Asia remains an important source of inbound investment into Canada, despite a decline in total investment volume over the past two years.
Despite recent challenges like potential implications around certain terms of the Canada-United States-Mexico Agreement (CUSMA), real estate related tax changes and high-profile diplomatic matters in progress, inbound investment has continued. For example, the LNG Canada export facility and Coastal GasLink’s pipeline projects (some have estimated to be worth over $40 billion) which includes major Asian companies such as Petronas (Malaysia), PetroChina (China), Mitsubishi (Japan) and Korea Gas Corporation (Korea).
There are also other recent examples of significant, publicly-disclosed deals in the mining sector including:
Zhaojin Mining’s investments in Sabina Gold & Silver worth over $68 million
Nextview New Energy Lion Hong Kong’s deal for Lithium X worth $257 million
Zijin Mining’s acquisition of Nevsun expected to complete for over $1.6 billion.
This isn’t just a story about resources. There’s a significant rising trend of Asian investment in Canadian technology companies, including:
Quantum computing’s 1Qbit raising $45 million in a round led by Fujitsu (Japan)
Hanwha (Korea) and Tencent (China) investing in Element AI’s US$102 million ($137.5 million) round
Singapore’s GIC/SGInnovate/Singapore Management University’s strategic partnership with Element AI
Wattpad closing a $51 million round led by Tencent (China)
Korean Companies, SK Telecom, Hyundai and Hanwha, establishing a US$45 million fund with Element AI
While many of the transactions in the technology sector are private, it’s clear that there’s increasing interest from Asian strategic investors as well as financial investors in all areas of technology where Canadian companies are seen as being innovators or leaders.
Even with tax hurdles and foreign currency restrictions tightening, there is still some Asian investment activity in real estate and hospitality in Canada, including high-profile BC assets like Grouse Mountain, the Bentall complex and Retirement Concepts.
For Canadian companies looking for foreign investment, they should be aware that Canada continues to offer a number of key structural benefits attractive to Asia-Pacific investors, primarily including the following:
highly-educated and skilled workforce
natural resources across a number of key categories
high quality infrastructure (transportation and telecommunication)
access to the highly significant US market
stable business environment
transparent legal system
In addition, Canada is a leader in a number of industries that will be catalysts for Asian inbound deal activity in the years to come, including:
agricultural products such as meat and seafood
food products from staples to value-added high-end branded goods
health and wellness products such as supplements
leadership in certain emerging technology areas, such as quantum computing, artificial intelligence, hydrogen fuel cells and blockchain/cryptocurrency
energy, mining and forest products
life sciences and healthcare technology
Canada also continues to expand on its bilateral investment treaties with five foreign investment promotion and protection agreements (China, Hong Kong, Mongolia, Philippines and Thailand) and a free-trade agreement with investment provisions with Korea. As well, the recently ratified Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) is an multilateral free-trade agreement between Canada and 10 other countries including Australia, Brunei, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore and Vietnam.
The impact from increased tourism into Canada from Asia, increasing numbers of secondary and post-secondary graduates from Canadian schools from Asia and ongoing immigration on Asian inbound investment is not always apparent but these are also factors that are beginning to drive investment.
Despite current geopolitics and some observed decreases in investment activity, Canadian organizations should look at Asian investment with a long-term view. We expect Asian inbound investment into Canada to trend up over the long term and Canadian firms should consider Asia when planning for financing, partnerships on new ventures or divestitures of shares and/or assets.