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China’s sovereign wealth fund sets up shop in Toronto

Edward

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Another step up for our financial status.

http://www.theglobeandmail.com/repo...-fund-sets-up-shop-in-toronto/article1867917/

China’s sovereign wealth fund sets up shop in Toronto

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China is preparing to step up its investments in Canada with the opening of a Toronto office for its deep-pocketed sovereign wealth fund, representing the first permanent foreign location for the state-backed institution.

China Investment Corp. (CIC), which has recently plowed billions of dollars into the Alberta oil sands and Canadian resource companies, will unveil plans for an office in Canada’s financial capital next week.

By choosing Toronto over other financial centres such as London and New York for its first corporate location outside of China, the $300-billion (U.S.) fund is signalling it plans to ramp up its Canadian holdings, particularly in the resource sector.

“It is symbolically and substantively significant because its speaks of CIC taking Canada very seriously and wanting to have a permanent presence here,†said David Emerson, a former federal trade and foreign affairs minister, who is a member of CIC’s international advisory council.

CIC’s top executive and chairman Lou Jiwei is expected to be in Toronto to mark the opening of the office. Felix Chee, a former executive with Manulife Financial Corp., who serves as a special adviser to Mr. Lou, is expected to play a key role in CIC’s new Canadian operations.

CIC has sought to keep its decision to open the Toronto office out of the limelight because a number of politicians, bankers and business people in the United States have been lobbying for it to open an office south of the border.

“This is a huge coup for Canada and for the City of Toronto,†said Manulife Financial Corp. chief executive officer Don Guloien. “It's a great tribute to the investment possibilities that CIC sees in Canada.â€

With the mandate of investing a sizable portion of China’s $2.85-trillion worth of foreign exchange reserves, CIC has attempted to portray itself as a passive institutional investor focused on returns, not boosting state influence. Yet investments in Canadian companies by state-backed entities such as CIC continue to concern some Canadians who are wary of China’s government gaining sway over domestic assets and corporations. According to the Asia-Pacific Foundation of Canada, only 18 per cent of Canadians are in favour of a Chinese state-owned company buying a controlling interest in a Canadian company.

Mr. Emerson said CIC’s new Canadian presence recognizes that foreign direct investment by sovereign wealth funds remains “a little bit†controversial.

“You need to be on site to understand people’s issues and concerns,†he said.

"Canada has a good relationship with China that has continuously improved since we took government," Finance Minister Jim Flaherty said in an emailed statement Wednesday. "I've visited China three times as federal Finance Minister and in my last visit in 2010, I discussed the mutual benefits such an initiative would yield to both our countries. I am pleased that the China Investment Corp. has chosen Toronto to locate its North American headquarters."

CIC came to the rescue of a debt-laden Teck Resources in 2009, investing $1.5-billion for a 17-per-cent equity interest in the Vancouver mining firm. That deal has paid off handsomely for the Chinese fund, which disclosed last year that its Teck holdings were worth $3.5-billion. CIC was also recently granted a seat on Teck’s board of directors.

Last year, CIC paid $817-million (Canadian) for a 45-per-cent stake in an Alberta oil sands project owned by Penn West Energy Trust, and $435-million for a 5-per-cent interest in the company. The fund has also disclosed small stakes in Potash Corp. of Saskatchewan Inc. and Kinross Gold Corp.

During an interview in October, CIC president Gao Xiqing spoke at length about his desire to do more deals in Canada.

“There are countries with comparable economic characteristics to Canada, but with a lot less friendly environment,†Mr. Gao said. “In our dealings with the Canadian government, various parts of the government, with the business people, we feel that it’s a lot more congenial to our investments.â€

A number of bankers say that they are expecting an increase in investments by Chinese firms and investors in Canada over the coming months.

Adam Waterous, global head of investment banking at Scotia Capital, predicts that there will be a series of oil and natural gas deals in Canada this year, and that many of those might have Chinese involvement.

“We expect Asian interest in conventional-operated oil and gas companies and assets in Canada to be substantially higher than in the past,†he said.

And he disagrees with the idea that Ottawa’s decision to block an attempted takeover of Potash Corp. by Australian mining conglomerate BHP Billiton will cool interest from China for Canadian resource deals.

“There will be certain very large oil and gas companies that may have been on their radar screens which no longer will be, but that’s just a handful, it’s a very small number,†he said. “I don’t think there’s a perception that Canada’s closed the door on foreign investment. In fact, I actually think that the government will be potentially even more accommodating on some of the smaller transactions because there’s potentially a view that they want to be seen as still welcoming foreign investment.â€

A large part of the reason the office is in Toronto is to accommodate Mr. Chee, who has become invaluable to CIC, said one person who deals frequently with CIC. Another factor is the location of various Canadian pension plans, with which CIC is striking up successful working partnerships.

“We look forward to working with them more closely,†said Mark Wiseman, executive vice-president of investments at the Canada Pension Plan Investment Board. “We have a good relationship with them. Our office in Hong Kong interacts with them regularly, and them having an office in Toronto will, we think, in the long run further our ability to partner with them in Asia, and for them to partner with us in North America.â€

The new office is also a symbol of a strengthening relationship that has developed between the Canadian and Chinese business communities.

