A weaker loonie may entice Chinese
As the Canadian dollar continues to weaken, 77 cents to the US dollar as of Wednesday, more investors from China may seize the opportunity to spend in Canada.
Analysts point to several reasons that have led to the fall of the loonie. They include a sustained fall in oil prices and other commodities that Canada exports, interest rate cuts by the Bank of Canada that have resulted in the lowering of Canada’s currency, the rise of the US dollar as the country’s economy recovers, and a slowing Chinese economy.
The Bank of Montreal expects the Canadian dollar to continue its slide to about 75 cents (US) as fall approaches, and it warns the drop is bad news for consumer spending.
Conversely, it may be good news for Chinese investors, new immigrants, tourists and students.
The trade of Canadian dollar to Chinese yuan has dropped from 6.3 to the latest 4.8, depreciating around 23 percent in one year.
“Though it is too early to expect more Chinese companies will establish operations in Canada because of the cheap Canadian dollar, Chinese importers should take the opportunity,” said
Yuan Zhanling, the former economic and commercial counselor for the Chinese embassy in Canada.“It is a good timing for China to import the key commodities from Canada as Chinese currency remains strong, such as wheat, potash, lumber and mineral products.”
In July the Chinese investment firm Beijing Tairui Innovation Capital Management Ltd agreed to invest C$80 million to acquire a strategic 51 percent stake in Canadian potash miner Western Potash Corp.
The property market in Canada is increasing in popularity, gaining an edge from the weakening currencies.
More Chinese investments will go to spend in Canada’s property market, especially in Vancouver and Toronto.
It was reported in July that the property markets in such areas in Canada have seen an unusual boom. The prices of houses and apartments in good locations are soaring.
A real estate agency in West Vancouver said that new Chinese investors are major buyers in the recent hot market.
In the recent report by the Guardian, real estate agents in Australia and Canada were bracing for a surge of new interest in their already hot property markets, with early signs that “wealthy Chinese investors are seeking a safe haven from the turmoil in Shanghai’s stock markets.”
Kevin Chen, a land broker in Vancouver, said in an email interview that some new Chinese immigrants and investors worry the Chinese yuan might depreciate as well, so many of them have decided to buy.
Tourism and recreation is a winner in Canada. Chinese investors and travelers will flock to Canada because of the cheap loonie.
The low Canadian dollar is attracting foreign buyers to wellestablished recreational property markets across the country.
Evergrande, a major Chinese real estate group, has recently purchased the Fairmont Le Château Montebello resort complex in west Quebec.
“I will go ski in the Whistler Mountain in British Columbia in Canada this winter, one of the skiing paradises that I haven’t been yet,” said Jin Xiao, a 31-year-old ski lover in Beijing.
“Because of the cheaper price, I will spend more, for instance, on a better hotel and shopping. It would be feeling like everything is discounted.”