Amid uncertain relationship with the U.S., Alberta eyes trade with China

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Alberta's Trade Minister is planning two trips to China this year to cement growing trade ties, as part of a pivot designed to reduce his province's reliance on an increasingly unpredictable relationship with the United States.

While China still has a thirst for securing access to Alberta's large oil reserves, Deron Bilous says the trade relationship with the Asian giant is evolving in a way that aligns with Premier Rachel Notley's goal of moving the province's economy away from its dependence on a struggling oil and gas sector.

The Trade Minister says a booming middle class in China wants the high-quality food and travel experiences that Alberta wants to sell.

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Adding urgency to his planned discussions is a sense of uncertainty about U.S. President Donald Trump and his trade agenda.

"Without knowing what direction the Trump administration will go, China is interested in reaching out much more to us," Mr. Bilous told The Globe and Mail outside a provincial cabinet retreat in Banff. "We are looking at going back to China twice this year. It is absolutely critical to be there face to face."

China has taken priority in 2017 and Ms. Notley's office confirmed no additional trade trips have yet been scheduled outside of North America over the coming year. The Chinese have reciprocated, with three trade delegations expected to visit the province in 2017.

While it can be challenging for foreign companies to break into the Chinese market due to complex regulatory barriers, the Alberta government's relationship building has had successes, according to Jia Wang, the acting director of the China Institute at the University of Alberta.

"The government is building a support network to help companies seize those opportunities when they come up," Ms. Wang said. "With the new Trump administration there is more pressure on many Canadian provinces, particularly Alberta, to look beyond the relationship with the U.S."

While Mr. Trump has given the green light to the proposed Keystone XL pipeline, which would increase the amount of Alberta oil flowing to the United States, suggestions of a border tax by Republican officials has raised concerns in the province's business community.

Nearly two-thirds of Chinese investment in Canada has gone to Alberta, much of it in the province's oil sands. It's a relationship the province's governing New Democrats have been seeking to deepen since they took office in 2015. Mr. Bilous's trips to China this year won't be his first. He led two trade delegations to China in 2016, including one in November that was the largest in the province's history and brought along more than 80 companies.

While those companies have made inroads into China, the Chinese have also invested in Alberta and created jobs in the province, according to Mr. Bilous. As an example, he pointed to Siwin Foods, a Chinese-owned company that helped create one of the world's largest food-products business incubators south of Edmonton. After planned investments, the Minister says the incubator will soon be the largest in the world.

"This is going to take time. Diversification isn't a switch you can throw overnight, but we're looking at building on our strengths. There is real interest on the Chinese side on increasing tourism to Alberta. Chinese officials who come to Alberta absolutely love our province," he said.

There will be hurdles to deepening the trade relationship. In late 2016, the Chinese government began curbing foreign investment and requiring state approval to move large amounts of capital out of the country. While the government's goal was to shore up a rapidly dwindling foreign-exchange reserve, the move makes it harder for Chinese buyers to purchase homes in Vancouver and invest in a new business in Alberta.

Ms. Wang says Alberta will be competing for a smaller amount of investment in 2017 as outflows of Chinese capital are expected to be lower than they were last year.

A history of troubled purchases in Alberta could lead some Chinese firms to exercise caution. A number of Chinese oil giants have faced buyer's remorse after high-profile takeovers in the oil sands resulted in investments that yielded weak returns and ran into significant operational challenges.

One of the largest bets was CNOOC Ltd.'s $15.1-billion purchase of Calgary-based Nexen Inc. in late 2012. CNOOC has since written down nearly $1-billion of Nexen's value and grappled with pipeline ruptures and worker deaths at northern Alberta projects.