China buys into Canada – by Vanessa Lu (Toronto Star – July 20, 2012)

The Toronto Star, has the largest circulation in Canada. The paper has an enormous impact on federal and Ontario politics as well as shaping public opinion.

Just five years ago, China’s foreign direct investment in Canada was too little to report. But since the 2008 financial crisis, the inflows of cash from across the Pacific have soared, especially as a booming China with $3 trillion (U.S.) in reserves, moves to shore up its supply chain access to certain commodities.

Given Canada’s natural resources potential, China has looking here for investment opportunities. Well-publicized deals include China Investment Corp., the sovereign wealth fund, buying a $1.74 billion stake in Teck Resources, or the state-owned China Petroleum Corp, better known as Sinopec Group, buying a 9 per cent chunk of oil sands producer Syncrude for $4.56 billion.

Last year, Sinopec also acquired 100 per cent ownership in Calgary-based Daylight Energy, an oil and gas explorer with operations in Alberta and British Columbia, for $2.2 billion last year.

The deals keep coming, a far cry from 2004, when China Minmetals Corp. initially bid to acquire Noranda, raising considerable political concerns, given that Minmetals is a state-owned Chinese enterprise. The deal eventually fell apart, with Noranda merging instead with Falconbridge.

Bids by foreign companies for Canadian companies can be littered with landmines. Australia’s BHP’s Billiton Ltd.’s $40 billion hostile bid for Potash Corp. of Saskatchewan was blocked in 2010 by the federal government, when Industry Minister Tony Clement said he was not satisfied the takeover would be a net benefit for the country.

That’s probably one reason why China and investors are becoming more sophisticated in their dealings, learning to court Canadian enterprises and First Nations groups, which often control tracts with critical natural resources.

“China’s desire to increase its investment in raw materials and natural resources worldwide will absolutely continue to grow. And they have the money,” said Paul Darby, deputy chief economist at Conference Board of Canada.

The board published a report in June, Fear the Dragon? Chinese Foreign Direct Investment in Canada, that says China’s investment will likely outpace France and Japan by 2015, and possibly leapfrog over the United Kingdom into second place behind the United States by 2020.

It argues Chinese investments in Canada are in the Canadian national interest, and that more specific rules are needed to reduce arbitrary political interference.

It recommends the test be whether “an investment is contrary to the national interest” as opposed to foreign investors having to demonstrate a “net benefit.”

For the rest of this article, please go to the Toronto Star website: http://www.thestar.com/business/article/1229028–china-buys-into-canada