Canada is likely to replace Australia as the preferred investment destination for Chinese investors, who are eyeing the energy, natural resources, agriculture and biotechnology sector of the North American country.

Armed with more than $2 trillion in foreign exchange reserves, China has supported its oil companies in making landmark overseas acquisitions since energy assets have fallen considerably due to the global economic downturn.

Chinese majors have moved into Canada this year making hi profile investments in the Canadian energy sector.

Wuhan Iron & Steel, China's fourth biggest steelmaker, acquired 19.9 per cent stake in Consolidated Thompson Iron Mines Limited for $240 million in June to gain access to iron ore.

CIC, the $300 billion Chinese sovereign wealth fund acquired a 17.2-per cent stake in Teck Mining Company (Teck Cominco), Canada's largest diversified miner for $1.5 billion in July to take advantage of its coal resources (See: China's CIC fund to invest $1.5 billion in Canadian miner).

Last month, state-owned oil giant, PetroChina agreed to acquire a 60-per cent stake in two planned Athabasca Oil Sands projects in Western Canada for $1.9 billion. (See: Petrochina buys 60 per cent stake in Canada's oilsands for $1.7 billion)

Although China has not yet reduced its investment in Australia in the first half of this year, Beijing has been looking elsewhere since the past two months for securing its energy supplies.

For the year 2008, China was the fourth largest investor in Australia with investments of $56.3 billion as of 31 December 2008, while China's investment in Canada was C$2.75 billion at the end of 2008. Canadian direct investment in China was nearly $3.6 billion.

The non-profit Asia Pacific Foundation of Canada, surveyed 1,100 Chinese companies with overseas business who have annual revenues of  $146,000, during the period December 2008 and February 2009, says says Canada should be ready for a growing inflow of Chinese investment over the next few years in a report titled China is Going Shopping. Is Canada Ready?.

The survey, released this week, reveals that Canada is near the top of the list of overseas investment targets for Chinese companies. The 'new China' is flexing its economic muscle and Chinese investors are prepared to buy their way into new markets and secure access to resources and technology.

Amongst the key findings of the survey were Canada's attraction due to its openness to Chinese investment, compared with countries in Western Europe.

Chinese companies are most interested in Canada's energy and natural resources, agri-food and biotech sectors.

Although only 7 per cent of the companies surveyed have investments in Canada, an impressive three-quarters of those already there say they are considering further investment within the next few years.

One of the attractions of Canada is its position within the North American Free Trade Agreement (NAFTA), the trilateral trade bloc in North America comprising the US, Canada and Mexico.

The majority of Chinese companies that have invested in Canada are looking to service the entire NAFTA market. Only 25 per cent said their planned investment was to service the Canadian market alone, the report showed.

The survey found that among the biggest concerns Chinese firms have in considering investment in Canada is the unfamiliarity of Chinese brands in Canada, as well as their own lack of understanding of legal and market risks in that country. Among their least important concerns is the possibility of negative reaction from the Canadian public or government to greater Chinese investment.