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CHINA & CANADA A BRIDGE TO A PROSPEROUS FUTURE

Remarks By: The Honourable Sergio Marchi


Special Advisor, Pace Global Advantage The 4th Annual Wealth Management & Private Banking Conference Shanghai, China, November 28-29, 2011

Introduction It is a real pleasure to address this distinguished, fourth annual Wealth Management and Private Banking Conference. Our Pace Global Advantage (PGA) delegation, including CEO, Al Pace, has been in this fast-moving region for the last two weeks. I had the privilege of speaking at the China Overseas Investment Summit in Hong Kong an exciting event marking the tenth anniversary of Chinas entry into the World Trade Organization. We also travelled to Beijing and Chongqing as part of the Canada-China Business Council Trade Mission, and held a series of other business meetings to solidify PGAs plans to establish a presence in the region. This conference in Shanghai culminates our trip in great style. Shanghai is such a cosmopolitan and energetic world class city it has come to epitomize the rise of China and Asia --- with its extraordinary wealth creation capacity across all classes. The speed of Asias economic transformation has been nothing short of impressive, thanks to an increasingly open and reformed marketplace --- a great legacy to the vision and actions of Deng Xiaoping, in the late 1970s. Moreover, Asian governments have encouraged and aided the internationalization of their economic development. By 2030, the Asian Development Bank estimates that Asias middle class will number more than 2 billion people, and as a result, trillions of dollars will have to be invested in physical and social infrastructure, in order to satisfy the needs and demands of this growing affluent community. Boats, in all harbours, are rising. Not all at the same rate, to be sure. But the trend is clear. And now, more than ever before, Chinese and Asian citizens alike are concerned about sustaining this success; about ensuring that their children enjoy a better quality of life. And yes, now more than ever, Chinese and Asian entrepreneurs and investors are increasingly concerned about issues of wealth management and wealth preservation; for themselves and for future family generations. Thus, the value and importance of such a conference as this one can hardly be overstated.

A Fast Growing & Changing Wealth Terrain The depth and breadth of wealth generation in China has been breathtaking. There are now 271 Billionaires in China, and 1 million millionaires. As you know, a Bain and Company report estimated that the number of Chinese high net worth individuals, defined as having a net worth of more than $1.5 M USD is projected to rise to 585,000 this year, nearly twice as many as in 2008. Not only is wealth creation growing, but the behavior of the wealthy is also changing.

When the financial crisis hit in 2008, it prompted Chinas wealthy to reconsider their investment strategies. Many individuals became more risk averse and started, more aggressively, seeking professional advice about asset allocation to preserve family wealth. Chinas HNWIs have become sophisticated investors. It is thus very important to understand their financial priorities, as well as their aspirations for life. According to Bain, Chinese HNWIs demand for both personal and corporate financing have increased more than 40% over 2009, as have demands from wealth management institutions for value-added services---- such as tax planning , healthcare, childrens education ,and the introduction of investment opportunities. Bain also found that 60% of HNWIs said they have considered or completed investment immigration. In this regard, another recent study conducted jointly by the Hurun Research Institute and the Bank of China, shows that 46 percent of their respondents say they are thinking of living permanently in a foreign country. The bottom line from both surveys reveals an extremely high degree of mobility among this class of Chinese, prompted by three leading motivations: i) their childrens education, ii) wealth safety, and iii) retirement plans. One-third of the respondents say they already have investments abroad, mostly in real estate properties, while another 30 percent who have no overseas assets, plan to invest overseas within three years. In fact, foreign investment by Chinese HNWIs grew rapidly over the past two years, with assets more than doubling. Some 50% of this finds a home in Hong Kong. A few years ago, Chinas HNWIs had two major objectives: accumulating wealth and improving the quality of their lives. Those were the drivers. While these continue to be relevant factors today, we at PGA find that the interests of our Chinese clients have diversified greatly. Specifically, they have also become concerned with wealth preservation; family inheritance planning; business and career development; better healthcare; and with diversifying their investment opportunities and portfolios. Through many millennia, the Chinese people, like other nations, have experienced highs and lows. Without a doubt, these last 30 years or so --- while they represent a very, very tiny part of their traveled road --- have been an exceedingly high point.

Canada and China Canadians understand the historical moment that China is living through. After all, the Canadian-Chinese relationship has deep roots. Canada was one of the first Western countries to recognize China diplomatically. Last year, we celebrated the 40th anniversary of our formal ties. The many bonds certainly include the economic dimension.

Canadian companies have finally diversified their trade and investment strategies beyond our traditional dependence on the giant US market, and they indeed have their sights squarely set on China, and the broader Asian community. Quite quickly, China has become our second largest trading partner and in the last five years, Canadas exports to China have been growing at double digits. As the Chinese government and Chinese HNW individuals now pursue an aggressive global strategy, we in Canada and at PGA, invite you to take a good, hard look at Canada. And when you do, you may be surprised at what you find.

