Chinese investment in Alaska - not

December 06, 2012

Firmex has produced a graphical piece highlighting Chinese investment in North America.

According to Firmex’s research:

• Since 2005 China has invested $42 B directly in the US. However, in terms of importance China was 30th of all countries, accounting for just 0.15% of direct investment in the US. Given that China is the second largest economy in the world this is shocking.
• China invested $17 B in Canada and this ranked 9th. Interestingly Canada is ranked first for Chinese M&A activity. The federal government is considering a $15 B take-over of Nexen by CNOOC.
• Investments in metals and oil and gas form about 60% of Chinese investments.
• The three main vehicles for Chinese overseas investments are Sinopac, CNOOC and China National Petroleum Corp. In the past 2 years, these players have completed 11 joint ventures—8 in Canada and 3 in the US. They have completed two take-overs in Canada (Opti-Canada and Daylight Energy), none in the US.
• Both Canadian and US governments have vetoed take-over deals.
• The US Commerce Dept notes that in 2010, foreign-controlled companies employed 13,600 Alaska workers. Major sources of foreign investment in Alaska in 2010 included United Kingdom, Japan, Canada, and France. Alaska’s exports to China totaled $1.5 B in 2010.

 

Commentary

The attached graphic is deceiving. It shows the US with a higher concentration of Chinese investment than Canada and it shows Alaska with a higher level of Chinese investment. In absolute dollars the level of Chinese investment in the US is higher than in Canada, but the US economy is ten times larger.  Proportionately Chinese investment is much lower in the US than in Canada. Could be China views America as a rival and chooses not to invest (a political decision) or it could be concern with investment return/taxation (business decisions), not sure which.

Alaska exports to China are significant ($1.5 B/year) but direct investments by Chinese companies are nowhere on the radar. This lack of investment undoubtedly costs economic opportunities and jobs for Alaskans. Next door in Yukon, Chinese capital is employed in mining (Yukon Zinc mine, Selwyn zinc project,etc.) and oil and gas exploration with Northern Cross’ Eagle Plains drilling program.

Sources

• a) FIRMEX Data Rooms as noted in http://www.ritholtz.com/blog/.



• b)http://www.trade.gov/mas/ian/statereports/states/ak.pdf



• c)http://dnr.alaska.gov/commis/Presentations/Asia_Pipeline_Summit.pdf