COVID-19 pandemic puts big dent into Canada's inbound FDI from Asia-Pacific

A recent report shows that inbound foreign direct investment (FDI) from the Asia-Pacific region into Canada in the first half of 2020 has slowed dramatically, owing directly to the COVID-19 pandemic.

According to an Asia Pacific Foundation of Canada dispatch report by researchers Kai Valdez Bettcher and Sainbuyan Munkhbat, H1 2020 FDI from Asia-Pacific countries into Canada fell to just $1 billion - which means it is unlikely to match the 2019 FDI totals of $9.6 billion.

In addition, the region's two largest investors (China and Australia) had so far in 2020 only accumulated Canadian investments of "tens of millions" of dollars, which pale in comparison to the $4.1 billion and $2.7 billion each country invested into Canadian projects respectively last year.

What's especially concerning, Valdez Bettcher said, is that while similar investments were key in helping the Canadian economy recover from previous recessions in 2008-2009 and 2015, it is increasingly unlikely that the same FDI pattern can be relied upon for Canada's economic recovery this time.

"Some sources of investment - namely Japan, mainland China and South Korea - played key roles in dampening earlier declines and driving recoveries, but face historic headwinds of their own in 2020," he said in the report. "Further, Canada's automobile, mining and oil sectors drove investment numbers back up in previous recessions. Those sectors are likely indicators of potential challenges... for attracting similar forms of new investment in the coming years."

Among the deals scuttered by COVID-19 was a $233-million bid by Singapore Press Holdings to buy senior housing properties in Ontario and Saskatchewan. The bid collapsed in March.

Valdez Bettcher said attention is now on whether China's Shandong Gold Mining $207-million bid to buy Toronto's TMAC Resources will receive government approval. If not, it spells another major blow to Asian FDI into the Canadian market this year, he said.

"2020 and the coming years will be a turning point for Canada-Asia Pacific two-way investment," he said, noting that Canadian outbound investment into Asia also fell to $1.4 billion in H1 2020, down from $11.7 billion for the entirety of last year. "The two recent recessions indicate that Canada can expect major shifts in deal flow - inbound and outbound - over the next few years.

The full report can be read at https://www.asiapacific.ca/dispatches.