Canada this week scrapped the Immigrant Investor Program, which allowed individuals to effectively buy permanent residency. While the program isn’t targeting Chinese citizens and will be replaced by regulations that bring Canada more in line with what other countries are doing, the change is challenging the perception in China of Canada as one of the West’s most friendly jurisdictions.
In late 2012, Canada moved to prevent state-owned enterprises from buying up Canadian oil-sands assets, except in rare circumstances—a move some Canadian businesses and bankers say has put a chill on Chinese investment in Canadian assets.
Canada closed its Immigrant Investor Program, which is popular among rich Chinese. Here, the Toronto skyline is pictured with a frozen section of Lake Ontario on Jan. 7, 2014. Associated Press
Canada’s moves on immigration and foreign ownership could benefit other countries looking to attract money from the world’s second-largest economy.
On Wednesday, Immigration Minister Chris Alexander said it was “absolutely wrong” to suggest Chinese immigrants were any less favored in Canada and that the country had become less welcoming of investment from China.
“The facts prove otherwise, China will have been the top source country [for immigrants] in 2013,” he said in an interview.
The canceled visa program granted permanent residency to those who committed 800,000 Canadian dollars (US$726,700) to a five-year zero-interest loan to one of the country’s provinces, and was particularly popular with Chinese citizens. The government said it would replace the program with a new Immigrant Investor Venture Capital Fund, which will require immigrants to invest money, rather than just loan it.
But the new program hasn’t assuaged concerns among emigrant hopefuls. Larry Wang, the chairman of a Beijing-based immigration consultancy firm, said he has been dealing with a stream of worried clients since the change was announced Tuesday in Canada. “They can’t believe it,” he said. “The clients are getting the message: Canada doesn’t want them. They now will have to look for other opportunities,” he said.
Canada lets in more new immigrants per capita than any of the Group of Seven advanced economies, and has ranked as a top choice for Chinese investor-immigrants because of its relaxed immigration policies and generous publicly funded health and education systems. While Chinese immigration has tailed off since its peak in 2005, it still made up around 11.5% of all immigrants to Canada in 2011, according to the government.
The vocal community of lawyers and real-estate agents whose clients used Canada’s investor immigration program said other countries that have rapidly rolled out their own plans would benefit from Canada’s move to change its policies.
Jean-François Harvey, an immigration lawyer based in Hong Kong, had 4,000 clients waiting for approval for the Immigrant Investor Program, with some waiting for over five years. He said three-quarters have sought residency in other countries, including the U.K. and U.S.
“I tell my clients, ‘Let’s go to a country where you’ll be welcome because Canada is not friendly right now,’ ” he said.
Australia unveiled a visa program in 2012 to allow immigrants a residency visa if they invested five million Australian dollars (US$4.5 million) into a local business or approved managed funds. So far, the program has attracted 601 applicants, of which 91% were Chinese nationals. In recent years, cash-strapped southern European economies, including Portugal, Spain, Greece and Cyprus, have allowed investors a residency permit for buying as little as €250,000 ($340,950) of real estate.
The Canadian immigration program that is being scrapped “significantly undervalued Canadian” permanent residency, the government said, because immigrants who used the program paid less tax and earned less in wages in Canada than those who enter the country in other ways.
Mr. Alexander said the program was also open to fraud, with applicants achieving residency but staying in their own country.
“It just wasn’t working,” he said.
Politicians from the opposition New Democratic Party have accused Prime MinisterStephen Harper‘s Conservative Party of tilting policy back to benefit European nationalities such as the British and French, whose immigrants once predominated. The government has scoffed at the suggestion, saying Asians and Middle Easterners still make up the majority of newcomers.
Concern over China’s waning interest in Canadian investment has been building since 2012, when the government said it was stopping state-owned acquisitions of oil-sands assets following Chinese oil giant’s Cnooc Ltd. 0883.HK +0.63% US$15.1 billion for Nexen Inc. and a bid by a Malaysian state-owned oil for another Canadian energy asset.
Last year, Chinese buyers spent just US$439 million in Canada, barely 2% of their investment in 2012, according to Dealogic. Chinese investment in the U.S., meanwhile, almost doubled to US$12.2 billion over the period, and increased by 13% to US$10.2 billion in Australia. Chinese executives say that concerns over State Owned Enterprises are based on a misinterpretation of their motives and organization.
Canada has long relied on foreign investment to help it develop its mineral and oil reserves and the government says it needs some 650 billion Canadian dollars ($657.5 billion) over a 10-year period to develop its energy resources.
“There is a feeling in China that Canada needs a better understanding for SOEs,” said Jerry Xie, executive vice president of China Gold International Resources Ltd., the Canadian-based unit of state-owned China National Gold.
Mr. Alexander said that the investment numbers were lower in 2013 because of the large size of the Chinese and Malaysian deals and because resource deals fell off in general.