By Nelson Bennett
Eight per cent of Chinese companies surveyed recently indicate they plan to invest in Canada over the next three years.
While 8% may not sound like a lot, Kenny Zhang, senior research analyst for the Asia Pacific Foundation of Canada, said the number needs to be considered in the context of China’s total outward investment – estimated at US$50 billion in 2010.
“If we say 8% would go to Canada, that’s $4 billion,” Zhang said.
The study China Goes Global 2010 was conducted by the Asia Pacific Foundation and the China Council for the Promotion of International Trade. It made two important findings:
- private and publicly traded companies in China – not just state-owned enterprises – want to invest here; and
- those companies are not just hungry for Canadian natural resources – some are also looking into the manufacturing, retail, hospitality and finance sectors.
Linda Zhu, who leads the China market practice for Ernst & Young, is not surprised by the survey’s results. Her office has been seeing a growing interest in Canada among Chinese companies.
“In the past, most industries that we’ve worked on are related to oil and gas and resources,” Zhu said. “But recently, I have [had] interaction with people who are looking for wind farms, looking for wineries, distribution channels, fish farms.”
One example of this trend is Huawei Technologies Co. Ltd., a Chinese telecom company that recently opened a Canadian headquarters and research lab in Ontario.
Closer to home, China’s Jilin Jien Nickel Industry Co. Ltd. recently formed a joint-venture partnership with Vancouver-based Goldbrook Ventures Inc.
Given the current trend of North American companies outsourcing production to China, one might wonder why Chinese companies would want to set up in Canada, where labour costs are so much higher.
For one thing, Canada is viewed as being receptive to investment from China, according to the study. It’s also rich in natural resources. Moreover, it provides a convenient back door to the U.S. market.
The U.S. is China’s largest trading partner, but trade barriers can make it tough for Chinese companies to sell into the U.S.
“If they can set up something here, then it will reduce the costs that come from the trade barriers,” Zhang said.
However, investing in Canada presents its own barriers. The study identified three main ones:
- a lack of managerial and professional expertise in China;
- problems finding Canadian business partners; and
- a lack of knowledge of legal matters and market risks.
Chinese businessmen and women may find North American accounting practices here unfamiliar, and they are not accustomed to using professional advisers – tax advisers, for example.
To a great extent, it’s up to Chinese businessmen and women themselves to overcome some of these barriers, Zhang said.
To help them with that, Ernst & Young has set up the China Overseas Investment Network. In more than 40 countries, Ernst & Young has teams of specialists who can work with Chinese companies to help facilitate investment overseas.
“We can provide the languages skills and understand the culture in China, and also understand the culture in North America and just be a bridge to help them transition,” Zhu said.
Vancouver’s Koi Communications provides a similar business-bridging service, which the company’s president, Jackie Cheung, likens to “a matchmaker service” for Chinese investors who come courting in Canada. Koi has already helped a number of Chinese investors take their companies public here.
“For example, if they are looking for a gold mine, then we will go out and find it and set them up,” Cheung said.
For the last two years, Koi Communications has organized the International Asian Investment Forum in Richmond to bring Canadian and Chinese businessmen and women together to learn about investment opportunities here.
Last year’s conference drew roughly 1,000 people. More than 50 Canadian companies attended as exhibitors – 22 of which were mining and exploration companies.
But it also featured companies involved in the media, real estate and high-tech sectors.