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Attitudes to Asian Investment: It All Depends on the Context

Aug 11 , 2015

Every year for more than a decade, the Vancouver-based Asia Pacific Foundation of Canada (APFC), has conducted its National Opinion Poll on the attitude of Canadians towards Asia. In 2014, the Foundation had to do some heavy soul-searching in the face of what appeared to be growing negative views about Asia and its importance to Canada, despite the country’s increasing trade and investment with the region. The 2014 Poll, which had added questions about foreign control of Canadian assets, appeared to indicate not only that support for engagement with Asia was declining across the board (including in social areas such as language teaching) but that support for more Asian investment in Canada was also dropping. The Poll noted that the fall in public support was particularly true in the case of China, where the proportion of Canadians who considered China to be highly important to their economic prosperity had dropped from 45% in 2013 to just 35% in 2014, the lowest level ever recorded by the Poll. The Foundation concluded that “Canadian hesitation to engage with Asia is likely to be costly. We risk losing opportunities for economic growth and diversification.” [1]

It is perhaps not surprising that public attitudes toward China hardened, given the large amount of negative media coverage concerning the $15 billion (CAD) takeover of Canadian energy company Nexen by Chinese state-owned oil company, CNOOC (Chinese National Offshore Oil Corporation) in 2012. This was a controversial acquisition and was only approved by the Conservative government of Stephen Harper with the caveat that in the future no further acquisitions by SOEs (State Owned Enterprises) of Canadian energy assets would be approved except in unspecified “exceptional circumstances.” Chinese companies investing in Canadian resources had also been in the news for attempts to bring in Chinese miners to work coal deposits in north-east British Columbia, a move vigorously opposed by various local unions. Possibly, attitudes toward Asia in general were being tarred by the Chinese brush.

Fast-forward a year to the release of the Foundation’s 2015 National Opinion Poll on June 1. Lo and behold, the key takeaway of the survey was that “Canadians are generally supportive of investment from Asia.”[2] In fact, Canadians had a more favorable view of investment from Japan (78% supportive) than from the US (77%). South Korea (67% approval rate) and India (59%) also scored high approval ratings. Perhaps not surprisingly, support for Chinese investment was lower, at 42%. Two areas particularly relevant to Chinese investment in Canada raised concerns: the role of SOEs and the concentration of investments in the resource sector. Not only did Canadians express concern about Chinese investment in Canada, they vastly overestimated its amount and significance, guessing that China holds 25% of all foreign investment in Canada whereas the actual total is about 3%. The sensitivity over the concentration of foreign control in resource sectors did not just extend to China, however. While 48% of respondents were concerned about the loss of control over resources to China, fully 42% also expressed similar concerns with regard to the United States. By contrast, investment from Japan was associated with new technologies, increased trade, economic growth and job creation.

What does this apparent turnaround in attitudes toward Asia and Asian investment tell us? First, a lot depends on the question and the context. It clearly is important to disaggregate Japan and South Korea from the PRC when discussing Asia. As we all know, Asia is a big and varied place. It is all too easy to use the general label of Asia or Asia-Pacific, when we mean China, Japan or India, or Southeast Asia. It also appears that there is a “contagion factor” from media coverage about Chinese SOEs or events in China that can carry over to influence public views on Asia generally and Chinese investment in particular. The fact that, in Canada at least, most large Chinese investments have been in the resource sector, which is a sensitive area, is also a factor. (The other area of Chinese investment that garners considerable media attention is the influence of Chinese buyers on home prices, particularly in Vancouver, where the inflow of Chinese money is alleged to price houses out of the reach of many local residents).

 

It is interesting to briefly compare the situation in Canada with that in the US. Chinese investment in the US has been much more diversified in terms of sectors and locations, and while there are concerns about investment from China, these have more to do with perceived threats from technology theft than from control of resources. Recent studies of Chinese investment in the US demonstrates that it has moved from real estate and energy to high tech areas and innovation targets.. The National Committee on US-China Relations has just issued a report that examines Chinese investment in the US, concluding that not only will Chinese investment in the US continue to grow, but that it will benefit the US in a number of areas, from job creation to exports to innovation. Already it is estimated that Chinese owned companies employ 80,000 Americans, a number forecast to grow to over 400,000. The report concludes that Chinese investment is just in its initial stages and can be compared to Japanese investment in the 1980s.

The Japanese example is illustrative. During the height of Japanese investment in North America, there were fears that “Japan Inc.” was taking over the corporate crown jewels. Now that Japanese investment has become widespread and widely accepted in both Canada and the US, creating employment in many areas, we see the striking phenomenon that almost 4 of 5 Canadians regard Japanese investment as very positive, more so than even investment from the US. China is of course not Japan. It is on a different growth trajectory, and has a scale that dwarfs even Japan. It is also not possible to predict how internal events in China (for example, repression of domestic dissent) or Chinese external policies (such as expansion of military facilities in the South China Sea) will affect public attitudes toward China and Chinese investment. It is likely, however, that as Chinese investment moves into more value-added areas (in Canada Huawei has already invested in a major R&D facility in Ottawa and plans to invest a further $500 million (CAD) in Canada in the next 5 years), it will be more accepted as a positive force for economic growth, innovation and job creation, just as Japanese investment has morphed from a threat in the 1980s to a valued asset 35 years later.

As the different results from the Asia Pacific Foundation’s 2014 and 2015 polls demonstrate, attitudes toward Asia can change, depending on the context, the question, and extraneous elements such as negative media coverage of domestic and international events.  When discussing Asia, it is important to distinguish between Asian partners. Asia may be too general a term to have much validity in many circumstances. When discussing China, and specifically Chinese investment, it is important to look not just at the provenance of the money, but also how the money behaves, and not to judge every long-term investment through the lens of the latest western news report coming out of Beijing.

[1]National Opinion Poll, 2014, Asia Pacific Foundation of Canada, p.6

[2]National Opinion Poll, 2015, Asia Pacific Foundation of Canada, p.9

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