cooperation between our great cities.”

On April 6, Ottawa Mayor Larry O’Brien, along with nine local companies and representatives from Ottawa Tourism and OCRI, embarked on the trade mission to encourage cooperation between Ottawa and China in a number of sectors including ICT and clean technologies, and to encourage increased Chinese investment in Ottawa-based companies. The mission, coordinated by OCRI, the city’s lead economic development agency, will strengthen existing relationships and further establish Ottawa as a valuable strategic partner.

On the same day, Ottawa Mayor Larry O’Brien signed a Memorandum of Understanding with the Mayor of Beijing marking the start of a very successful mission. 

Monday, the delegation will travel to Chongqing to meet with senior municipal officials, trade commissioners and companies followed by two days of meetings in Shenzhen. The mission wraps up in Hong Kong on April 16th.

For regular updates on the Mission to China please visit http://ocriblogs.com/ .

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About OCRI:

Leading the way for Ottawa, OCRI is the city’s economic development agency. OCRI is the rallying point to bring business, education, research and talent together to create the winning economic conditions that allow Ottawa’s knowledge-based companies to thrive locally and compete globally. At OCRI we promote sustainable economic development to maintain our high quality of life. For more information on OCRI visit our website at www.ocri.ca and for more information on the Ottawa Region please visit www.ottawaregion.com. In 2010, Ottawa was named one of the world’s top seven intelligent communities by the Intelligent Community Forum (ICF).

For information contact:

Kim Cunningham
Manager, External Communications
OCRI
Office: (613) 828-6274 ext. 256
Cell: (613) 851-0768
kcunningham@ocri.ca

Day 2: Wednesday, April 7th – Beijing

Nihao from Beijing (and that covers the full range of my Mandarin vocabulary). Air Canada treated us very well over the 20 hours between arriving at the Ottawa airport, transiting through Vancouver and finally landing in Beijing. Leaving early morning from Ottawa was easy enough and the planes for both legs were not completely full. Travelling in economy was quite comfortable when the seat beside was available to spread out papers and such.

It seemed strange to leave Ottawa in sunny early morning, travel almost around the clock in sunlight to arrive in Beijing mid-afternoon of the next day. We were well received in China with the coordinator from the Beijing Foreign Office  coming to the airport to meet us. After traveling nearly 12,000 km, this was a wonderful personal touch.

First impressions of Beijing from a sleep-deprived state of mind was …. well a fog actually, not the crystal clear air of the Rockies at least. The route from the airport downtown was very much that of a modern city with many tall buildings, both commercial office towers and residential, a few older apartment buildings and much more English writing on buildings than I expected. Mid-afternoon traffic from the airport to our hotel in central Beijing was moderate to heavy but moved well. There were bicycles and motorbikes on the road but not a huge number. The block around the hotel holds dealerships for Ferrari, Lamborghini and Aston Martin, shops for Gucci, etc. and even a Starbucks.

People at the airport, on roads, streets and hotel seem courteous and friendly. The Regent Hotel people were very helpful and fast on check-in. There was whole contingent at the door to welcome the Mayor including the hotel manager. Our home for the next five days and four nights looks to be excellent.

Lucky for us the itinerary for our first short day was to get settled in our hotel, get a briefing from the Vice Counsel from the Canadian Embassy in Beijing followed by a light dinner and then off to bed to attempt to synchronize our body clock with the local time. Asking my body to stay awake for more than 24 hours was so much easier a couple of decades ago – oh to be 30 again!

More to come after a very full day tomorrow….