China "Going Out"

Dispute between CNOOC and Toronto-listed Husky and Primeline could impact China-Canada trade

This terrific article by the Financial Post echoes the warning signs of an earlier Post piece by Probe International’s Patricia Adams on trade with China and, in particular, China’s state-owned enterprises.

Claudia Cattaneo for the Financial Post writes:

When Chinese oil giant CNOOC Ltd. sought Canadian government approval of its Nexen Inc. acquisition four years ago, it went to great lengths to present itself as a market-driven company that answers to its shareholders.

But its unilateral changes of major contracts in China with Toronto-listed Husky Energy Inc. and Primeline Energy Holdings Inc., after they spent billions to develop offshore gas discoveries, feeds concerns that state-controlled Chinese companies remain primarily instruments of the state — and could trip up efforts by Canada to expand trade with China. [Continue reading at the publisher’s website here]

How exactly?

Perrin Beatty, president and CEO of the Canadian Chamber of Commerce, tells the Post that “issues such as intellectual property, industrial espionage, the enforceability of contracts, and different business practices and laws” in an “economy run by state-owned enterprises” need to be better understood and that Canada’s expanding ties with China should be approached with caution.

In November 2012, when the Canadian government was considering whether or not to let China’s state-owned oil giant CNOOC buy Nexen Inc., the Calgary-based oil and gas producer, Patricia Adams of Probe International suggested a more foreceful approach in “Why we should say no to CNOOC”:

As instruments of the Communist Party, China’s state-owned enterprises (SOEs) are undisciplined by markets or the rule of law. Without subsidies, their rate of return on equity is negative. It would be impossible to stop them from distorting the Canadian economy, so Canada should just say no to CNOOC. [Continue reading here]

“While the dispute today is over offshore gas fields in the South China Sea (and not about the takeover of Nexen),” says Adams, “the warning signs remain the same.”

 

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