Deal with China worth billions

Paul Vieira, Financial Post

OTTAWA -- Canada clinched a multibillion-dollar investment deal with China Wednesday that highlights progress in wooing the world’s No. 2 economy while at the same time offering assurances it can continue to attract offshore cash after rejecting a foreign takeover of Potash Corp. of Saskatchewan Inc.

The pact would allow Chinese insurers, with $106-billion in capital at their disposal, to invest in Canadian capital markets. Analysts say it reflects the behind-the-scenes work by government officials to improve trade and investment ties with the burgeoning Asian economy.

The opening of the Canadian market may also be an attempt by Beijing to quell upward pressure on its asset prices and slow yuan appreciation.

Finance Minister Jim Flaherty, who is in Seoul for the Group of 20 leaders summit, announced the deal, which designates Canada as an approved investment destination for insurance companies under Beijing’s qualified domestic institution investor scheme (QDII). This builds on approvals Beijing granted to its banking and brokerage sectors to park cash in commodity-rich Canada.

Mr. Flaherty said the deal, which he has pursued for more than a year, “demonstrates to me the value of travelling personally to visit our trading partners to discuss issues of mutual benefit to our countries.”

He visited China, along with Bank of Canada governor Mark Carney and chief banking watchdog Julie Dickson, in August of last year to pitch Canada as an investment destination. He visited China again in June ahead of the G20 Toronto summit, and has met with his Chinese counterpart in bilateral meetings during G20 meetings of finance and central bank officials.

The deal “is a great development because it demonstrates the government of China’s confidence in Canadian financial markets and Canadian regulatory system,” said Cyndee Todgham Cherniak, an international trade lawyer at Lang Michener and board member for the Canada-China Business Council.

“The government doesn’t get enough credit ... in trying to woo China. We’ve been doing a lot more than people realize,” Ms. Todgham Cherniak said.