Reciprocity in Canada-China Trade and Investment
The US Congressional report warning of national security risks in telecommunications equipment supplied by Chinese IT giants Huawei Technologies and publically traded ZTE has reverberated loudly in Canada. Last week, Ottawa invoked a ‘national security exception’ that could exclude Huawei from helping to build Canada’s super secure data and telecommunications network. This is notwithstanding that Huawei is already providing high-speed networks for Bell Canada, Telus, SaskTel, and Wind Mobile.
The invocation comes at a time when the Harper government has just extended the Investment Canada Act (ICA) review by 30 days beyond the initial 45-day period for CNOOC’s $15.1 billion takeover of Calgary-based Nexen that can be extended again. The bid, overwhelmingly approved by Nexen shareholders, must be determined to be of ‘net benefit’ to Canada to be approved. Speaking to reporters in Dakar, Senegal last Saturday, Prime Minister Harper said Canada wants a growing relationship with China but Chinese investments had to be scrutinized for national security.
“The relationship with China is important. At the same time, it is complex. It’s complex because the Chinese obviously have very different systems than we do, economic and political systems, and that’s why obviously some of these particular transactions raise concerns. We will ensure as a government that we have not only a growing relationship with China but a relationship with China that is in Canada’s best interests”, he said.
Hysteria generated by the US report aside, the issue comes down to distrust among Canadians of Chinese SOEs, the opaqueness of the Chinese system, and the need for reciprocity in bilateral trade and investment. Yuen Pau Woo, CEO of the Asia Pacific Foundation, remarked, “There’s a strategic mistrust for China that comes from an economic and political system that is unfamiliar to Canadians and is, in some sense, undesirable. We don’t understand the opacity and we resist the opacity of the Chinese system.”
Many Chinese SOEs are not publically traded so information disclosure is limited and for those that are, information is released only as required by the legislation. CNOOC Group is fully owned by the Chinese government whose assets are overseen by the State-Owned Assets Supervision and Administration Commission ((SASAC) under the State Council. Its subsidiaries CNOOC Ltd and China Oilfield Services are listed on the Hong Kong exchange and on the Hong Kong and New York exchanges respectively. It is CNOOC Ltd that is bidding for Nexen.
Short of a major reform of the ICA and many ideas have been aired for clarification of Canadian objectives aimed at reducing ‘politicization’ of ICA reviews, the Harper government is looking at the CNOOC bid as a special case, eschewing a direct link between it and broader access to the Chinese economy. The Globe and Mail suggests that since the signing of the Canada-China investment protection agreement last February, the Canadian government is preoccupied with the detailed drafting of that treaty and its practical effectiveness. The government may also be focused on promoting trade following the recent release of the joint Canadian-Chinese “economic complementarities” report that was the subject of a series of previous posts.
At the same time, however, the Canadian government has been canvassing the need for reciprocity in Canada-China trade and investment. In February, Natural Resources Minister Joe Oliver said any long-term strategic relationship with China would have to be based on “mutual respect, reciprocity and equality”, without going into specifics. Before going to the APEC Summit in Vladivostok Prime Minister Harper said, “we want to see this economic relationship continue to expand, but we want to see it expand where it is a clear two-way flow and clear benefits for both sides.”
Speaking at a conference organized by the Canada-China Business Council (CCBC) in Beijing last November, John Manley, President and CEO of the Canadian Council of Chief Executives (CCCE) stated that Canadians (and other foreign investors) face a raft of restrictions in key sectors of the Chinese economy. In many industries, foreign firms can only take part via JVs with Chinese companies and a number of key industries are off-limits altogether. There are also restrictions for large individual and institutional investors to invest in Chinese equity markets and although quotas have been raised for Qualified Foreign Institutional Investors (QFII), they are still quite limited in the amounts they can purchase.
Mr Manley noted: “The lack of openness is an obvious source of frustration for Canadian investors, particularly given the recent dramatic increase in Chinese investment in Canada. It goes without saying that Canadian investors ought to be afforded the same access to China that Chinese investors are afforded to Canada.”
Estimates on Chinese investment in Canada vary considerably. The Conference Board of Canada and the CCCE estimated that by the end of 2010, China had invested $14.1 billion while Statistics Canada quotes a figure of $10.9 billion at the end of 2011. Chinese figures put the amount of Canadian FDI in China at approximately $8.3-billion for 2011 while Canadian sources cite $5 billion for 2010.
