This is not a covert global takeover. It is simply the product of the vast reservoir of latent demand and entrepreneurial energy unleashed by Deng Xiaoping, whose catchphrase was: "It does not matter whether a cat is white or a cat is black as long as it catches mice." Take a large, literate and increasingly urban population offer them the opportunity to improve their own lives through hard work, and the result is a China on the move, a China that is changing the world in which we live.

On the global stage, the impact of China's growth and its sheer size is beginning to be felt. Twenty-six years of almost 10-per-cent annual GDP growth have produced an economy that is more than 10 times the size it was in 1978, the sixth largest economy in the world. It's Japan's the largest trading partner, Europe's second largest and Canada's third. China is now the biggest magnet for global direct investment flows and has the second largest foreign exchange reserves in the world, buying huge volumes of U.S. treasury bonds, which finance America's deficit and fuel its consumer spending.

China is not, however, just the big exporting engine that we infer from all the trinkets, textiles and tools that fill our stores. The primary engine of Chinese growth is domestic demand, fuelled by the emergence of a middle class heading toward 300 million strong and a massive urbanization that will see 200 million more people move to China's cities by 2010.

Underpinning this is a dramatic expansion in the private economy, which has produced some 2.5 million private firms, with hundreds of thousands being added every year. Less than 50 per cent of the economy is now under state control.

Even if current growth rates fall to about 7.5 per cent, as many economists foresee, China will add another $1-trillion in global consumption and demand in the next decade, not only offering opportunities in this large market but also putting further pressure on global supplies (and prices) of oil and nickel and copper and aluminum and steel. China actually ran a trade deficit in 2003.

So how are we doing in all of this? Are we holding our own in China's import markets and are our firms establishing themselves to take advantage of its growth? Regrettably, the answer seems to be "no," at least in relative terms.

Canada's share of Chinese imports has been falling steadily for several years. And this at a time when other commodity exporters, such as Australia and Russia and some Southeast Asian countries, have been increasing the tonnes of minerals and the barrels of

oil and the board feet of lumber that they have been exporting to the Middle Kingdom's expanding markets.

Nor are we holding our own in the export of high technology or manufactured goods. Irrespective of the many success stories some of our leading exporters have had, the aggregate numbers speak for themselves. Even in the export of services we are failing to keep up with both the pace of change and the determination of our American, European and Australian competitors. And this in spite of a China that welcomes Canadians like few others -- a China that, in the words of former premier Zhu Rongji in 1998, views Canada as its "best friend."

What needs to be done to reverse this trend? The answer is not simply to spend more money on advertising Canadian goods, hosting more trade shows or carrying out more Team Canada missions, as valuable as these may be.

The first step is to recognize that what is happening in China is fundamentally changing our world.

Even companies that have no intention of competing in the China market must adapt to the reality that the country's rise is likely changing the dynamics of the markets in which they do compete, including in Canada. Competitors are likely taking advantage of

cheaper components or production costs or may be leveraging China's economies of scale to grow in size and market muscle.

So integration of China into global strategic planning is key for all companies, not just for firms hoping to export to China. Chinese costs will stay low, productivity will increase and the economies of scale will have an impact.

Chinese-made goods, whether by foreign or domestic companies, compete with Canadian-made goods in China, in third countries and at home. And if companies are not trying to understand how China affects their environment as part of global supply chains,

as a market, as a competitor or as some combination of all three, they are marching into the future blind.

Meanwhile, investment into China feeds both exports from the countries making those investments, and repatriated profits to those countries. Siemens, Cisco and General Motors are all stronger companies because of their huge commitments to manufacturing in China. But Canada is almost nowhere to be seen on the investment scene, with only 1 per cent of China's foreign direct investment in recent years coming from here.

Investment is a two-way street. As China's most successful firms begin to globalize, they generate jobs abroad. Haier of Qingdao has a huge factory producing fridges and other appliances in South Carolina. Chinese firms have bought American producers of

lawnmowers, auto parts and textiles. Major Chinese oil companies, nickel conglomerates and steel companies are purchasing oil fields, LNG terminals, mines and even steel mills in the Middle East, Australia, Brazil, Southeast Asia and Africa.

And where are we? In 1995, we were the No. 1 destination for Chinese outward investment. Today we do not rank in the top 10.

There are a few examples of Chinese investments in Canada. Shanghai's Worldbest set up a textile factory in Drummondville, Que., a few years ago. The current interest of China's Minmetals in Noranda is another exception. These investments are part of China coming of age. Its companies are reaching out to secure future market access and access to the resources needed to feed continued consumption and growth.

When I travel to New York or London or Munich, I find everyone is gripped with the question of what the emerging China means to them. In Toronto and Vancouver, I see far less preoccupation. And in a country uniquely blessed with a significant number of citizens with historical and family links to China, this is to me curious.

Howard Balloch, former ambassador to China, is president of the Canada China Business Council.