Strained relations hamper tech firms in Canada

The environment for Chinese investment in Canada has been constrained in a range of high-tech areas, according to recent survey findings.

"This goes hand in hand with US-China tensions and actions the US has taken against Chinese companies," said Sarah Kutulakos, executive director of the Canada China Business Council, or CCBC.

The survey, jointly conducted by the CCBC and the China Institute at the University of Alberta, shows that although the impact of frigid China-Canada relations has not been as significant as expected, the Chinese companies in security-related high-tech sectors were "harder hit" by the strained relationship.

The survey found that two Chinese tech companies in Canada saw a significant drop in sales after 2018 and had difficulties in developing and maintaining supplier and customer relations.

Chinese telecommunications and security-related companies see closed ties and a stable policy environment as essential to their future growth in Canada. But many companies expressed the view that chilly relations were "challenging" to navigate, even though the impact was often indirect.

Kutulakos said Chinese companies are affected in many sectors ranging from telecommunications to artificial intelligence.

"The biggest result is a discouragement of investment by Chinese companies, who may be worried the investment will be turned down on national security grounds," she said.

Chinese investment in Canada has faced heightened scrutiny relating to national security, work conditions and environmental impact in recent years.

Some 75 percent of respondents said that changing China-Canada relations have had some negative impact on their operations in Canada. Compliance issues and public relations are among the top factors that affect Chinese firms' overseas investment decisions.

Job creation

The survey found that although partnerships between Chinese and Canadian companies are common, Canada's public sector supply chains "rarely" include Chinese companies. Additionally, "very few" Chinese companies have received financial support from the Canadian government.

Many argue that Canada benefits from Chinese companies' job creation, product and service diversification, and global value-chain integration usually outweigh the risks of Chinese investment, according to the report.

Contrary to the negative impact on Chinese companies, the survey shows that Chinese companies have made great contributions to Canada through job creation, government tax revenue, investment, more consumer choice, improving exports of products and services, benefiting the Canadian supply chain, and greater social responsibility.

The survey also shows that Chinese firms actively engage in corporate social responsibility activities in Canada.

Eighty-five percent of Chinese companies reported such practices within Canadian communities, according to the survey.