“We’ve really seen the relations on an upswing, particularly the investment file,†said Sarah Kutulakos, executive director of the Canada China Business Council. “Back in 2007 and 2008, Chinese companies were telling us ‘we hear you saying you’are open for business, but we rally need to see proof.’ In 2009 and 2010, there was a lovely increase in investments both in terms of size and scale, and several of them were CIC.â€
 

Filip

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This is only an office.. I don't expect much more than a few thousand sqf.

Unless they're trying to make a statement, and knowing how ego-driven they are, maybe we'll get something out of it. Skyscraper? Definitely not. Probably the purchase of a smaller tower and their logo on top.
 

Tewder

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You are thinking like a Canadian and not like the Chinese... a splashy skyscraper would likely be seen as a wise investment for an organization with extremely deep pockets. Not to say they would utilize all the space but that it could generate substantial income through rental as well as go a long way to establishing the organization's presence/image.
 

Observer Walt

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I think Filip's take on this is more likely. An office in Toronto would likely not be more than a dozen or so people: a fraction of a floor in one of the downtown towers. It's very doubtful that they would build a new building, and also doubtful that they would invest in an existing one. The Chinese are interested in resources and commodities -- mines, oil, etc.
 

Mongo

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China Investment Corp. (CIC), which has recently plowed billions of dollars into the Alberta oil sands and Canadian resource companies, will unveil plans for an office in Canada’s financial capital next week.

I guess we will find out more details at that time. Does anybody know more about next week's news conference? (I assume that is what they mean here.) Would these plans be strictly of a legal/economic variety, or are they talking about literal design plans for a head office?
 
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taal

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I guess we will find out more details at that time. Does anybody know more about next week's news conference? (I assume that is what they mean here.) Would these plans be strictly of a legal/economic variety, or are they talking about literal design plans for a head office?

More importantly where will it go, might not even be downtown :) - Markham anyone (tax issues and all) ?

Yea I'm really interested in knowing the location - but I expect them to start out small anyway.
 

Ramako

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More importantly where will it go, might not even be downtown :) - Markham anyone (tax issues and all) ?

Yea I'm really interested in knowing the location - but I expect them to start out small anyway.

They're here to make big-time investments, so they'll want to be near the big financial players downtown. They're not going to operate out of the suburbs to save a couple bucks.
 

taal

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They're here to make big-time investments, so they'll want to be near the big financial players downtown. They're not going to operate out of the suburbs to save a couple bucks.

You wouldn't think so but I've seen stranger things happen, we'll know soon enough hopefully.
 

Ramako

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In general, I think they want to avoid making a big splash. They're keenly aware of the popular sentiment in the Western world against "China Inc." taking over. I bet they'll try to keep things on the down-low.
 

toto

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AqNdG.jpg


Shanghai 20 years ago and today.

Now that is growth.
 

TO City of Light

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toto - Nice juxtaposition.

While perhaps not as mind-blowingly spectacular, similar 20 and 30 year comparisons would apply to many east Asian cities - Jakarta, Singapore, KL, Bangkok and others. Behind the facade they are doing things to address global urban issues - public transport, open spaces, traffic management, pedestrian areas, public amenities, etc, that we in the west could well learn from.

Let's see what Mayor Ford can do.
 

wyliepoon

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While perhaps not as mind-blowingly spectacular, similar 20 and 30 year comparisons would apply to many east Asian cities - Jakarta, Singapore, KL, Bangkok and others. Behind the facade they are doing things to address global urban issues - public transport, open spaces, traffic management, pedestrian areas, public amenities, etc, that we in the west could well learn from.

In my opinion, the West (North America and Europe) are still light years ahead in terms of urban design and architectural principles and philosophy. The problem is that most of the West (especially here in Toronto) there is neither the money or the political backing to convert these principles into reality. On the other hand, Asia has the money and the political will (especially China) to carry out these projects. Much of the design work on Asian projects are carried out in the West, so really Asia is still learning from the West, not the other way around.
 

canarob

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The location is still unclear...

10962984273853851683.jpg


Chairman and Chief Executive Officer Lou Jiwei (R) of China Investment Corporation (CIC) cuts the ribbon with Felix Chee, Chief Representative Officer of CIC Representative Office in Toronto (L) during the inauguration ceremony of the CIC representative office in Toronto, Canada, Jan. 20, 2011. CIC, China's sovereign wealth fund, on Thursday inaugurated its first foreign representative office in this Canadian city.

BEIJING, Jan. 21 -- China Investment Corp (CIC), the country's 300 billion U.S. dollars sovereign wealth fund, announced Friday it had opened its first foreign representative office in Toronto.

Felix Chee was named chief representative officer in Toronto. The 63-year-old Chee was once CIC's chief investment officer (CIO), and before that he served as CIO of the Canadian company, Manulife Financial.

The Toronto office will seek to enhance CIC's cooperation with local companies and promote its overall investment business in Canada, according to its statement.

Last year, CIC opened a wholly owned unit in Hong Kong.

CIC, which also holds large stakes in China's major state-controlled banks, added 58 billion U.S. dollars to its overseas holdings in 2009, mainly in publicly traded stocks and bonds.

The fund was set up in 2007 with a mandate to earn a higher return for the government.
Source:English.news.cn
 

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