Chinese investors diversify their B.C. holdings

Once focused primarily on resources, overseas money is now flowing into other sectors

Alice Chen, managing director of Sky Capital: Chinese investors are increasingly willing to diversify beyond real estate

Oil and gas. Hotels and resorts. Malls, retirement homes and condos. Farmland and aquaculture.

What are Chinese investors interested in? All of the above, according to Vancouver-based deal-makers who say interest in adding British Columbia assets to business portfolios will continue to grow over the next few years.

“It's just recently that I've started to see the next wave of investment interest, in the mergers and acquisitions space,” Alice Chen, managing director of Sky Capital Group, told Business in Vancouver. “They're wanting to invest in or buy out small and medium-sized businesses.”

Chen, who was formerly a corporate lawyer specializing in mergers and acquisitions, started Export Ventures Group in 2010. The business helped B.C. wineries export their wine to China and other Asian markets.

About two years ago, she began to see a switch: the Chinese importers didn't just want to buy B.C. wine – they wanted to own the winery.

Chen recently started Sky Capital to meet the demand. The company acts as a project manager to guide deals through from start to finish, from bringing the buyer and seller together to headhunting bilingual executives to manage the acquired business.

She has since helped put together deals involving a winery and several hotels.

“There are a lot of small and medium-sized enterprises (SMEs) [in B.C.] wanting to either find a successor because people are retiring, or they're wanting to also internationalize by taking in a foreign partner so the strategic investment can help them open up a market in China,” Chen said.

A decade ago, Chinese investors looking to invest in B.C. were mostly focused on natural resources, said John McDonald, executive director of strategic investments at the B.C. Ministry of International Trade. Much of the investment came from China's large state-owned enterprises.

That's changed.

“Now we're seeing SMEs as well as private entrepreneurs looking at a vast array of different opportunities across the industrial spectrum, from manufacturing to agriculture to mining and forestry, as well as retail and service,” McDonald said.

The Chinese government has been encouraging businesses to make foreign investments through its internationalization policy, said McDonald and Chen. Chinese policy-makers hope this push will help to diversify the Chinese economy.

Lily Wang, a partner at Borden Ladner Gervais, agreed that Chinese investors are diversifying into just about every sector. She's received inquiries about agricultural land, pharmaceutical companies and mining, and continues to hear interest in liquefied natural gas.

Commercial real estate continues to be a mainstay.

“I've seen hotels, resorts, and people buying blocks and blocks of current residential areas, trying to rezone them and develop them,” Wang said.

The typical investor is deep-pocketed and has already built a sizable business – and fortune – in China.

“These are all super-successful business people in China, with huge business empires in China,” Wang said.

Chen agreed, describing her clients as “tycoons.”

“They probably don't have to work for three generations.”

Some of Chen's clients have relocated their families to the Lower Mainland. Being exposed to Canadian life can encourage investors to try their hand at unfamiliar business ventures.

Chen believes that Chinese investors will start to invest in businesses that don't have a real estate component. She's currently sourcing a food processing business for a client, a trend she expects to grow in response to worries about the quality and safety of food in China.

While B.C. is seen as a stable and friendly place to invest, Chen said, the province's business community needs to learn more about the Chinese business people doing deals here.

“In doing so we will propel ourselves forward to become a truly internationalized commercial centre such as Singapore, New York, Shanghai and London,” she said.