The Middle Kingdom and the Yukon

When you look at a Chinese map of the world, for some reason Canada isn't in the middle of the page. Instead China is at the centre. Indeed the Chinese characters for their country's name translate roughly as "Middle Kingdom.

When you look at a Chinese map of the world, for some reason Canada isn’t in the middle of the page.

Instead China is at the centre.

Indeed the Chinese characters for their country’s name translate roughly as “Middle Kingdom.”

Scattered around the edge of the map are far-away places like France and New York. The Yukon appears as a blob far across the Pacific. Not as isolated and about to fall off the map as a place like Toronto, but still distant.

The old Chinese emperors definitely thought of themselves as the centre of the universe, surrounded by tributary kingdoms and barbarian bands in the outlands.

A recent trip to Hong Kong showed that this old world view is echoing increasingly loudly as China’s resurgence takes its companies around the world. This has been highlighted during the Global Financial Crisis, when Chinese business has accelerated its global expansion even as the grand old names of Atlantic capitalism teeter.

Indeed, the phrase “Global Financial Crisis” elicits titters and eye rolling in Asia, usually with mocking air-quotes around the world “Global.”“When Asia had a financial crisis (in 1997) they called it the Asian Financial Crisis. When the US and Europe had one they called it ‘Global,’” I was told by a banking analyst at a leading bank in Hong Kong.

And they are right. Excepting Japan and South Korea, economic growth in Asia never dipped below six per cent per year during the “crisis.” North America and Europe haven’t grown that fast in decades, maybe generations. Asia already represents one-third of the global economy, according to the Asian Development Bank, and this will grow strongly. Three of the five biggest economies in the world will be Asian in 2020, while Canada will have slipped out of the top 10.

Chinese exports have been a phenomenon for years, but now leading Chinese companies are investing aggressively abroad with the support of their government. The papers in Greater China are full of announcements. Many of these involve access to resources. China Minmetals took a stake in Australia’s Oz Minerals. Earlier this year Chinese oil giant CNOOC took a 50 per cent stake in Argentina’s Bridas and steelmaker Baosteel paid over $1.5 billion for a third of Anglo-American’s big Brazilian iron ore mine.

In Canada, China National Petroleum Corporation pulled off a $1.9 billion deal for a 60 per cent share of two oil sands projects in Alberta. Closer to home, Yunnan Chihong Zinc & Germanium Company bought into the Selwyn lead/zinc project, taking 50 per cent and advancing $100 million to drive the project ahead. This is on top of another Chinese acquisition of Yukon Zinc and its Wolverine property in 2008.

But the trend isn’t limited to resources. For example, to facilitate Chinese trade with Africa, Industrial and Commercial Bank of China, the world’s most valuable bank by market capitalization as of June 2010, has bought a big stake in one of South Africa’s big banks. Chinese trade with almost every region of the world is booming, with rapidly growing trade flows with South America and Africa for example.

The Yukon investments of these Chinese companies are just part of their portfolios. Yunnan Chihong also has investments outside its home region in Inner Mongolia and Australia. From their point of view, the Yukon is just one of many potential resource zones across the Pacific. It’s around 4,500 nautical miles from Shanghai to Skagway, or about 14 days in a 14-knot bulk carrier. To compare, Brisbane Australia is a bit closer at 4,100 nautical miles while the resources of East Africa are just 6,300 nautical miles away.

Of course, Chinese companies have been criticized for their investments in Africa, with some claiming they are taking advantage of the fact that Sudan’s environmental permit process may be less onerous than, say, the Yukon Environmental and Socio-Economic Assessment Board’s.

The Chinese don’t seem too worried about the criticism.

Overall it’s clear that we’ve only seen the first tentative overseas investments from big Chinese companies. There’s more to come, and in the future $100 million deals like Selwyn will likely be considered pocket change. And depending on the quality of Yukon ore bodies and our business climate compared to the rest of the Pacific Rim, some of those may be in our part of the map.

Keith Halliday is a Yukon economist and author of the Aurore of the Yukon series of historical children’s

adventure novels.