Politics

Chinese mining companies feel misled by Canada, report says

China's surge of resource investments in Canada has ended, partly because commodity prices have fallen. But an internal report also suggests Chinese mining companies feel they were misled by Canadian government pitches about investing in Canada, especially the lack of infrastructure in remote areas.

Document outlines 'unhappiness' among China's mining firms with too-rosy investment pitches by Canada

Guy Saint-Jacques, Canada's ambassador to China, reported to Ottawa that some Chinese mining investment companies say they've been misled about harsh conditions in Canada's North. (Adrian Wyld/Canadian Press)

Some of China's resource companies feel they have been misled by investment-seeking Canadian governments about just how difficult it is to establish successful mines in Canada, Ottawa's ambassador to Beijing has warned.

That sour note may help to explain declines in Chinese investment in Canada in favour of the United States, and serves as a backdrop to recent diplomatic jousting between the two countries.

An internal report last October by Ambassador Guy Saint-Jacques details a raft of complaints from an official with the China Mining Council about the unwanted surprises some mining companies encountered in Canada.

Wang Jiahua's "concerns seem to centre mostly in what he called less-developed, remote areas, where climate is harsh, infrastructure is less developed, and workforce is scarce," Saint-Jacques wrote.

David Mulroney, Canada's former ambassador to China, says Chinese resource companies want Canada to relax its regulations. (Sasa Petricic/CBC)
"Some members felt that, when promoting potential investment projects, the provinces did not disclose the full picture about the mining environment, namely the risks and challenges, and that this led to misinformed decision."

"Mr. Wang emphasized repeatedly the need for the Canadian side to be more comprehensive and forthcoming when presenting the mining environment in various regions of Canada." The obstacles should be "more clearly flagged."

Saint-Jacques's Oct. 13, 2015, report, circulated within Global Affairs as well as Natural Resources Canada, was obtained by CBC News under the Access to Information Act.

Investors seek changes

The document provides a behind-the-scenes glimpse into troubled Chinese mining investments in Canada.

Many have failed as commodity prices decline and companies run up against "harsh climate, poor infrastructure, scarce workforce, foreign temporary worker limitations and regulatory requirements," as cited in a related document from Natural Resources Canada.

Wang also cited Canada's immigration policies as a barrier, because they "make it impossible for Chinese investors to bring Chinese labour to Canada to work on mine construction, resulting in a timeframe of 8-10 years to project start, vs. 1-2 years if Chinese labour was allowed," Saint-Jacques noted.

A former Canadian ambassador to Beijing calls the complaints an example of "negotiation by other means," and that the real goal is to put pressure on Canada to set aside its domestic restrictions.

"Did China really need to be reminded that the weather is harsh and infrastructure is limited in the Canadian North?" said David Mulroney, who was posted in Beijing from 2009 to 2012.

China is trying to make us feel guilty.- David Mulroney, former Canadian ambassador to China

"China is trying to make us feel guilty enough to suspend our own laws and regulations, including those governing fair employment in Canada."

"China would like to do in Canada what it does with investment projects in the developing world, namely to ship in its own workforce and run the project as a Chinese enclave."

The complaints are no surprise to Sarah Kutulakos, executive director of the Canada China Business Council, whose group alerted Saint-Jacques after canvassing grumpy mining executives in China last summer.

"There was sort of a blanket unhappiness with Canada," she said in an interview from Toronto. "Chinese mining companies … in the context of investment attraction, perhaps felt misled.… We started hearing the frustration."

"They come in with an idea of how you get things done, and in China, the government can basically make anything happen." Chinese investors have erroneously thought that Canadian governments — federal, provincial and even local — can solve all their problems on the ground, she said.

Acknowledges costs

A Nov. 20 briefing note by Natural Resources Canada plays downs the Chinese complaints.

"Unfavourable global market conditions and other economic considerations, e.g., lower than expected ore grades, played a significant role in the closure/suspension of Chinese-funded projects," it says.

But it also acknowledges that "in some instances, infrastructure development costs in Canada's North were not anticipated by Chinese investors."

Sarah Kutulakos (right), executive director of the Canada China Business Council, speaks in 2011 with former trade minister Ed Fast. Kutulakos says her group heard last summer that some China mining companies have felt misled by Canada about difficult conditions for establishing mines. (Global Affairs Canada)
A spokeswoman for Natural Resources Canada says the department recently compiled an investors' guide to mining in Canada, which is currently being translated into Mandarin.

"The guide is promoted to investors abroad and provides a clear and comprehensive guide to the regulatory environment and investment climate in Canada, including in Canada's North," Cathy Koury said.

Last week, China's Foreign Minister Wang Yi scolded an Ottawa reporter for asking questions about the country's human-rights record, and demanded a personal meeting with Prime Minister Justin Trudeau. Chinese officials have warned that human-rights issues could pose risks to the relationship, including economic relations.

Trudeau plans a trip to China later this fall, and the government is reportedly weighing the possibility of a free-trade deal.

Follow @DeanBeeby on Twitter

About the Author

Dean Beeby

Senior reporter, Parliamentary Bureau

Dean Beeby is a CBC journalist, author and specialist in freedom-of-information laws. Follow him on Twitter: @DeanBeeby

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