Canada and China collaborate on natural resources

BEIJING - Canada's resources sector is set to become a new target for Chinese companies.

That's after the announcement of a $1 billion fund focused on investing in the sector.

The Import-Export Bank of China and the Canada-based Canaccord Financial Inc announced the move on Thursday during a five-day visit to China by the Canadian Prime Minister Stephen Harper.

"The China-Canada Natural Resource Fund demonstrates the importance of Canadian financial markets in the development of resources companies and the continued expansion of Chinese participation in natural resource projects around the world," Paul Reynolds, president and CEO of Canaccord Financial, told China Daily.

The fund aims to invest in both public and private natural resources and energy companies and projects in Canada, and in companies that are listed, or have the potential to list, on the Canadian stock exchange.

The Chinese and Canadian sides will each own 50 percent of the fund. Investment will primarily come from individuals, investment groups and sovereign wealth funds.

Howard Balloch, the former Canadian ambassador to China and chairman of Canaccord Genuity Asia Ltd, the capital markets division of Canaccord Financial, said that the company has been in discussions with a number of potential investors and the first closing will be in the first half of this year.

Balloch said Canaccord Genuity helped China's third-biggest steelmaker, Wuhan Iron and Steel (Group) Co, invest in an iron ore program in Canada, and participated in the acquisition of the Canadian oil and gas company Daylight Energy Ltd by China Petroleum & Chemical Corporation, also known as Sinopec, for C$2.2 billion ($2.1 billion).

"I have been living in China for 16 years and the economic structure of the country has undergone a fundamental change," Balloch said. "When I was an ambassador here, China was exporting coal and petroleum and now it is a major consumer of natural resources."

In 2011, China overtook Japan to become the world's largest importer of coal. According to statistics from the General Administration of Customs, China's net imports of coal were 168 million tons in 2011, a rise of 15.2 percent, year-on-year.

Net oil imports to China, the world's second-biggest consumer of the fuel, rose to 264 million metric tons, an increase of 7.7 percent from 2010.

"Canada has abundant natural resources and a center of financing for natural resources companies," said Balloch.

More than 400 natural gas and petroleum companies and more than 1,600 mining companies globally had listed on the Toronto Stock Exchange and TSX Venture Exchange by the end of 2011, according to data from TMX Group.

In a speech at a business forum on Thursday, Vice-Premier Li Keqiang made a pitch for China as a buyer of Canadian energy.

Canada is one of the countries with large reserves of energy and resources. China is a stable and reliable consumer market, he said.

Li added that both sides should facilitate large-scale cooperation in oil, gas and mineral resource projects, in addition to increased collaboration on nuclear and clean and renewable energy sources.

On Wednesday, Harper and Premier Wen Jiabao oversaw the signing of agreements worth $3 billion to boost investment and promote energy exports to China.

The visit highlights Canadian efforts to diversify energy sales. The US market currently absorbs 97 percent of Canada's oil exports.

AP contributed to this story.

China Daily

(China Daily 02/11/2012 page9)