(October 29, 2012) Any day now, the Canadian government will decide whether to let China’s state-owned oil giant CNOOC Limited (China National Offshore Oil Co.) buy Nexen Incorporated, the Calgary-based oil and gas producer.

If you feel uneasy about the prospect of a Chinese Communist Party-led enterprise operating in Canada, you are not alone. Here are good reasons to oppose this deal:

China’s SOEs (short for “state-owned enterprises”) are controlled by the Chinese Communist Party, and their role is a political one – to keep the Party in power. They get subsidized financing from state-owned banks that get subsidized savings from captive Chinese citizens who are not allowed to invest their money where they want. SOEs typically get other subsidies such as free land, monopoly control over their markets, expedited licenses, and exemptions from having to meet environmental and other standards. You can imagine, in a country where the rule of law languishes, what low standards China’s SOEs can get away with.

Though many are in awe of China’s “rise,” it is a Potemkin village of misallocated capital that, at its root, depends on the suppression of consumer, labour, environmental, and investor rights.

That is why our colleagues at the Beijing-based think tank, the Transition Institute, want
Chinese SOEs privatized and forced to operate according to market discipline and the rule of law, and not by political favour. SOEs have become flush with cash at the expense of Chinese citizens who have to overpay for everyday products, with the destruction of their environment, seizure of their land, and suppression of their right to sue to defend themselves. And with those unethical funds, Chinese SOEs are now on a shopping spree around the world for investments such as Nexen.

Foreign investment is not a bad thing, and Canada’s law that requires such takeovers be reviewed is a good one. It requires foreign investors to adhere to our standards of free and
fair enterprise, and to be accountable under the law. Chinese SOEs do not ordinarily operate by our standards. They are notoriously secretive and it would be virtually impossible to stop them from distorting Canadian economic conditions. Should a political issue arise between Canada and China, the SOEs would necessarily do the bidding of their owners – the Chinese government.

Should a Chinese SOE make money by virtue of its Canadian investments, it will only fuel its master, the Chinese Communist Party, against ordinary Chinese citizens. If it loses money by its Canadian investments, it will hurt ordinary Chinese consumers and taxpayers.

We at Probe International are inspired by our Chinese colleagues who are working hard to
establish China as a country ruled by law and representative governance. They are brave
and principled and clear on the way forward. We agree that, whether in Canada or China,
state-owned enterprises, with access to the deep pockets of taxpayers and consumers, and
at the behest of their political masters, become the perpetrators of the worst economic and
environmental abuses.

If you feel strongly about this issue, spread the word to your family and your friends, to your neighbours and your community groups. And let our government know how you feel. We cannot expect them to do a good job representing us if we don’t let them know our views.

And please join us in our work to find common cause with Chinese citizens to protect our
economies and our environments, with a generous donation to Probe International.

Yours sincerely,

Patricia Adams

Executive Director

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