I. Chinese Investment in Canada Continues to Grow.
Canada has been one of China’s favourite global destinations for investment in recent years. China’s Ministry of Commerce statistics shows that China’s non-financial outbound direct investment (ODI) rose 14.7 per cent year-on-year to a historic high of US$118.02 billion in 2015. This was the 13th year of consecutive growth for China’s ODI, which averages 33.6 percent over the last 13 years. As of year-end 2015, the stock of China’s ODI exceeded one trillion US dollars for the first time. Canada ranks 12th among China’s ODI outflow destinations.
According to Statistics Canada, the stock of China’s direct investment in Canada was valued at CAN$25.08 billion at the end of 2014, up 22.8 per cent year-on-year, accounting for 3.42 per cent of Canada’s total inbound foreign direct investment (FDI). China is now Canada’s sixth largest source of FDI. The stock of Canada’s FDI in China was CAN$6.794 billion at the end of 2014, rising 16.4 per cent year-on-year and accounting for 0.82 per cent of Canada’s total outbound FDI.
According to preliminary statistics of the Chinese Embassy in Canada, as of year-end 2015, over 200 Chinese companies have invested in Canada. The stock of their investment was valued at over US$60 billion. In 2015 alone, 22 Chinese-invested companies were set up and started operation in Canada, with an investment flow of US$4.495 billion.
II.Investment in Canada is Diversifying.
Although Chinese investment has focused on the energy and mining industries, there has been a growing trend towards investment in other sectors in recent years. This is particularly true in the last two years when more and more Chinese investors have opted for sectors other than energy and mining.
Among the 22 Chinese-invested companies that were set up in Canada in 2015, only two chose to invest in the energy and mining sectors and their investment accounted for only 2 per cent of the 22’s. Seven of them invested in real estate or related sectors while the remaining 13 channelled their capital to other sectors ranging from wholesale and retail, science research, technology service to commercial service, agriculture and hotel industry. Chinese investment could be found in almost all Canadian provinces and territories except Prince Edward Island, New Brunswick and Nunavut.
Impacted by the global economic cycle, some Chinese-invested companies in Canada, especially those in the energy and mining sectors, are finding themselves in a difficult situation. That being said, Chinese investors remain confident about investment prospects in Canada. Their confidence is built on Canada’s sound investment environment and the two countries’ high economic complementarities.
III. Investment Promotion and Protection Agreement and Other Bilateral Agreements Facilitates Mutual Investment.
In September 2012, China and Canada signed a Foreign Investment Promotion and Protection Agreement (FIPA), which entered into force as of 1 October 2014. The FIPA has boosted two-way investment significantly.
On 2 April 2015, China and Canada signed an Agreement on Social Security. The agreement provides for continuity of social security coverage for employees sent by their Chinese or Canadian employers to work temporarily in the receiving country. The agreement eliminates situations in which such individuals and their Chinese or Canadian employers will have to contribute to both China’s pension programme and the Canada Pension Plan for the same work.
In February 2016, a Foreign Investment Promotion and Protection Agreement (FIPA) between China’s Hong Kong Special Administrative Region and Canada was signed in Toronto.
The conclusion and implementation of these agreements provide additional legal and institutional assurances to investors of both countries and will strengthen their confidence. The agreements can help Chinese and Canadian investors more easily access each other’s investment market and will have a positive and far-reaching impact on the growth of China-Canada trade and economic relations. A Free Trade Agreement (FTA) between China and Canada, once concluded, is sure to give even stronger impetus to two-way trade, investment and cooperation between the two countries.