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Chinese Investment Into Canada Boomed In 2012: BMO

Huge Boom In Chinese Investment Into Canadian Resources

A recent news report brought up the spectre of briefcases full of illicit Chinese cash making its way into Canada's real estate market, but far more money from the booming Asian economy is coming into Canada by way of investment in Canadian resources.

According to an estimate from the Bank of Montreal, foreign direct investment into Canada from China hit an all-time high in 2012, with most of that money going to purchases of natural resource companies and projects.

The much-debated and controversial purchase of Nexen Energy by Chinese state-owned CNOOC accounted for a large portion of the estimated $25 billion that China poured into Canada in 2012, BMO economist Christy Chen told The Huffington Post Canada. The Nexen deal is worth $15.1 billion alone.

But even as Canadians debate whether or not foreign state owned enterprises such as CNOOC should be allowed to purchase Canadian resource companies, investment by non state owned companies also saw an enormous leap in 2012, by around 44 per cent compared to the year before. Chen, who stressed that the 2012 numbers are just an estimate, said the jump was driven by growing Chinese investment into Canadian mining operations.

Many of those individual deals were relatively small, and escaped media attention, such as China Minmetals’ purchase of a 15-per-cent stake in Sama Resources, a Vancouver-based company that mines for copper and nickel in Africa.

Some of those deals have been larger. In August of last year, a consortium of Chinese companies announced a $1-billion plan to develop three mines in British Columbia to produce metallurgical coal, an ingredient of steel.

Chinese companies appear to be turning to Canada in part because of rapidly growing demand for resources at home, but also because some other, more preferred, locations are becoming harder to do business in.

Australia, China’s long-time favourite source for resources, has seen Chinese investment slip since introducing a carbon tax, and another tax on mining. Critics of Australia’s policies have said unpredictability in the country’s legislative regime is scaring away investors.

BMO’s Chen predicts Canada could see a similar kind of cooling from Chinese investors, following Prime Minister Stephen Harper’s announcement last month that he plans to tighten restriction on foreign ownership of Canadian resources.

Chen says she expects Chinese foreign investment into Canada to decline, in dollar value, as a result.

“The focus for 2013 will be more on the private sector,” rather than on the big state-owned companies, she said.

Of course, Canada's not alone in feeling the investment love from China. According to research group Rhodium Group, Chinese investment into the U.S. will see a record high in 2013.

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