China Eats A Quarter of World’s Meat
China now eats twice as much meat as the U.S. and must rein in its appetite or face a food crisis, one of the country’s leading farm experts has warned.
“It is not possible to feed everyone so much meat,” said Wen Tiejun, the dean of Renmin university’s agriculture school and a leading advocate of rural reform. “People must simply eat less.”
In the past 30 years, Chinese demand for meat has quadrupled, according to figures from the U.S. agriculture department. The country now eats a quarter of the world supply, 71 million tons a year.
Chinese farmers are unable to keep pace with demand, and imports of meat, breeding stock and animal feed have risen dramatically. Food scares have resulted from farmers attempting to bulk up their produce.
The average Chinese person still only eats half the meat eaten by his American counterpart.
– The Province
Jacques: Understand China as a Civilization State
Excellent commentary by Martin Jacques, author of When China Rules the World that caused a stir in 2009-2010 due mainly to its title. Despite the sensationalist title, the book is critical in introducing the notion of the Chinese ‘civilization-state’ to readers who are more accustomed to the Western concept of the ‘nation-state’.
There are other manifestations of the civilization-state throughout world history but the Chinese variant is the longest and most continuous. It involves history, politics, culture, language, ethnicity, but above all a Chinese identity. Although China maintains contiguous borders, the civilization-state goes beyond it to incorporate the diaspora. So, while I differ with Jacques’ interpretation of Chinese racialist views and their implications for international relations under a more China-centric world, I completely agree about the need to understand China as a different political entity with a centralized state for over 2200 years.
The Western concept of the nation-state has only been around in China for about a century since the fall of Qing Dynasty. Particularly after the founding of the PRC, the Chinese authorities have adopted it ferociously, constantly making references to national sovereignty, territorial integrity, national unity, and so on. But, in spite of that adoption and the strong rhetoric behind it, the state as a civilization, and people’s relationship to it, especially for intellectuals, remains firmly ingrained in the Chinese mindset.
Chinese people are obsessed by the centrality of the state in their lives and want to serve it in ways not simply out of patriotism. So, the best and brightest want to become officials rather than joining the private sector. This is also true to varying extents in Hong Kong and Taiwan. It’s a concept of the state going back to Confucius that views the state as virtuous and greater than the individual, standing Western conceptions fundamentally on their head. Depending on one’s political persuasion, people want to maintain, reform or revolutionize it, but the result is always very different from the West.
I also agree with Jacques on Deng Xiaoping’s invention of the ‘one country, two systems’ approach to the repatriation of Hong Kong and Macau, which has worked remarkly well in preserving their systems and character. To entice Taiwan to join the fold, they will inevitably have to act on a form of ‘one country, many systems’ that again is contrary to an integral nation-state. This will also influence China’s approach to foreign policy and international relations that is less prone to violence against other states as is the case under the US lead system.
So, over the coming decades, as Jacques emphasizes, the West must begin to understand China on its own notions of the state that will also transform the world.
World Bank Chief: Expect Aggressive Action from China to Stimulate Economy
China is likely to take “very aggressive” steps to kickstart its slowing economy after a once-in-a-decade leadership shuffle next month, the World Bank’s newly installed chief said today.
“In talking with the Chinese authorities, I’m completely convinced that they understand exactly the nature of the problem and they are taking every measure,” to boost growth, said Jim Yong Kim.
“They are going through a political change right now, and once the political change is complete, my sense is that they’ll be very aggressive in trying to restore growth,” he added.
– The Hindu
Mo Yan Wins Nobel Prize for Literature
Long awaited. Back in early 2000s, Oi Kenzaburo, one of Japan’s literary greats and a Laureate of the 1994 Nobel Prize, said it was just a matter of time for Mo Yan to get it. Mo Yan’s (pename meaning ‘do not speak’) main claim to fame is Red Sorghum that was later made into Zhang Yimou’s classic movie and Big Breasts and Wide Hips, a bizarre story about a young farmer’s fetish for breast milk among other things.
