Chinese are coming. They’re going to continue to come, and experts say local
businesses need to know how to cut deals with them if they’re to realize the
huge Asian opportunity the Chinese present.
Canadian business community and also the public, the media, even the
government have to face this reality or new trend that is likely more Chinese
investment coming to Canada,” said Kenny Zhang, a research analyst with the
Asia Pacific Foundation of Canada.
the past several years, China’s juggernaut economy has generated numerous
deals for Canadian companies, many of which are Vancouver-based resource
Joyce Lee, a partner in
McCarthy Tetrault’s business law group, is a go-between for Chinese and
Canadian companies looking to negotiate deals.
year, Lee played a role in six deals between resource companies worth more
than $1.3 billion and has worked with Wuhan Iron & Steel (Group) Corp.,
the Hanlong Group and state-owned China Investment Corp. (CIC).
it’s no secret that China’s hunger for natural resources appears
insatiable, Lee said Canadian companies have been slow to realize that.
long and short of it,” Lee said, “is the Canadian companies have been
reluctant to deal with Chinese companies, because they’re not very used to
dealing with Chinese investors.”
She added that there are
two reasons why Canadian companies have been reluctant to catch on.
The first is that prior to
the recession, the commodities market was so strong Canadian companies had
little reason to venture abroad.
second reason goes back to 2005 when China Minmetals Corp. made a bid for
Canadian copper and nickel producer Noranda Inc.
deal fell through, and Switzerland’s Xstrata plc bought a stake in the
think it’s fair to say they [Chinese investors] were not as prepared as
today,” Lee said, “and they were not very used to dealing with
transactions the so-called ‘western way.’”
consequently turned their attention to Australia and in Canada focused on
smaller resource deals. But that approach didn’t last long.
2007, Chinalco, China’s largest diversified miner, bought Peru Copper Inc.
for US$860 million.
Last year, CIC took a
$1.74 billion stake in Vancouver’s Teck Resources Ltd. (TSX:TCK.A/TCK.B).
Lee said Canadians and
Chinese have figured out how to do business together, and it’s unlikely the
rate of deals will ebb any time soon.
said the Chinese are involved in three types of deals with Canadian companies:
investments short of majority shareholder positions; and