Rising tensions

Chinese investment into Canada continues to fall: data

Chinese investment into Canada has continued to decline amid souring relations between the two countries, according to new data.

Total Chinese investment into Canada totalled $3.1 billion in 2019, according to data from the University of Alberta’s China Institute. That figure is well below the previous four-year average of roughly $5 billion per year, and lower still than pre-2015 levels when Chinese investment into Canadian natural resources was running at a record high.

A separate set of recent data, from the Asia-Pacific Foundation of Canada, shows Chinese investment totalling $21 billion between 2016 and 2019, down from $27 billion in the four years between 2012 and 2015.

The steady decline comes amid fraught relations between the federal Liberal Party and the Communist Party of China, which have deteriorated since the arrest of Huawei chief financial executive Meng Wanzhou. Canadian authorities arrested Meng, daughter of Huawei founder Ren Zhengfei, in December 2018 at the request of U.S. officials.

Slumping Chinese investment also comes after several years of lower foreign direct investment (FDI) into Canada overall, clouding efforts by Prime Minister Justin Trudeau to boost foreign investment levels. Trudeau said in a 2016 speech at the World Economic Forum in Davos, Switzerland that attracting higher foreign investment would be a “key priority” for his government.

Gordon Houlden, director of the Alberta-based China Institute, said the drop is likely due to a range of factors, largely a collapse in commodity prices in mid2014 that sent oil markets into a tailspin. China has invested $82 billion into Canada since 2000, more than $51 billion of which was funnelled into oil and gas, according to data from the China Institute.

But Houlden said heightened geopolitical tensions between the countries are also a “significant” factor, which could be nudging stateowned enterprises (SOEs) away from placing bets in Canada.

“If you’re an SOE employee reading state media every day, and there’s harsh criticism of Canada, you may or may not have been told to not go ahead with certain investments,” Houlden said. “You might ask yourself why you would go out on a limb. So there may also be some self-restraint happening there.”

Canada and China have continued to trade barbs since Meng’s arrest, and China has imprisoned two Canadian citizens – Michael Kovrig and Michael Spavor – in what was viewed by many as retaliation. China has also barred imports on some Canadian goods such as pork and canola.

Chinese investors have shied away from Canada after making an ambitious push into the country in 2010 as part of the Communist Party’s “going out” strategy, in which it sought to rapidly build up its international asset base through strategic acquisitions.