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)

September 8, 2018

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 partially 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.

The first two quarters of 2017 were relatively slow; in Q1 2017, Chinese FDI into Canada totaled CAD $1.75 billion, which decreased significantly in Q2 2017 to CAD $420.58 million. The significant increase from Q2 to July was primarily driven by two high profile acquisitions: Hong Kong-based Cheung Kong Property Holdings Ltd.’s recent purchase of Ontario-based Reliance Home Comfort for CAD$2.82 billion, as well as the sale of Norsat International to Hytera Communications for CAD $85.2 million. In a third, less publicized acquisition, NextGen Energy was sold to CEF Holdings for CAD $138 million. While these three acquisitions accounted for the bulk of investment in July, there were also a higher-than-average number of transactions: Discover Key Investments Limited purchased a majority share of Ontario-based online poker and gambling company Amaya Inc. in a total of 19 transactions, 11 of which occurred in July. In total, Amaya shares were purchased for a total of CAD $169.19 million, CAD $67.6 million of which closed in July. In August, Amaya Inc. rebranded as The Stars Inc., and announced a major expansion into Asian markets. Entertainment and Real Estate remains a stable source of Chinese investment: in 2015, investments totaled CAD $2.55 billion, while in 2016, confirmed Chinese FDI in this sector reached a combined total of CAD $3.14 billion. From January to July of 2017, commercial real estate and entertainment accounted for CAD $1.49 billion, which appears in line with investment of previous years.

However, unlike previous quarters, July saw a significant decrease in real estate investment compared with entertainment:  no commercial real estate deals closed in July. This change is likely due, at least in part, to the announcement of new formal restrictions made by the central Chinese government on outbound foreign investment. Property, hotels, film, entertainment, and sports investment will all be restricted by the central government, while investment in the gambling industry will be prohibited. It is therefore likely that Chinese foreign investment in the real estate and entertainment industries will slow in the coming months, given the new restrictive regulations.