Rant Against “China’s Economic Imperialism”

Posted by david on Jan 20, 2013 in Blog | 0 comments

A recent diatribe in Business in Vancouver was full of anti-China bile.  Within a few short paragraphs, the author called China a neo-economic imperialist, a dangerous and remorseless dictatorship, an anti-democratic rogue state, a currency-manipulator, and an industrial spy-master, not to mention laying into Mao as a mass murderer.  And, in the wake of the Harper government’s approval of CNOOC’s Nexen takeover deal, he lambasted that Canada is “kowtowing to Chinese economic imperialism without a peep”.  Wow! Such putrid stuff from a guy still lamenting the end of the Cold War.

The point of this post is not to respond to his pubescent outbursts and unsubstantiated rants that the author himself writes “comes straight from a gnarled, bitter heart”.  However, his tirade against the Nexen deal deserves a thorough rebuke.  Citing a Alberta civil liberties writer, he suggests the takeover is inherently bad for Canada and CNOOC could trample the objections of the BC government, the First Nations and environmental critics if it became a lead partner or major investor in the proposed Northern Gateway pipeline.  What a load of bunk! 

The Globe and Mail reported last December that prior to approving the CNOOC takeover, the Harper government had negotiated a framework under which CNOOC would submit annual reports to Industry Canada on meeting commitments under the Investment Canada Act (ICA).  Although the company did not include binding capital spending commitments beyond the roughly $3 billion a year Nexen spends on oil and gas development, CNOOC has promised to list on the TSX, retain Nexen management and employees to the largest extent, and support oil sands research and social and community projects currently pursued by Nexen. 

CNOOC would also base its new headquarters for North and Central America in Calgary as well as incorporating Nexen’s Canadian and American operations and CNOOC’s own multi-billion dollar assets in the region. CIBC World Markets, cited in the G & M article, expects Nexen to spend as much as $3.9 billion on capital projects in 2013.  Nexen has assets around the world, including Long Lake oil sands and BC Horn River’s unconventional gas fields.  It also has projects in the North Sea, Gulf of Mexico, and Yemen.   

Following its decision to approve Nexen, the Harper government insisted that it still welcomed investment from foreign SOEs, whether Chinese or other, but only as joint ventures or minority interests in the oil sands.  Soon after, PetroChina announced that it would take a $2.2 billion 49.9% stake in the rich Encana shale gas project.  By taking a minority position, the partners would be able to circumvent stringent reviews under the new restrictions.  But, the Harper government said that it is examining the proposed deal to see if review is necessary under national security provisions of the ICA.

A recent Canadian Defence and Foreign Affairs Institute (CDFAI) policy paper Feeding the Hungry Dragon made a fair assessment of CNOOC’s foray into Canadian oil sands: “The relatively small role that Nexen plays in the oil patch, the limited size of its assets in Canada, the insignificant amount of Chinese investments in Canada in proportion to total FDI and the fact that any investor, Chinese SOE or otherwise, has to operate within the framework of established laws and regulations that exist in Canada should help put this debate into context.  However, resource nationalism can trigger knee-jerk reactions bordering at times on the irrational.  As a result, political decisions may be made that are not soundly rooted in economic realities.”

In a following post, I will focus on supposed veiled threats of ‘Chinese economic imperialism’ and the contention that although Nexen is a done deal, Canada should not welcome more Chinese investment in and out of the oil and gas sector. A recent backgrounder by the Washington-based conservative think-tank Heritage Foundation points to China’s global reach that presents it with numerous opportunities for where to invest beyond North America.