What the World already knows about Canada You may be more familiar with some of the attributes that we have been blessed with: an open, tolerant, and multicultural society a democratic nation, built and guided by the rule of law. a stable society, socially and politically. a country that is consistently ranked by the UN as having one of the highest standards of living anywhere on the planet a land of cities and towns that are secure and peaceful. a country proudly known for its publicly funded health insurance system a vast territory and environment that is inspiring in its beauty

Generations of Canadians have built a prosperous country, with sound values.

The Canadian Economic Renaissance But, I would like to say that this is only part of the Canadian story. The more recent chapters are about our own economic renaissance, and these pages may be less well-known. So, allow me to briefly elaborate.

Fiscal Order Rather quietly --- which is often our style --- Canadas economy has become one of the worlds most advanced and dynamic. Its performance regularly outpaces comparable economies, and stands today as the worlds ninth largest, at US$1.57 trillion bigger than that of Russia, India or South Korea. 4

In fact, over the last decade, Canadas economy grew faster than every other G-7 country; a growth founded on prudent fiscal management and financial regulation, a business climate that rewards innovation and entrepreneurship, low corporate taxes, and an open economy that welcomes foreign direct investment. As proof, Canadas economy came through the global economic recession in better shape than all other industrialized countries, and Canada is the only G-7 country to have returned to pre-recession levels in terms of employment and real GDP. The World Economic Forum reported that Canadas banking system is the worlds soundesta fact of vital importance to investors, given the new spotlight on banking safety and stability. Not a single Canadian bank required a bailout during the global financial crisis. In fact, for the second consecutive year, six of North Americas 10 safest banks are Canadian, thanks to best-in-class financial regulations and a strong balance sheet.

Business Environment The business environment in Canada is welcoming and secure. The World Bank has stated that Canada occupies first place in the G-7 and in the OECD, for the lowest number of procedures required to establish a new business. In terms of investor protection regulations, we again rank first in the G-7, according to the International Institute for Management Development. Canadas increasingly attractive business environment has led to our country becoming the worlds seventh-largest recipient of foreign direct investment (FDI) inflows, on a per capita basis. Since 2000, the total stock of FDI in Canada has more than doubled ($562B). When it comes to federal corporate taxes, the trajectory is coming down. The rate was cut to 16.5 percent in January of this year, and will be cut again to 15 percent in 2012, bringing combined provincial and federal corporate income taxes on new business investment to 26 percent, more than 13 percentage points below U.S. rates, and one of the most competitive in the G-7. There are also opportunities to minimize personal taxes utilizing recognizable tax planning methods. In addition, Canada does not have wealth taxes or inheritance taxes.

Creativity & Innovation From next-generation cars to smart phone technology, Canadian innovations touch the lives of millions worldwide. Canada offers some of the most generous R&D tax credits in the world, and accelerated deductions for research expenditures. All companies based in Canada that invest in R&D can benefitirrespective of 5

size, industry sector or technology areaas long as they perform qualified R&D. Eligible expenses include salaries, overhead, capital expenditures, materials and subcontracted research services. Total expenditures on R&D in Canada amounted to $29.2 billion in 2010a 26.3-percent increase over 2001. Furthermore, private-sector personnel working full-time in R&D increased by an impressive 74.1 percent from 1999 to 2008. As well, the cost of R&D in Canada is the second lowest in the G-7, as much as 12.9 percent lower than in the United States. Thats why nine of Canadas top 25 corporate R&D spenders last year were foreign investors. And at the height of the global financial crisis, these companies increased their R&D expenditures by a full 6.5 percent from 2008 levels!

An Educated Workforce Investing in our people is a core Canadian value, and Canadas workforce has the skills and motivation needed to achieve excellence. More than half of all working-age Canadians have a post-secondary educationsecond highest among OECD countries. The quality of Canadas educational system is outstanding. The Global Competitiveness Report 20102011, prepared by the World Economic Forum, ranks Canada : No. 1 in the G-7, in the quality of its education system No. 1 in the G-7, in the quality of management schools No. 1 in the G-7, in the quality of primary education and No. 1 in the G-7 , in the quality of math and science education

Canadas business schools are also climbing the global polls. According to Bloomberg Businessweek, last year, four of the top 10 business schools in the world were Canadian

Living next door to the Giant As you know, Canada has unparalleled proximity to the vast U.S. market and the fastest shipping times from Asia and Europe to the heartland of North America are through Canada. Our world-class transportation infrastructure has been maintained and enhanced during recent years by the infusion of billions of dollars. With the North American Free Trade Agreement (NAFTA) in place, foreign companies have access, through Canada, to a deeply integrated market Canada, the United States and Mexicowith 453 million consumers and a combined GDP of US$17.1 trillion. Canada provides you with an ideal launching pad for this vast community.

Canada and the United States share a deep and mutually beneficial commercial relationship. More than US$1.7 billion in goods and services cross the Canada-U.S. border every day. Its no coincidence that 17 of Canadas 20 largest cities are within a 90-minute drive of the U.S. border. Beyond NAFTA, Canada has also concluded eight additional free trade agreements, and is in the midst of negotiating a good number of others, including a major, comprehensive agreement with the EU.

