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Canada’s Asia-Pacific investment shifts to Australia

Inbound investment interest from China continues, despite political tensions
Sydney, Australia. | Steve Heap, Getty Images Plus/iStock Image

While Canada’s inbound-outbound investment in the Asia-Pacific market rebounded significantly in 2021, there were fundamental changes to the nature of that activity, as well as questions of whether the growth is sustainable.

According to the Asia Pacific Foundation of Canada’s 2022 Investment Monitor report, inbound foreign direct investment (FDI) more than doubled last year, rising to $14.4 billion in 2021 from $6.4 billion in 2020. What’s even more surprising to some, however, is that 2021 marked the highest flow of outbound investment from Canada into the Asia-Pacific region since the report began in 2012: a total of $25.5 billion.

For Anastasia Ufimtseva, business Asia program manager at the Asia Pacific Foundation of Canada and an author of the report, the finding validates part of the reason the foundation was so interested in the results in this year’s investment flows.

“There is regular tracking of data, but there is special interest in this report, wanting to figure out whether the post-pandemic changes – especially the economic reopening we’ve seen since 2020 – were in any way changing existing trends, especially given the disruptiveness of COVID-19 between Canada and the Asia-Pacific,” Ufimtseva said. “One of the most surprising facts was 2021 actually marking the highest outbound flow of investment into the Asia-Pacific.”

There are other takeaways, too. For one, China and Hong Kong – which, combined, finished fifth in the 2020 rankings for top Canadian FDI destinations ($1.82 billion) – fell to eighth in the 2021 rankings, with $424 million in Canadian outbound FDI last year. That means that Canadian FDI to the Chinese market in 2021 shrunk to about one-quarter of 2020 levels.

Canadian FDI also fell in India (ranked second at $3.4 billion in 2021), Japan (fourth, $1.4 billion), South Korea (sixth, $690 million) and Singapore ($22 million).

Meanwhile, there was one market that benefited significantly from Canadian FDI last year: Australia. The country saw Canadian FDI balloon in 2021 to $15.3 billion, up from $2.4 billion in 2020.

Markets like Taiwan (third, $2.8 billion), Indonesia (fifth, $794 million) and New Zealand (seventh, $656 million) also saw more Canadian investment over the last year.

“Traditionally, Australia has been a really important Canadian partner over time, [ranking] No. 1 [for outbound FDI] for 2019, 2018 and a few other years,” Ufimtseva said. “And we’ve seen a continuation of the deepening of that strong relationship. We have similarities in terms of things like institutional setups, government structures and legal systems. There are similar business climates, so it’s likely there will be a smooth bilateral relationship that will continue.”

The China picture is more uncertain.

Ufimtseva said that while it is no secret that Ottawa and Beijing have had a difficult geopolitical relationship over the last few years, trade has grown during that time.

The drop in FDI from Canada to China, she said, may be indicative of travel difficulties during the pandemic, since China’s stringent zero-COVID policy has effectively shut down business travel to the Chinese market for many Canadian and other western investors.

Ufimtseva said the uncertainties regarding China’s business and travel regulations will have a big say on whether the outbound FDI lull continues – although interest in inbound FDI into Canada remains. Indeed, that is reflected in the inbound FDI picture for Asia-Pacific investment into Canada in 2021, where China invested $2 billion into the Canadian market. That amount was surpassed only by Indonesia ($3.8 billion) and Australia ($4.8 billion).

“Despite these political tensions, investment ties between Canada and China continue to be an important aspect of their bilateral economic relationship,” the Investment Monitor report stated.

“China is Canada’s top source of inbound FDI from Asia, with inbound investment from China totalling $92.8

billion between 2003 and 2021.”

Those numbers coincide with a separate report – Chinese Company Business Practices and Impacts in Canada – by the University of Alberta’s China Institute and the Canada-China Business Council (CCBC). The report stated that while there are adverse conditions facing Chinese investment in Canada, many business officials maintain that Chinese FDI has played a beneficial role in Canada that should not be overlooked.

“Recently, Chinese investment in Canada has faced heightened scrutiny relating to national security, labour conditions and environmental impacts; however, many argue that the associated benefits in areas such as job creation, product and service diversification and global value chain integration usually outweigh the risks of Chinese investment,” the CCBC report stated.

“Given current challenges in Canada-China bilateral relations and mixed domestic attitudes toward investment from China, it is important to understand Chinese multinational enterprises’ investment motivation and business practices in Canada and to evaluate the wide-ranging impacts of their activities on the Canadian economy, business, society and policy.”

Omar Allam, global trade and investment managing director at Deloitte Canada and a former Canadian diplomat handling trade and investment issues, said there is no doubt that the desire from the international community to invest in Canada remains strong.

Allam said he has dealt with clients in markets that are interested in investing in Canada – meaning that the figures posted in the Asia Pacific Foundation of Canada’s Investment Monitor report could, and should, be a lot higher if Canadian officials had a more concrete and holistic plan to attract investment.

“From the FDI point of view, we are seeing a lot of countries coming in with their muscle in terms of financing,” Allam said. “They are putting money on the table. And I think what’s important … is we need to go a little bit beyond creating a level-playing field [in attracting international investment] and being a bit more strategic in terms of identifying opportunities.”

What that means, Allam emphasized, is the need for Canada to create comprehensive and case-specific plans to go after FDI opportunities that would maximize economic benefit to the Canadian economy. It does not mean having piecemeal, incidental and passive offerings of services and data when someone comes calling, but creating a concrete value proposition for the investment that Canada truly needs.

“When you are coming from a client’s standpoint, you have to understand their criteria for investment,” Allam said.

“You are looking at hundreds of millions – potentially billions – of dollars where investors are saying, ‘We have key pillars in our investment portfolio [that] we want to go into markets with – whether that’s Canada, Brazil, the U.S., Europe, the Asia-Pacific or the Middle East.”

The Asia Pacific Foundation of Canada report can be read at, and the CCBC report can be read at