Canada’s need to attract foreign capital and China’s desire for strategic investments abroad are playing an elaborate game of cat and mouse.
Business ties between the two are deepening. Canada and China are currently engaged in free-trade talks and Canada proposes to invest $256 million over five years to join the China-led Asian Infrastructure Investment Bank (AIIB). Two years ago, the two countries opened the first North American renminbi trading hub in Toronto.
The Globe and Mail recently reported that as part of China’s free-trade talks with Canada, Beijing seeks “unfettered access for Chinese state-owned firms to all key sectors of the Canadian economy.” But experts say state-owned enterprise (SOE) investment disadvantages Canada from both economic and—coming from China—ethical perspectives.
“When it comes to Chinese investment, the biggest issue is state-owned enterprises,” said Jack Mintz, President’s Fellow of The School of Public Policy at the University of Calgary, in a phone interview.
On March 27, the Liberals reversed a 2015 Harper government ruling that prevented a Chinese takeover of Montreal high-tech firm ITF Technologies due to national security concerns. The newly approved purchase by O-Net Communications gives China an edge in weapons technology.
Foreign investment has historically been a critical component of building Canada, said Bank of Canada Governor Stephen Poloz in a speech at Durham College in Oshawa on March 28. His speech pushed for open economies and noted that foreign investment is needed to fund infrastructure in Canada given the inadequate domestic savings base and relatively small population with its vast geography.
Last fall, the Liberal government created a new federal body, the “Invest in Canada Hub,” to better coordinate efforts to attract foreign capital. The government also raised the threshold for the review of foreign purchases of Canadian companies to $1 billion in 2017—two years sooner than originally planned—and published new rules regarding takeovers with national security concerns.