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China finds gems in Canadian technology while free trade negotiations stumble

The free trade talks between Canada and China have not yet managed to take off. Say it to the technology sector.

China's technology giants, including Tencent Holdings Ltd. and Huawei Technologies Co. are driving investment in Canadian companies with exposure to everything from electric vehicles to artificial intelligence, attracted by the swelling of the country . ranks of graduates in science and technology, cheaper valuations than the United States, and government incentives.

"Over the last six months, I've probably been contacted by at least half a dozen new funds that have Chinese money," said Janet Bannister, a partner at Toronto-based Real Ventures. The venture capital firm said last week that raised C $ 180 million ($ 142 million) in fresh funds for new Canadian companies, including an undisclosed amount from Tencent, based in Shenzhen.

China is the second commercial partner of Canada, Chinese investment in the country was reduced to an annual average of C $ 1.21 billion in the period 2013-2017, of C $ 8.16 billion in the five previous years, when the Asian country was investing money in the energy patch . Justin Trudeau has promised to reverse that trend, but the two countries have not yet started talks on a possible free trade agreement during the Canadian prime minister's visit to China this week.

Robot Startup

Even so, technology is becoming increasingly attractive to China, although the values ​​may be small compared to the acquisition of the oil company Nexen Inc. by Cnooc Ltd. at $ 15,100 million in 2012.

In addition to the venture capital fund, Tencent took part in a financing round of $ 102 million for Element AI based in Montreal and $ 28 million for Kindred Systems, a startup of manufacture of AI robots based in Toronto. The telecommunications giant Huawei, which already employs 700 people in the country, is testing an Internet of Things project together with the Canadian BCE Inc. in a Niagara warehouse. And BYD Co., the world's largest electric vehicle manufacturer, said it plans to open an assembly plant in Ontario after partnering with Loblaws Cos., To electrify the giant truck fleet of the market.

Kathleen Wynne, premier of Ontario, the most populous province in Canada, traveled to China last week to meet with a number of technology companies. The announcements included an investment of C $ 351 million from John Electric Holdings Inc. based in Hong Kong to increase its auto parts operations, with the provincial government paying C $ 24 million.

Robust research

While Chinese companies have been looking for technology investments around the world: Tencent bought a stake in Snap Inc. and backed the German jet-in-flight designer Lilium GmbH; Political tensions are increasingly pushing investors to look north from the United States to Canada, Bannister said.

"With us open to immigration and particularly with the United States closing its doors, that has also created a window of opportunity for the Canadian ecosystem and Chinese investors," he said, adding that valuations for new companies to the north of the border tend to be more reasonable than Silicon Valley.

China is part of a broader wave of foreign investors that turn to Canadian technological talent, particularly in artificial intelligence. Facebook Inc. opened its first IA laboratory in Montreal this fall and Uber Technologies Inc. is building a team at Toronto to improve its autonomous vehicle software, hiring a teacher from the University of Toronto to direct its operations

Canada's solid talent pool and Shenzhen's experience in bringing products to the market make a great match, said Jenny Qi, president of the Shenzhen Confederation of Associations, which connects businesses and investors between the two regions.

"In Canada, The R & D advantage is here, education, research is here, but in Shenzhen, the global supply chain, manufacturing systems, marketing is really advanced," said Qi. "They complement each other very well"

– With the assistance of Chris Fournier

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