Investment Blog

New Zealand Coalition Government Aims to Reduce Perceived Chinese Influence in NZ Industry and Real Estate

On December 20, 2017, New Zealand’s Overseas Investment Office (OIO) blocked the takeover a unit of the ANZ bank called UDC Finance, to HNA Group, based in southern China, for a proposed US$462 million. This declined acquisition is part of a larger trend within the New Zealand government to resist perceived Chinese influence and economic power in New Zealand’s industry, real estate, and government sectors. Given the assertive stance against China in the current New Zealand and Australian governments, it seems China’s influence in this region may be in decline.

StatsCan Releases Controversial Report on Foreign-ownership of Canadian Residential Real Estate

On December 19, 2017, Statistics Canada, in partnership with the Canada Mortgage and Housing Corporation, released the first report in a series that will develop a framework to address gaps in in Canadian housing availability and affordability. This first report contradicts the Canadian perception that low availability and inaffordability of residential housing in the Toronto and Vancouver Census Metropolitan Areas (CMAs) is due to high degree of foreign-owned real estate. However, the methodology of the StatsCan report has been called into question, and it is unclear whether this report accurately captures the rates of foreign ownership of residential real estate in Canada.

President Trump’s Reported US$250 Billion Worth of Chinese Deals May Be Exaggerated

Since President Trump’s trip to Asia, much media attention was paid to the announcement of US$250 billion worth of investments and trade deals between America and China. However, this figure is likely inflated, as most of the deals were previously announced and approved, or are merely pending transactions and are therefore not considered new deals negotiated by Trump himself. Despite this, Trump did manage to bring home several deals that will add to the manufacturing job sector of the American Midwest—an important campaign promise in the 2016 American election. Overall, it is clear that Trump is not interested in strengthening trade with other world leaders, but is instead catering to American domestic audiences.

President Trump’s Asia Trip More Show than Substance

From November 3-14, 2017, Donald J. Trump conducted his first trip to Asia as President of the United States. President Trump has indicated that his administration will abandon Obama’s ‘pivot to Asia’ policy, but has not yet articulated an overall Asia strategy. While the aim of the trip was to solidify American presence in East Asia, to achieve specific bilateral trade outcomes, and to strategize with Asian counterparts regarding the North Korean nuclear crisis, it is not clear whether President Trump meaningfully achieved any of these objectives, nor has his administration formulated a long term vision for the region.

CCCC International Holding Ltd.’s bid to Acquire Aecon Group Inc.

In October 2017, Chinese state-owned enterprise CCCC International Holding Ltd. (CCCI) made a CAD $1.5-billion bid to buy Aecon Group Inc., a leading construction, procurement, and engineering firm that built many of “Canada's most famous landmarks – from the CN Tower and St. Lawrence Seaway, to the Vancouver Sky Train and Halifax Shipyards”  (CBC, 2017). Such deal, if realized, would be the single largest Chinese investment in the Transportation and Construction sector in Canada, according to data collected by the China Institute’s investment tracker.

Share of Chinese State-Owned Enterprises investment in Canada is shrinking

According to the China Institute’s China-Canada Investment Tracker database, the relative share of Foreign Direct Investment (FDI) transactions made by Chinese SOE investors in Canada has decreased significantly: prior to 2014, the vast majority of acquisitions made in Canada by Chinese firms were state-owned enterprises (SOEs)—which were particularly active in the Alberta energy sector. However, since 2014, most of the investment in Canadian industries was committed by private ventures: in 2016, 95% of the total Chinese FDI into Canada was from private firms for a total of CA$7.14 billion. Between January-August 2017, 80% of Chinese FDI was contributed by private firms for a total of CA$4.249 billion.

Trump blocks sale of semiconductor firm to China, citing security threat

On September 13, 2017, American President Donald Trump blocked the US$1.3 billion acquisition of Lattice Semiconductor Corp. by Canyon Bridge Capital Partners, private equity firm based in California that is backed by several investors, including China Venture Capital Fund Corporation Limited, a Chinese subsidiary of a state-owned enterprise. Lattice produces microchips, and in the past, has provided the American military with field-programmable gate arrays, which are microchips that individuals may reprogram with their own software. Because the sale was backed, in part, by funds from the Chinese Central government, President Trump obstructed the acquisition on the grounds that the sale represented a national security breach. Lattice claims the company no longer supplies chips to the American military.

Pew Research Centre data suggests China has made significant soft power gains, particularly in Canada

On August 23, 2017, the Pew Research Centre released data which suggests that the United States and China (rather than Russia) are the most-favorably viewed global superpowers. Both China and the U.S. are approximately equal in global popularity: China is more popular in the Middle East and Latin America, while the U.S. retains influence in Europe and the Asia Pacific regions. Of the countries surveyed, America and China were equally popular in Africa. In comparison to previous years, however, American influence has decreased significantly, particularly in countries that were traditionally long-standing allies.

After two slow quarters, July 2017 indicates significant growth in Chinese FDI to Canada, real estate and entertainment remains a stable source of investment (for now)

From July to August 2017, Chinese foreign direct investment (FDI) into Canada exceeded CAD$3.16 billion in 16 separate transactions, which brings the combined total of Chinese FDI into Canada for 2017 to CAD$ 5.219 billion, according to data collected by the China Institute – University of Alberta’s (CIUA) Investment Tracker. While this increase is attributable to three particularly large acquisitions, the real estate and entertainment sector remained a stable source of Chinese investment in Canada, as it has in previous quarters. However, this trend may not persist, given new regulatory restrictions announced by the State Council on August 18, 2017.

Significant sector growth in Agriculture and Food for Chinese FDI in Canada

The majority of new Chinese investments in Canada for Q2 2017 were in the agriculture and food sector, which consisted of a single deal worth CAD $225 million. Prior to this quarter, the agriculture and food sector had not been a significant recipient of Chinese FDI. The combined total value of Chinese investment into the Canadian agriculture and food industry from 1990 until the end of Q1 2017 date was CAD$136 million. However, the most recent greenfield investment by Feihe International Inc. increased the combined total of Chinese FDI in the agriculture sector by 129% to CAD $400.7 million.

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