The Global and Mail
OTTAWA -- Finance Minister Jim Flaherty reaffirmed his plan to "protect Canadian assets" against takeovers by some foreign state-owned companies yesterday, even as more concerns were raised by China watchers.
In the House of Commons, Mr. Flaherty said the government will closely monitor any attempt by a state-owned company that does not operate on market principles to take over a major Canadian firm, saying such a deal must be judged to be in Canada's best interest.
"It is important that we protect Canada and we protect Canada's assets in certain circumstances where foreign state-controlled interests might be involved," Mr. Flaherty said.
The position -- which was unveiled in the fall economic update last week and is seen as directed at China -- would be used only rarely, when a foreign state-owned firm plans an investment that would not be in the long-term interests of Canadians, he said.
But while he played down the significance of the new rule, critics say the government is signalling to the Chinese -- and to other emerging countries that rely on state-owned firms -- that their companies are not welcome to invest in Canada.
Wenran Jiang, director of the University of Alberta's China Institute, said yesterday that Chinese company and government officials are increasingly skeptical about Canada's openness to Chinese investment.
Mr. Jiang said Canada is losing ground in the global competition to gain access to Chinese markets and be the recipient of out-bound Chinese investment. He said Canadian governments would have full power to regulate any foreign subsidiary that resulted from an acquisition.
"Is there reason for being alarmed at all I think that is totally ridiculous" Mr. Jiang said. "There is absolutely no reason to think that we need to be alarmed about Chinese investment in our oil sands."
The economist said the federal concern about potential Chinese takeovers echoes a similar fear heard in the United States, where members of Congress managed to thwart a bid by China National Offshore Oil Corp. to acquire California-based Unocal Corp.
Much of the global oil industry is now in the hands of state companies, from Saudi Aramco, to Petroleos de Venezuela SA, to renationalized companies in Russia.
Currently, Chinese state-owned companies operate globally mainly in the resource sector, including China MinMetals Corp., which pursued a takeover of Noranda Inc. two years ago. But China watchers say the rapidly developing Asian country may soon take the world stage with companies ranging from auto parts to steel.
Mr. Flaherty's policy announcement comes just two weeks after his colleague, Natural Resources Minister Gary Lunn, travelled to China to attract investment in the energy and mining sectors.
Accompanied by executives from Calgary-based Enbridge Inc., Mr. Lunn met officials from several state-owned petroleum companies, prospecting for investments in the Canadian oil sands that would facilitate the building of a pipeline from Alberta to the west coast.
Company spokesman Glenn Herchak said yesterday Enbridge is continuing its discussions with Chinese companies about partnering in a pipeline project and believes Canadian producers would be well-served by the opening of new markets.
He refused to comment on the federal government's investment review policy.
Economist Peter Morici, a University of Maryland trade expert, said China operates behind a wall of protectionism and pursues its own state interests with its investments overseas.
"I think it is time for the West to take a hard look at the commercial criminal behaviour of China," Mr. Morici said.