Sector Rich Canada has a diversity of globally-competitive sectors, which could well address some of the aspirations and ambitions expressed by HNW individuals in this region; We are one of the richest countries in the world in terms of natural resources, providing vast opportunities for investment We have the 3rd largest global oil reserves in the world. We are the 3rd largest natural gas producer and the 6th biggest crude oil producer. Our aerospace industry ranks fifth in the world. We are fully integrated into the North American automotive market with annual sales of about 20 million vehicles and $US260 billion in original equipment parts Our machinery and equipment manufacturing sector recorded sales of $26.8 billion in 2009 and continues to attract international investment We are a global agri-food powerhouse. The KPMG Competitive Report rates Canada first in the G-7 for low food-processing costs The chemical industry in Canada is strong, with nine of the worlds 10 largest chemical companies having located production facilities in Canada Our services sector is modern and dynamic, and represents over two thirds of our GDP

Ladies and Gentlemen, these are the aspects of todays Canada, that we hope you will also see when you consider Canada for your future plans, and for the clients and families that you represent.

A Value-Added Nation We Canadians do not claim that Canada is the indispensible country. After all, all of us have a place we call home; where we were born and raised; where we played as kids and went to school; where we started a profession and a family. Indeed, all of our homes are castles. 7

Yet, ours is truly a world on the move. Countries are moving up. And people are moving about, across all borders, in all corners, and in record numbers. True, people have been on the move since time immemorial. However, since the advent of globalization, never before has this movement been so intense and so broad-based. All told, including the different classes and categories of migrants, there are more than 1 billion people on the march around the globe. Furthermore, the deepening integration of our global community, brings with it heightened pressures for the effective mobility of labor on an international level. We cannot escape the reality --- migration has become a global phenomenon, and this is likely to
characterize our global village for many years to come.

In this context, we at PGA view Canada as a value-added nation. One that offers stability; an attractive location for those who seek to start and grow a new business; or to diversify their foreign investments; or to establish a home away from home; or indeed, for those who seek a new home altogether. As you know, immigrants from around the world --- including millions from this region --- have arrived on our shores and helped to build a dynamic, forward-looking, internationally-minded Canada. Indeed, Canada is home to the second largest population of Chinese in the world, outside Asia, exceeded only by the number of Chinese in the US. In major Canadian cities, it is possible to do your shopping, banking, doctor visits and much more all in Mandarin, Cantonese, or other Chinese languages. And people are still coming. But one characteristic about this ongoing movement that is relatively new is the number of HNW individuals, investors, and entrepreneurs, who are attracted to Canada. They too are arriving on our shores. And that is where PGA comes in. The PGA Bridge Pace Global Advantage (PGA) provides Global Migration Solutions for High Net Worth clients and their families. We work in conjunction with private bankers, wealth managers, family offices, and other advisors, using our three-pillar approach which combines Immigration Services, International Tax Planning, and Business Facilitation Services. We provide options and solutions in one, coherent, seamless package. Naturally, each clients situation is unique. Thus, we will work with you or your client and other advisors, to develop a custom-made investment and residency/citizenship plan that accounts for the individuals global business, tax and immigration needs; First, we develop an understanding of the clients objectives and desired timeline. 8

Second, we identify one or more geographic regions that would provide opportunities that match the clients interests. Third, together with our network of brokers, agents and other associates, we source or create the appropriate business entity to serve as a vehicle for the investment. We have the experience and the bench strength to identify and develop opportunities in many sectors. And finally, we work closely with the client to develop an immigration strategy that takes into account their preferred country of residency for him/herself and their family; any need to maintain non-resident status in a destination country for tax purposes; and the complexity, timelines and cost of alternative strategies.

In Closing In closing, the new China and the new Asia that have clearly emerged is all about building a better future. People in this part of the world often risk everything for a better life; for a better opportunity for their kids; for a future built on hope. In turn, their dedicated labor and energy, the richness of their ideas, and their collective experiences, help to renew and rebuild nations, to propel their societies forward. And thats in part how we measure progress and development. In a similar fashion, the powerful forces of migration have helped to build, sustain, and energize Canada. To be sure, we too have our burdens. However, as I outlined earlier, there is much to like about Canada; I urge you to consider, in some capacity, becoming part of this decent land. This could include ensuring that your clients are aware of the merits of the investment opportunities that Canada offers. Some of your clients may want to work and live in Canada. These individuals can grow their investments and businesses in Canada and in the process, add their efforts to building this youthful nation. Visit, invest, work or live in Canada, and let PGA be your bridge to a more exciting future! Thank you.
The Honourable Sergio Marchi is Special Advisor to Pace Global Advantage, a Canadian company with offices in Toronto and Geneva. Mr. Marchi also heads up the Geneva office. As well, he teaches at Webster University, in the International Relations Department. Mr. Marchi was a former Canadian MP, and served as Minister of Citizenship and Immigration, Environment, and International Trade, as well as Ambassador to the WTO and UN agencies in Geneva. ______________________________________________________________________________________________________

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