Are you a business owner in Canada considering foreign direct investment from China or joint ventures with Chinese enterprises? This is increasingly a trend for many reasons.
Facilitation of Market Entry
Through Chinese equity investment, BC private companies gain knowledge and ease of entry into the massive marketplace of China through a local partner. Canadian companies seeking geographic diversification can leverage their Chinese partner’s local expertise and connections to access established distribution networks, market share and talent infrastructure, and to create closer ties to foreign customers, all much faster than organic growth allows.
International Branding & Scaling
Many Chinese enterprises struggle to create strong international reputations despite a growing market share. In an effort to increase global competitiveness, Chinese enterprises are keen to secure interest in a Canadian company, which subsequently assists the export of its now Canadian-branded products into the Chinese market.
At the same time, BC companies can benefit from the leverage of Chinese direct investments to accelerate its globalized growth. In an average Chinese province there are as many as 45 million people whereas British Columbia has a population of 4.5 million.
Leverage the “Canada Brand”
The Canadian brand slogan “Quality is in our Nature” holds international cache. By investing in a Canadian company, Chinese investors can leverage on the strength of the Canada brand while its Canadian counterpart benefits from our inherent geographic advantage.
Many BC high-tech companies consider relocating their testing process to China to take advantage of the lower costs. A Chinese partner with local credibility can help to satisfy foreign certification and regulatory requirements in China and tap into existing networks. On the other hand, the Chinese company benefits from the technology developed by its Canadian partner.
What Does This Mean for Business Owners?
As the focus on the natural resources and energy sectors shifts to an overall interest in foreign direct investment across sectors, we predict that more Chinese investors will secure Canadian businesses through mergers and acquisitions for capital deployment. This is great news for the Canadian private companies.
RMB$1.5 trillion (approximately C$250 billion) will be invested in the development of the seven strategic industries over the 2011-2015 timeframe, through both domestic development in China and outbound investment. The Chinese government proactively encourages foreign direct investments by private and public enterprises with a goal to facilitate both learning opportunities and strategic collaborations with foreign businesses.
The National Development and Reform Commission (NDRC), China’s top economic planner, is expected to relax rules on overseas investments by Chinese companies. Effective March 2011, non-resource-related overseas investments less than US$100 million in valuation are exempted from obtaining NDRC approval. This expedites the migration of Chinese capital outward and makes foreign investments more appealing to the Chinese enterprises.