Watchdog raises concern about Canadian pension investments in China

Open this photo in gallery:

A watchdog group that monitors the Chinese government is urging more scrutiny of Canadian pension fund investment in Chinese companies, as awareness grows about these firms’ role in helping Beijing violate human rights or exploit developing nations.

Hong Kong Watch, a U.K.-based group whose patrons include Chris Patten, the last governor of the former British territory, points out in a new report that global financial ties are deepening with China even as diplomatic, trade and security tensions grow.

Canadian pension funds have emerged as one of the drivers of Canadian investment in the Asia-Pacific region and China, it says.

The report notes that the most recent available list of investments for the British Columbia Investment Management Corporation (BCI), which manages money for public sector employees in the province, includes a stake valued at $45-million in Hangzhou Hikvision Digital Technology Co., Ltd., a manufacturer of surveillance cameras. Hong Kong Watch says Hikvision has “helped construct the surveillance state and camps” where a vast number of Uyghurs and other Muslim minorities have been detained in China’s Xinjiang region.

Two successive U.S. governments, Canada’s Parliament and the U.K., Dutch and Lithuanian parliaments have all declared China’s repression of Muslim minorities to constitute genocide.

Hangzhou-based Hikvision is one of nearly 60 Chinese firms that U.S. President Joe Biden named in an executive order earlier this month barring American investment in companies with ties to China’s military or surveillance industry. Mr. Biden’s order continues a policy begun under former president Donald Trump.

Last year the U.S. Department of Commerce also barred 28 Chinese companies from buying products and components from American firms. The United States said Hikvision and other companies named “have been implicated in human rights violations and abuses in the implementation of China’s campaign of repression, mass arbitrary detention and high-technology surveillance against Uighurs, Kazakhs and other members of Muslim minority groups.”

Is ESG compliance at odds with investing in China?

EU’s in the spotlight, but Canada’s investment treaty with China still ties Ottawa’s hands for the next decade

China set to implement its first civil code, as private investment slows

The March, 2020 list of investments by BCI shows the pension fund manager has money invested in a number of companies that Mr. Biden’s order said belong to the “military-industrial complex of the People’s Republic of China” and “undermine the security or values of the United States and our allies.” The value of the investments at the time included $2-million in China Communications Construction Co., more than $104-million in China Mobile, more than $56-million in China National Offshore Oil Corp., more than $1.4-million in China Railway Construction Corp., more than $2.7-million in China Telecommunications Corp. and $2.29-million in China Unicom Hong Kong.

The Globe and Mail asked BCI for comment on Hong Kong Watch’s concerns and an update on whether the fund manager still holds these securities. “We will respectfully decline to comment,” spokesman Ben O’Hara-Byrne said, adding that the company publishes an annual investment inventory in October.

Hong Kong Watch also highlighted pension fund investments in the e-commerce company Alibaba and the Chinese media company Tencent, both popular targets for Western money.

The group noted that Alibaba has produced facial recognition software that specifically targets Uyghurs. When this came to light in media reports in late 2020, Alibaba said it was dismayed to learn of this and that it never intended the software to be used in this manner.

Tencent owns social media application WeChat, which the Australian Strategic Policy Institute think tank last fall said “has become the long arm of the Chinese regime, extending [its] techno-authoritarian reach into the lives of its citizens and non-citizens in the diaspora.” Even “WeChat users outside of China are increasingly finding themselves trapped in a mobile extension of the Great Firewall of China through which they’re subjected to surveillance, censorship and propaganda,” it said.

Human Rights Watch said in a September, 2020 report that WeChat “censors and surveils users on the [Chinese] government’s behalf and hands over user data to authorities” and cited “numerous reports about people getting harassed, detained or imprisoned for their private messages on WeChat.” Added the rights group: “Uyghurs and Tibetans have been imprisoned for using WeChat to share religious materials.”

In its most recently disclosed list of holdings, dated December 31, 2020, Ontario Teachers’ Pension Plan Board held a stake in Alibaba valued at nearly $740-million and shares in Tencent valued at more than $200-million. Teachers’ spokesman Dan Madge declined comment on Hong Kong Watch’s report.

BCI’s March 2020 list of investments showed it had a stake valued at more than $500-million in Alibaba and holdings of more than $500-million in Tencent.

The Canada Pension Plan Investment Board, which manages the investments held in the Canada Pension Plan, held a stake in Alibaba as of March 31, 2021, that was valued at $2.7-billion, along with a $4.3-billion stake in Tencent. CPP Investments spokesman Frank Switzer said some of CPPIB’s holdings are long term in nature while others are not. He declined to say whether CPPIB still held these companies. “Outside of our regular, predictable reporting cycle, we appropriately refrain from commenting on the purchase, intent or sale of any specific securities as doing so undermines the best interests of contributors and beneficiaries.”

Hong Kong Watch also noted that major Canadian pension funds have significant investments in Chinese state-owned banks that have acted as large lenders in Beijing’s Belt and Road initiative, a project that stands accused of ensnaring developing nations in debt-trap diplomacy.

With a report from Reuters

Know what is happening in the halls of power with the day’s top political headlines and commentary as selected by Globe editors (subscribers only). Sign up today.