Mo Yan, whose real name is Guan Moye, is not a dissident, unlike Gao Xingjian who won the 2000 prize for his hatred of the government. It also may be Nobel’s attempt at reconciliation after awarding the 2010 Nobel Peace Prize to former nobody Liu Xiaobo. Recall Western pundits saying a non-critic of the Chinese government could never receive the Nobel Prize for either literature or peace. Others pontificated that no great literary work can emerge under an authoritarian government.
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http://www.chinadaily.com.cn/2012-10/12/content_15812079.htm—-
MacLean’s Critique of the Huawei, ZTE Witchhunt
Excellent commentary, took the words out of my mouth.
Q&A: Chinese Women’s Status and Wealth Compared to Indian
Interesting interview with Michael Silverstein, lead author of Boston Consulting Group’s new book The $10 Trillion Prize which I have previously posted on. Chinese women’s status and wealth owes a lot to Mao and China’s development policies which are way ahead of India’s, he said. He also dispells some myths about China’s one-child policy.
http://finance.fortune.cnn.com/2012/10/10/women-wealth-china-india/?section=money_news_international
Lenovo Now World #1 PC Maker
China’s Lenovo Group Ltd edged out Silicon Valley icon Hewlett-Packard Co to become the world’s No. 1 PC maker in the third quarter, according to new data released by research house Gartner on Wednesday.
A rival to Gartner, IDC, still ranks HP in the lead — but by less than half a percentage point — in terms of PC shipments worldwide. But both studies reinforce HP’s struggles against rivals as new CEO Meg Whitman tries to overhaul the stalled 73-year-old company.
– Reuters
Moderate Islam Among the Hui in Ningxia
Short but interesting excerpts from an interview of an Egyptian Islamic scholar who praises the moderate ways of the Hui Muslim minority in China.
Over the centuries, there have been few stir-ups between the Hui and the Han majority. During the Sino-Japanese War, integrated and independent Hui divisions fought shoulder-to-shoulder with the Han against the Japanese.
Since the founding of the PRC, a number of Huis have assumed high Party and government office such as Hui Liangyu, currently a prominent Vice-Premier.
At the grassroots, they are well integrated in society. The Niujie (Cattle Street) area is a major enclave of the Hui in Beijing and you often see peddlers of Hui delicacies in farmers’ markets, selling largely to Han customers.
The reference of the scholar to attempts by Saudi Wahhabiists to instill a purist and patriarchal form of Islam at the expense of native traditions in many parts of the world has basically failed among the Hui in China. Radicalized Islamic elements mainly belong to the Uighur minority in southwestern Xinjiang Autonomous Region bordering the Central Asian states.
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Over the past decade, people around the world have grown accustomed to a violent face of Islam, the extremism that a leading Islamic law expert, Khaled Abou El Fadl, described as “petrol bomber” Islam.
That extremism makes alternatives, like the more liberal traditions among the 10 million Hui Muslims in China, where female imams and women’s mosques are the norm, “more important than a lot of people might realize,” said Mr. Abou El Fadl, a professor of Islamic law at the University of California, Los Angeles.
Living far from the Middle East in an officially atheist state where they nonetheless enjoy substantial religious freedom, Chinese Hui Muslims have “remarkably untapped and underexplored rich and nuanced traditions” that would contribute immensely to global Islam if they shared more, said Mr. Abou El Fadl — although he warned those traditions may need protection from attempts by Islamic fundamentalists to radicalize them.
China’s Foreign Ministry Adds Economic Diplomacy Division
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China’s Ministry of Foreign Affairs on Tuesday established the Department of International Economic Affairs to serve economic diplomacy, which is increasingly important in China’s diplomatic blueprint. The move shows that Beijing has recognized its increasing power in the economic field and is moving forward to make better use of it, Chinese experts said. A rapidly growing number of international business disputes intertwined with political factors forced the Foreign Ministry to set up the new body to protect national economic security, they added. Foreign Ministry spokesman Hong Lei said at a daily briefing on Tuesday that the new body will assume responsibility for international economic affairs including preparation for, and follow-up actions resulting from, Chinese leaders’ attendance at significant events such as the G20 and Apec summits, and meetings of BRICS countries. The department is set to work with other Chinese government organs to make arrangements for the country to cooperate in economic and development fields within the United Nations and other international and regional cooperation frameworks, Hong said. It will also focus on research work on issues such as global economic governance, international economic and financial situation and regional economic cooperation, he added. – China Daily |