Canada-China Relations Committee on May 8th, 2023

[Arnold Viersen, Conservative, Peace River—Westlock, AB]

How much of your investment in China ends up in Africa anyway?

[Michel Leduc]

That would be hard to reverse engineer.

As I said, we're very focused in the “how” in China, so it's not across all sectors. I mentioned the largest area, which would be consumer discretionary, which is really aimed at the consumer market in China. It's a demographic play. It's understanding the sheer size of the market. It's real estate, which means multi-family housing, and it's logistics. China is the largest exporter in the world, investing in things that help carry products and services around the world.

Those are the three buckets that—

[Arnold Viersen, Conservative, Peace River—Westlock, AB]

You can see how logistics would.... We invest in Chinese logistics companies for them to then do more business in Africa.

[Michel Leduc]

Certainly those products and services would make their way to Africa, absolutely.

[Arnold Viersen, Conservative, Peace River—Westlock, AB]

Mr. van Gelderen, would your investments coming through China end up in Africa?

I guess what I'm getting at is that China is doing a lot of work in Africa. Canadian investments in Chinese banking, for example, only facilitate Chinese influence in Africa. We could probably cut out the middleman and go directly to Africa ourselves.

Could you comment on that?

[Eduard van Gelderen]

It's a comment similar to what was said by my neighbour. Africa consists of 55 different countries. They are very different in nature and economic growth. If you were really looking at Africa as an investable continent, you would probably end up with only a few countries that would be interesting for us as very large investors.

You then come to the next challenge. Are there investments in Africa that are of interest? Are they really available to us? Again, there are many hurdles to overcome.

On a very limited scale, we do invest in agriculture.

[Arnold Viersen, Conservative, Peace River—Westlock, AB]

Of your investments in China, what percentage do you think ends up facilitating Chinese influence in Africa?

[Eduard van Gelderen]

I cannot answer that.

[Arnold Viersen, Conservative, Peace River—Westlock, AB]

Are you invested in any banking, such as the Postal Savings Bank of China?

[Eduard van Gelderen]

Large chunks of our investments in China are passive. For sure, there will be investments in financial institutions as well, and they will for sure invest in Africa, but I do not have a number for that.

[Arnold Viersen, Conservative, Peace River—Westlock, AB]

Do the folks from Quebec have any comments around your investments in China and how they may allow for Chinese influence in Africa?

[Vincent Delisle]

Our decision to invest in China is based on factor complementarity. Our exposure in China gives us access to an economy and sectors that are growing rapidly. As mentioned earlier, China represents 20% of global GDP and about half of global economic growth over the past 10 years.

What attracts us most to the Chinese market is middle-class growth and consumption. For us, there's no link between China and Africa.

[Arnold Viersen, Conservative, Peace River—Westlock, AB]

Thank you.

[The Chair, Liberal, Ken Hardie]

Thank you very much, gentlemen.

We'll now go to Mr. Cormier for five minutes or less.

[Serge Cormier, Liberal, Acadie—Bathurst, NB]

Thank you very much, Mr. Chair.

I'd like to thank the witnesses for being here with us today.

I'm not an investment expert either, but every time I look at my statements at the end of the year, I like to see that my modest investments have generated a small profit.

Mr. Leduc, you said that among other things, you checked to ensure that investors were respecting human rights. That's been a topic from the outset.

A few weeks ago, we had an Acadian witness from my region whose name I recognized. It was Mr. Carl Breau, the chief executive officer of two electronics companies. He told us the following:

Overall, the business environment in China is actually very transparent… Most company information is public and readily accessible, including legal records, ownership structures, labour disputes, ..., etc.

Would you agree with what he said, to the effect that information about companies in China is readily accessible?

[Michel Leduc]

It varies significantly. I would hesitate to say information is easily accessible. It depends on what you're investing in.

If you're a direct investor, an active investor, and you're looking at a real asset, it's similar to a situation in Canada or the United States. In private markets, those companies and the management teams are not as constrained by very rigid securities-related rules, so we're able to enter the business and spend a lot of time with the management team, and if necessary the board of directors, and get information that would not otherwise be publicly available. That really allows us to calculate the risk-adjusted returns.

In China, it could be very similar. If we're buying a real asset, such as a logistics centre by a port, our ability to enter the business and understand it through our partners, through our local experts, means a significant advantage for information efficiency. On the thousands of publicly traded potential holdings through the China-Asia market, there again we depend heavily on the local securities rules of the Chinese markets. The China Securities Regulatory Commission has quite significant and sophisticated rules around disclosure.

[Serge Cormier, Liberal, Acadie—Bathurst, NB]

Thank you, Mr Leduc.

Mr. Delisle, do you think that ordinary people care as much about investing in a company that respects human rights or other international laws as they do about their end-of-year profits?

It's not really a hypothetical question I'm asking, because I'd like an answer.

Have you recently noticed a change of this kind in investor behaviour?

[Vincent Delisle]

Yes, people talk about it a lot. Investors want to know that their money is being invested properly. Of course, performance and ESG criteria go hand-in-hand. The one does not exclude the other.

In fact, the Caisse de dépôt et placement du Québec's sustainable investment policy has been there for several years now—since 2017 in fact. It's based on the principle that companies which follow healthy environmental and social principles, and good governance practices, perform well for our investors.

So if ordinary people ask us about it, we tell them that they go hand in hand. Companies that follow best practices will likely perform better.

[Serge Cormier, Liberal, Acadie—Bathurst, NB]

Among the types of investors you represent, by which I mean the 46 depositor groups, do any of these, in Quebec, handle farmers' pension funds?

[Vincent Delisle]

There are actually 48 depositor groups, but I couldn't name all of them. Among other things, they handle insurance funds and employee funds in the public and parapublic sectors.

For example, we manage Quebec's pension plan, the RRQ, and Quebec's government and public employees retirement plan, the REGOP.

All the depositor groups support us. They have encouraged us to adopt these sustainable investment best practices. They encourage us in all of the ESG policies we have been adopting as part of our processes.

[The Chair, Liberal, Ken Hardie]

Thank you very much, Mr. Cormier.

We'll now go to Mr. Trudel for two and a half minutes or less.

[Denis Trudel, Bloc, Longueuil—Saint-Hubert, QC]

Thank you, Mr. Chair.

Mr. van Gelderen, you said earlier that you had been consulted by the government in connection with the expulsion of the Chinese diplomat.

How does that work? I would imagine that this isn't the first time it's happened. Concretely, what form do these consultations take?

[Eduard van Gelderen]

You misunderstood me. There was no consultation whatsoever.

[Denis Trudel, Bloc, Longueuil—Saint-Hubert, QC]

I see.

In this instance, the funds invested nevertheless involve a lot of money, $1 billion, in fact.

Do you think it would be appropriate for the government, before it imposes sanctions on countries in which you have invested, to explain the situation, the impact of the sanctions, and what comes next?

[Vincent Delisle]

We don't make the rules. That's the government's job. What we do is keep our ear to the ground so that we can consider possible options.