Canada Worried by China Buying its Resources

Canada Worried by China Buying its Resources

Story by David Ljunggren, Reuters News Service

January 27, 2005

FREDERICTON, New Brunswick - Canada is concerned by the prospect of China buying up its natural resources firms and is reviewing tougher investment safeguards, Industry Minister David Emerson said on Wednesday.

Critics say that Ottawa should take steps to ensure that control over a large chunk of Canada's natural resources does not pass over to a China hungry for foreign commodities.

"I have heard general concerns expressed -- and I think I share some of those concerns -- that when you have state- owned enterprises such as enterprises owned or controlled by the government of China, that they may not be entirely market motivated," Emerson told reporters.

"That gives rise to issues that would be of some potential concern to us. That's not to say that we would not welcome Chinese investment in Canada or Canadian resource industries. It's simply to recognize that we would need some undertakings," he added.

China Minmetals Corp., the state-controlled metals trading giant, is in talks with Toronto-based Noranda Inc. about a possible takeover of the base metals producer.

Sinopec and PetroChina are keen for a deal with pipeline operator Enbridge Inc., which is seeking Chinese buyers for crude oil to be shipped via a planned line to the Pacific coast.

"When you expose yourself to potentially substantial parts of a given sector being taken over by a foreign government, then you have to start asking questions about at what point does that kind of dominant control of a particular sector become a matter of national interest," Emerson said.

Last week in Beijing, Prime Minister Paul Martin signed agreements aimed at boosting co-operation between the countries in oil and mineral exploration.

But Martin is under pressure from the left-leaning New Democrats -- the party keeping his minority government afloat -- to ensure Canadian sovereignty is not harmed. Emerson said he was looking at how to strengthen the Investment Canada Act to protect Canadian interests when foreign entities bought domestic firms.

"We would probably want to ensure that these companies were open and transparent and, ideally, continue to be publicly traded," said Emerson, adding that if the act were changed it would be within the next year.

"We have to ensure that -- particularly in the case of non- renewable resources -- we're not just willy nilly unloading our natural resources without ensuring full benefits to Canada as a result."

Ottawa was also reviewing whether to amend the act to give Parliament more control over the merger process. The government currently has to approve any merger worth more than around C$250 million ($200 million).

"There is some question in my mind as to whether we might not want to have the option of review on smaller transactions that may be of a very strategic nature," said Emerson. (US$1=$1.23 Canadian)