In an era of trade wars and rising protectionism, advanced economies, including Canada, have ramped up the number of direct equity investments they’ve made in private companies.
The surge in government ownership in the private sector puts a new spin on Western industrial policy that’s more associated with China’s central planning economy than free-market capitalism.
In fact, during the first seven months of the year, advanced economies such as the U.S., European Union, Canada and Britain have announced four times as many equity stakes as China and India combined. This is a reversal from the same period in past years, according to an analysis by Global Trade Alert, an independent trade-monitoring organization based in Switzerland.
Under U.S. President Donald Trump, government ownership stakes in companies have become increasingly commonplace, starting with Washington’s golden share in U.S. Steel Corp. X-N that gave it veto control over corporate decisions, and its 10-per-cent stake in chip giant Intel Corp. INTC-Q
Since then, the Trump administration has taken ownership positions in as many as 30 companies.
Not to be outdone, the Canadian government has pursued stakes in numerous private businesses. Most recently, the government said it will invest up to $400-million in Teck Resources Ltd.’s TECK-B-T Trail smelter to boost germanium, gallium and antimony capacity through the Canada Growth Fund, a federal arms-length investment vehicle.
Earlier this year, the fund invested millions in Exiro Minerals Corp. and Nouveau Monde Graphite Inc. NOU-T as part of Ottawa’s critical minerals strategy, bringing the number of equity stakes Canada has taken so far this year to 13, according to Global Trade Alert.
While computer chip and AI supply chain companies drew the largest share of investments from governments, they were followed by stakes in critical minerals companies.
All of this is a break from the past. During the 2009 global financial crisis, governments begrudgingly took stakes in failing banks and car-makers to keep them afloat when no other financing options were available.
“Equity used to be an emergency tool,” Global Trade Alert said in a note on Tuesday. “The state has moved from lender of last resort to shareholder of first choice.”