PROFESSIONAL SERVICES

Professional Services

Canadian professional services can provide essential services to Chinese companies looking to enter the Canadian market, including advice and guidance on legal, tax and accounting issues, as well as insight on Canadian culture, the potential requirement for consultation with First Nations, navigating government approvals and securing social licence to operate.

Context

In 2014, China became a net exporter of foreign direct investment (FDI), with most outward-bound investment focusing on the energy, real estate and transportation sectors.^[1] Although Chinese investments in Canada had been on an upward trend, heightened geopolitical tensions and China’s restrictions on outward capital investment have led to a recent decline in Chinese investment in Canada, which fell from $8.45 billion in 2017 to $4.43 billion in 2018.^[2] In something of a shift, the majority of the investments (72%) in 2018 were from state-owned enterprises rather than private companies.

While the warmth between Canada and China may have waned, Canada is still held in positive regard and is seen as a stable destination for Chinese capital. Chinese companies continue to seek opportunities to enter the Canadian market through mergers and acquisitions, joint ventures or venture capital investment.

The Canadian government regulates inflows of FDI through the Investment Canada Act; foreign acquisitions of Canadian companies over a certain dollar amount must show that they are of “benefit to Canada” to receive approval. Investments from state-owned enterprises are also subject to review if it is believed that the investment could be of detriment to national security.

Areas of growth

Top areas of outward-bound investment from China are in the energy, raw materials, entertainment, high tech and commercial real estate sectors.

Opportunities for Canadian organizations

Given these areas of concern, there is a pressing need for Canadian professional services firms to help Chinese companies successfully navigate and manage these issues.

Chinese companies wishing to enter the Canadian market require a full suite of professional services. There are many opportunities for Canadian companies to offer services in areas that include management consulting, legal, tax, accounting, wealth management, public relations, and government advisory.

Canadian professional services firms can offer guidance on:

• how best to structure the investment – joint venture, acquisition of non-controlling
  interest, starting a new business, merger and acquisition, etc.
• how to demonstrate that the investment shows a net benefit to Canada – in terms
  of employment of Canadians, capital expenditures, etc.
• immigration options and requirements
• if applicable, requirements on consulting with First Nations
• wealth management services for employees

March, 2019

^[1] China Institute at University of Alberta, Timeline of China’s Foreign Direct Investment Policy Evolution (With Attention to Canada’s Investment Policies).

^[2] China Institute at University of Alberta, Year end Review 2018: Chinese Investment in Canada.