Facts ‘n’ Figures: China closes its wallet in Canada

One factor that helped the global mining industry weather the 2008–09 recession better than many other heavy industries was China’s rising presence in metals and minerals markets, both as a ravenous consumer of raw materials and a deep-pocketed foreign investor.

However, some of the pain felt by North American miners over the past year is due to China’s relative absence on the global M&A front, at least in the resource sector.

Thankfully, New York City-based Rhodium Group carried out the difficult task of compiling China’s foreign investment activities in 2014 in a newly released report that includes M&A deals, joint ventures, asset purchases and equity investments. It puts some hard numbers on anecdotal evidence, and paints a striking picture.

Globally in 2014, Rhodium tallied US$53 billion in cross-border M&A deals in all sectors by Chinese companies, off 13% from 2013 — the first annual drop since 2011, but still above the five-year average.

China’s acquisitions in energy and materials “dropped sharply,” Rhodium notes, as it turned its attention to technology, brands, financials and real estate. Chinese firms spent US$30 billion annually on energy and materials deals on average between 2008 and 2013, but this number tumbled to US$19 billion in 2014.

Rhodium comments that Chinese M&A in Canada last year “collapsed” due to both “lower interest in extractive assets and greater political scrutiny for investment by state-owned enterprises.” The latter refers to the Canadian government’s new foreign investment rules in December 2012, in connection with the controversial US$15.1-billion cash acquisition of Calgary-based oil and gas producer Nexen by China National Offshore Oil Co. in February 2013.

Rhodium’s data set, as shown to iPolitics, has only one natural resource-related Chinese M&A deal in Canada in 2014, versus 19 in 2013, four in 2012, five in 2011 and nine in 2010.