For the first time in five years, China’s massive sovereign wealth fund is starting the new year without a Canadian head office, a symbolic exit that underscores the fading fortunes of Canada’s battered resources sector.
China Investment Corp. has closed its Toronto headquarters, shuttering its only Canadian outpost – and its first on foreign soil – after nearly five years in the country.
CIC, which manages $747-billion (U.S.), said in December that it would use a new location in New York to scout for potential investments in the United States and the Americas, including opportunities in Canada.
The move comes as Canadian energy and mining firms reel from tumbling oil and metals prices, crimping returns on some of CIC’s holdings. It was long assumed that China’s investment vehicles had nearly insatiable appetites for resources, and more important, operated with lengthy time horizons that would help it withstand any economic downturn. The decision shows the country’s thinking has evolved.
Several bets by the fund have soured in recent years, prompting it to reconsider its exposure to Canada, said Wenran Jiang, a senior fellow at the Asia Pacific Foundation of Canada. Meanwhile, the former flood of investments by China’s state-owned energy firms has all but evaporated.
“I would say it definitely has everything to do with the performance of the CIC and its official position in Canada,” Mr. Jiang said. “It’s a very different scene today.”
China had already pumped billions of dollars into Canadian energy and mining firms when CIC set up its Toronto offices in 2011. A wave of investment culminated in 2012 with the $15-billion (Canadian) acquisition of Calgary-based Nexen Energy ULC by state-run oil giant CNOOC Ltd.
That deal prompted then-prime minister Stephen Harper to impose new limits on investments by Chinese state-owned enterprises in the oil sands, a move partly blamed for a sudden slowdown in energy sector deals.
CIC recruited Felix Chee, who previously worked at Ontario Hydro, Manulife Financial Corp. and the University of Toronto’s asset management fund, to help it allocate investments. Mr. Chee left CIC in 2013. At his prompting, the fund invested $1.5-billion (U.S.) in Teck Resources Ltd. in 2009, becoming a major shareholder in the diversified miner.
Like other moves in Canada, however, that investment has not fared well. Teck has been hammered by plunging commodity prices, while CIC’s other bets on Penn West Petroleum Ltd. and Sunshine Oilsands Ltd. have gone south as the energy sector retrenches to cope with skidding global oil prices.
The fund could not be reached for comment on Thursday. “CIC highly appreciates the kind support and assistances provided by Canadian government agencies, local institutions and other stakeholders to Toronto Office during its more-than-five-year operation,” it said in a statement posted to its website in December.
“CIC applauds the open and fair investment policy and business environment of Canada and will continue to explore relevant investment opportunities in Canada.”Report Typo/Error
Follow us on Twitter: