If Canada is going to tap into the billions of dollars worth of Chinese investment opportunities, it needs to come up with a long-term plan, according to a new report from the Canadian International Council, a non-partisan research group in Toronto.
With China’s economy booming at a rate of more than nine per cent annually, its demand for energy has also grown, but so far the nation has been looking elsewhere to get its fix.
The research council’s report found that only about one per cent of Chinese foreign direct investment went to Canada in 2009.
“Given Canada’s size as a country, our very rich endowment of natural resources and minerals, this investment is extremely small,” said Wenran Jiang, the report’s author and a political science professor at the University of Alberta.
China’s biggest investments in Canada’s energy sector included PetroChina’s $1.9-billion stake in Athabasca Oil Sands Corp.’s oil sands project and CIC’s $1.7-billion equity investment in Teck Resources.
Jiang said these figures are “extremely underwhelming” and contradict “any discourse about China taking over Canadian companies.”
Nor do the investments come anywhere close to the tens of billions China put into countries like Australia, Kazakhstan and Iran.
Despite this, the potential for investment in Canada’s energy sector is huge, he said, adding it goes beyond traditional oil to renewable energy and technical knowledge.
“There is a lot of management know-how here that the Chinese would love to learn…we have expertise they don’t,” Jiang said.
The report cited several barriers to Chinese investment in Canada’s energy sector, including higher labor costs, expensive oil sands extraction, and a lengthy, complicated regulatory process.
Jiang also said the government needs to do more to help Canadian companies trying to break into China’s market.
“We have high-tech companies with production bases in China that are frustrated with the lack of government support in carving out and promoting Canadian technologies in these emerging markets,” he said.
These are just some of the issues Canada will need to address if it plans to do serious business with China.
Canada could soon use the new partner, Jiang said, pointing to the economic downturn, protectionist measures and anti-oil sands campaigns in the US.
“If we’re going to look to China as an alternative market, we need to ask what will help facilitate that — whether it’s pipeline and infrastructure issues, more incentives for investments and technologies, or other policy issues,” he said.