How chilly relations with China are playing out for Canada’s miners

As the world’s largest metal consumer, the second largest economy in the world, and the largest funder of overseas metal projects, China’s impact on the mining business globally cannot be overstated.

That’s why Canadian miners have been playing close attention to recent political and economic developments involving China.

Three key stories have characterized the first half of the year. Firstly, Canadian businesses are seeing the effects of the new investment restrictions the government implemented last year, requiring ministerial approval on Chinese investments in the Canadian mining sector. Alongside these new restrictions on inbound Chinese investment, Canada’s traditional allies have been courting Canada as they look to “friend-shore” their supply chains and diversify away from China. Finally, the underwhelming economic rebound following China’s reopening has reduced the Chinese import of metals writ large. These political and economic trends have changed the investors available to Canadian miners and softened demand in the world’s biggest metal consumption market.

Chinese investment falls

We have seen a decline in Chinese investment in Canadian metal firms as a result of the worsening Sino-Canadian relationship. However, politics aren't the only factor behind the drop off. It’s also part of a larger slowdown in Chinese dealmaking over the last several years. Chinese miners are facing pressure back home and abroad to avoid owning assets abroad, especially in perceived-hostile jurisdictions, like Canada. As President Xi Jinping began his unprecedented third term with a new handpicked Politburo earlier this year, the messaging from China’s highest political organ has set out a more conservative development strategy focused on national self-reliance.

Previous messaging from governmental elites highlighted the need for continual economic growth, since January however, the new committee has instead preached the prioritization of self-reliance, calling for countrymen to traverse the new “turbulent seas” and “solve the problem of strangleholds by foreign countries.” Within the Chinese political system, state-affiliated firms take their cues from such elite political messaging and have therefore been hesitant to invest in countries perceived to be geopolitically hostile. As a result, Chinese investment funds and large national miners, which operate with varying degrees of independence but still have close ties to the government, have limited investment abroad.