Aug. 14 (Bloomberg) -- Canadian Finance Minister Jim Flaherty’s trip to China this week may pave the way for firms such as Sun Life Financial Inc. to win more business, while setting the stage for a visit by Prime Minister Stephen Harper.

During the visit to Beijing and Shanghai, in which he met Vice Premier Li Keqiang, Flaherty sought to nurture ties with government officials to help finance firms expand in the Asian nation. He also opened the door for Chinese investments in Canada’s natural resources.

Canada’s banks and insurers this week “were hearing there is good potential growth for them in the Chinese market,” Flaherty told reporters today in Shanghai, at his last press conference on the trip.

Canada, the second-biggest exporter to the U.S. after China, needs to strengthen trade ties with China to reduce its dependence on the slumping U.S. economy. Canadian exports to China increased 6.8 percent in the five months through May, according to Statistics Canada data, while exports to the U.S. over that period fell 26 percent.

“Trade is a two-way street,” Flaherty, 59, told Chinese reporters on Aug. 12. “We encourage more investment by Chinese enterprise in Canada. We expect that Canadian enterprises would have continued opportunities.”

Fourth Trip

This week’s six-day trip was the fourth by a senior government minister over the past four months. Trade Minister Stockwell Day visited China in April, followed by Foreign Affairs Minister Lawrence Cannon in May and Transport Minister John Baird last month.

“If we want to have strong bilateral economic relations we have to have strong bilateral political relations,” said Peter Harder, president of the Canada China Business Council and former Canadian deputy minister of foreign affairs.

A trip by Harper, his first since taking power in 2006, would be the biggest gesture of rapprochement between the two countries, said Peter Clark, an international trade strategist at Grey Clark Shih in Ottawa who has advised the Chinese government.

Flaherty is “trying to set the stage for the prime minister to go over at a fairly early date and the prime minister to come back with things that we haven’t been able to do with China for some time,” Clark said in a telephone interview.

China has been reluctant to give Canada so-called “approved-destination status,” which would allow Chinese and foreign travel agencies to promote and package group tours to Canada, Clark said.

November

Canada’s La Presse newspaper reported in June that Harper may visit China as early as November, when he travels to Singapore for a meeting of leaders of the Asia Pacific Economic Cooperation group of countries. Harper “looks forward” to visiting China “at some point,” said spokesman Dimitri Soudas.

Under Harper, Canada has expressed concern that China was unfairly keeping its currency undervalued, giving its exporters an advantage in the U.S. and stemming Canadian exports into China.

Harper’s Conservative government also has criticized China’s human-rights record. When Harper met with the Dalai Lama in 2007, China warned the move would have a “grave” impact on relations between the two countries. Canada’s new foreign investment rules, which single out state-owned entities for additional scrutiny, have also raised questions about whether the rules were aimed at China.

While Flaherty regularly talks about the pace of decline of the U.S. dollar, he told reporters Aug. 12 that currency issues were not a “primary” concern when asked about the Chinese currency.

Canadian Presence

Flaherty also met with Lou Jiwei, the chairman of China Investment Corp. on Aug. 11. Flaherty said the sovereign wealth fund is interested in boosting its Canadian presence in the country.

“When you look around the world and look at issues of political stability, the rule of law, good governance of financial institutions, prudent fiscal and monetary management,” Flaherty said in an interview, “Canada looks quite good.”

Flaherty cited mining, manufacturing and infrastructure as areas of interest for CIC, and said Chinese investments are welcome as long as they are done on a “commercial basis.” The minister recommended state-run entities like CIC consider listing shares in Canada or buying stakes in publicly traded companies as the “easiest” way to avoid problems.

Small Presence

Canada is among the world’s 10 largest producers of oil and natural gas, and is a major exporter of nickel, fertilizer and wheat. While Canada sits on the largest pool of oil reserves outside of the Middle East, China’s state-owned companies have a relatively small presence in the country’s energy sector.

Sun Life Chief Executive Officer Donald Stewart, who accompanied Flaherty on the trip, said July 29th that the company will more than double its capital to C$500 million in its partnership with the China Everbright Group Ltd. Bombardier Inc. has been a supplier of rolling stock for the Shanghai subway, which is expanding.

Flaherty was also accompanied on the trip by Bank of Canada Governor Mark Carney and Canada’s top financial sector regulator, Julie Dickson. He met with Chinese central bank Governor Zhou Xiaochuan, his counterpart Xie Xuren and financial industry regulators in the Beijing leg of his trip. Yesterday, Flaherty met with municipal government officials in Suzhou and Shanghai. He closes the trip with a speech today to executives in Shanghai.

To contact the reporter on this story: Theophilos Argitis in Shanghai at targitis@bloomberg.net.

Last Updated: August 14, 2009 08:42 EDT