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Hong Kong Hustle Is Heating Up Canada


International Business

HONG KONG HUSTLE IS HEATING UP CANADA

In 1983, P. K. Lui was a shining example of the entrepreneurial energy that's legendary in the British colony of Hong Kong. His five-year-old business making battery chargers for Panasonic Co. and components for IBM PCs was booming. Then came the news that Hong Kong would be ruled by Beijing after 1997. Worried about Hong Kong's future under communist rule, the mainland-born Lui made the toughest decision of his life: to emigrate with his wife and young children.

It didn't take long for Lui to reemerge in his new home, Toronto. By 1985, he had founded STD Computer Inc.--with one employee. Today, it is a thriving assembler of low-cost IBM-compatible PCs with about 150 workers and plants in 6 of Canada's 10 provinces. Lui obtains components from Hong Kong and Taiwan and sells to hundreds of computer retailers. In the past two years, sales have doubled, to $35 million. Now, the tireless Lui, 41, who drives a Cadillac painted red for good luck, is expanding his product line.

BRAIN DRAIN. Such stories are becoming common in Canada. Thanks to the industrialized world's most open policies for business immigrants, Canada has become the No. 1 destination for entrepreneurs and professionals fleeing Hong Kong. In one of history's great drains of talent, the country has welcomed more than 110,000 immigrants from Hong Kong since 1984, or about 2% of the British colony's entire population. A record 29,000 arrived in 1990, and as many are expected this year. Immigration experts say as many as 200,000 more might arrive by 1997.

It's already clear that the Hong Kong Chinese are having a profound impact on Canada's business climate. Just as Canada faces free trade with the U. S. and Mexico, the Hong Kong immigrants are bringing what Canada needs most to compete: entrepreneurial energy, experience in a tough market, and ties to huge amounts of capital and trading power in Asia. The growing class of Hong Kong owners is helping to stimulate Canada's manufacturing base--with success stories from electronics to apparel--and aiding a shift beyond the traditional focus on natural resources. The newcomers also are pushing Canada's trade toward the Pacific, which now exceeds its trade across the Atlantic.

Some economists believe the inflow of billions of dollars from the Hong Kong Chinese has even given a boost to the Canadian dollar and softened the impact of a nasty recession. In all, $2 billion to $4 billion a year of Hong Kong money is flowing into Canada, estimates the Canadian Imperial Bank of Commerce. That has helped push the Canadian dollar to 88~, up from only 72~ in 1986.

The new blood is also reinvigorating Canada's business elite, made up of a few powerful families and a small group of white male power brokers. As the new Chinese assume a higher profile, some of their international focus and high-energy work ethic is bound to rub off. It worked in the 1950s when Canada opened its doors to waves of Europeans and others who helped spark record growth. Forty years later, it's crucial for Canada once more. "To compete in the next century, we need a much more entrepreneurial economy," says Michael Goldberg, dean of commerce at the University of British Columbia.

EASING TENSIONS. The sudden influx of Hong Kong emigres is causing friction. They got a hostile welcome in Vancouver, where the sudden influx in the late 1980s "created lots of fears and concerns" in the homogeneous, British-flavored city, says Mayor Gordon M. Campbell. Some Vancouverites blamed the Chinese for skyrocketing real estate prices and complained bitterly about the newcomers' "monster homes" and teenagers driving BMWs to school.

But tensions have cooled in recent months. Campbell held public meetings to help "people realize that our economy is now more resilient" because of immigration. In a blindingly short time, Canada's trade with Asia started to grow faster than trade with the U. S., its biggest partner. Nowhere is the shift more evident than in Vancouver, where a huge Asian influx has created an economic vitality "that's like California after World War II," says Jon Markoulis, vice-president of land developer Concord Pacific Developments Ltd. In fact, British Columbia has virtually escaped the recession hammering central Canada because of the new Asian links.

Many of the newcomers are exceptionally affluent. Those entering under Canada's special immigration program for investors bring in more than $1.5 million apiece, far above the required minimum of $220,000. So it hasn't taken long for them to emerge as key players. In Vancouver, Victor Li, a Canadian citizen and eldest son of billionaire tycoon Li Ka-shing, will this fall break ground on a $2 billion development at the site of the `86 Expo. Recognizing the new Chinese clout, Prime Minister Brian Mulroney in 1988 named David C. Lam, a Vancouver real estate millionaire, to the No. 2 spot in British Columbia's government.

In Toronto, James Ting, founder and chief executive of International Semi-Tech Micro-electronics Inc., has emerged as one of Canada's most globally ambitious executives. He bought SSMC Inc., maker of Singer sewing machines and other consumer products in 1989. Now he is rejuvenating the company, which he renamed Singer Co. and listed on the New York Stock Exchange in August.

Meanwhile, Hongkong Bank of Canada has vaulted past Citibank Canada to become by far the largest foreign-owned bank in Canada, with assets of almost $10 billion. It is the most profitable among Hongkong & Shanghai Banking Corp.'s foreign holdings. That success has Canada's top banks waging a cutthroat battle to win over Chinese customers. While they make up only about 3% of the population, Chinese residents account for 10% of all households with more than $200,000 in assets.

The Chinese are investing in Canada's brightest jewels. Hong Kong companies controlled by Li Ka-shing and his son Victor own 52% of Husky Oil Ltd. and close to 10% of Canadian Imperial Bank of Commerce, Canada's second-largest bank.

Economics aside, the deep roots that Chinese culture has put down in Canada are an important draw. There are 700,000 Chinese-origin residents in Canada. Most are clustered in Vancouver, which is almost 20% Chinese, and Toronto, which has five Chinatowns and is emerging as the leading Chinese community in North America. Prime Minister Mulroney likes saying that "it is a rare town that has no families of Chinese origin" across the vast country.

For all the big bucks from Hong Kong, it's the wave of eager entrepreneurs that may give Canada its biggest boost. Because they tend to start from scratch, most are still unknown. But the eventual contribution--the innovation, risk-taking, and productivity--could be enormous. For one thing, Hong Kong entrepreneurs think nothing of working seven days a week. Benny Tam launched Darius Technology Ltd., a PC assembler with 1990 sales of about $30 million, during his "spare" time from his comptroller's post at another company.

In fact, many Chinese are shocked by the Canadian work ethic. Raymond Cheng, a partner in Pax Manufacturing Co., a Toronto toymaker, says "the mentality is that `at 5 p.m., I'm gone.' " Cheng is beginning to impose more discipline, and now some supervisors work until 9 p.m. Sales have quintupled to some $9 million since Cheng's arrival at the company in 1984.

DIASPORA. Overall, Canada seems to be the nation winning the most from Hong Kong's diaspora. Britain has kept tight controls on the number of Hong Kong Chinese headed there, and the U. S. has only recently revised its immigration laws to favor skilled, affluent immigrants. Australia, another nation of choice for Hong Kong Chinese, closed its door to the business-immigrant program just last August. Many Australians became alarmed by what they called speculative investments and criminal activity by recent immigrants.

That hasn't been a problem in Canada yet. So if Canada can manage the frictions caused by the influx of hard-charging entrepreneurs, it could become a nimbler, more prosperous economy, better armed for the new North American market. And if China isn't careful when it takes over Hong Kong, Canada has plenty of real estate left for sale.William C. Symonds in Toronto, with Dori Jones Yang in Vancouver and Larry Zuckerman in Hong Kong


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