China in Canada: Only the Beginning

For the National Post, Wenran Jiang, political science professor at the University of Alberta, is writing a three-part series on China’s increasing investment in Canada. In the past two years, China has invested $16 billion in Canada’s energy sector. From the first-part of the series:

Based on my research and the annual Canada-China Energy & Environment Forum I have organized since 2004, eight specific factors explain China’s renewed interests in investing in the Canadian energy sector.

First, the Harper Conservative government changed its hardline policies toward China from early 2009 onward, and repeatedly assured Beijing that Canada welcomes Chinese investment. Such a policy shift is significant since China does not like to do business with politically unfriendly countries, be they democracies or dictatorships. There is a clear, well-documented correlation between Canada’s overall relations with China and the levels of Chinese investment in Canada: Chinese firms did not invest in the Canadian energy sector after the newly elected Conservatives removed China from its foreign-policy priority list. But since late 2009, Chinese money has flowed into Canada with the resumption of Canada-China summit diplomacy and an improved overall political relationship.

Second, the North American stock market has been low since the 2008 economic crisis, presenting buying opportunities for cash-rich Chinese firms and selling pressures for cash-strapped Canadian companies. Take Sinopec’s $2.2-billion purchase of Daylight Energy, the first 100% takeover of a North American energy firm by a Chinese oil company. The offer was $10.08 per share, more than double Daylight’s closing price of $4.59 prior to the announcement. While Daylight shareholders are happy with the generous offer, Sinopec looks for future growth beyond the total it put down. Another case is the nearly bankrupt Opti Canada Ltd., which was bought out by the third-largest Chinese energy company, China National Offshore Oil Corp. Opti was financially bailed out while CNOOC entered a joint-venture arrangement with Nexen Energy to keep the Long Lake project going.

See also, “China in Canada, part 2: Four misconceptions about China.”

January 16, 2012 9:25 PM
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