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Tthe Potash case was cited repeatedly during discussions with Chinese businiess leaders on Canada’s investment climate,

It has been a year since a hostile takeover of Potash Corp. of Saskatchewan Inc. was vetoed under the Investment Canada Act. But for people working with high-level mining and energy deals involving Chinese companies, it still feels far too fresh.

"Chinese companies that are looking to invest in Canada do not want to become a Potash-like story themselves. Face and company reputation are important," said Peter Harder, president of the Canada-China Business Council.

"They are global players, they are professionals. They don't want to be sideswiped by a political issue that gets ahead of the management process," he said in an interview in Beijing this week as Canadian and Chinese executives gathered for the council's annual general meeting.

The Potash case was cited repeatedly during discussions of Canada's investment climate, particularly as it relates to Chinese companies investing in Canadian natural resources such as Sinopec International's $2.2-billion bid for Calgary-based Daylight Energy Ltd. last month.

The Chinese energy giant also holds a 9-per-cent stake in Syncrude Canada Ltd., and has been identified as a financial backer of Enbridge Inc.'s planned Northern Gateway pipeline.

Attesting to the company's sensitivity about its dealings in Canada, Sinopec president Geng Xianliang spoke in a session at the general meeting on condition that news media were removed from the room, and declined interview requests.

While Australia's BHP Billiton's ill-fated bid for Potash Corp. was an attempt at a takeover, many Chinese companies are seeking only minority stakes in Canadian ventures. But these massive Chinese corporations are generally state-owned, or at least state-connected, raising questions about Canadian sovereignty over its own resources. The Investment Canada Act reviews significant bids by non-Canadians for Canadian resources "to ensure such benefit to Canada," a provision often criticized as subjective.

No current members of the Canadian government were present at the business group's general meeting, but former trade minister and former Treasury Board president Stockwell Day was in attendance.

"[Saskatchewan]and its Premier were vociferous that the deal should not go through," Mr. Day, now head of his own government-relations firm and an Asia-Pacific Foundation fellow, recalled during a panel discussion. "There is a responsibility that is constitutionally split between the federal and provincial governments … so all of those things have to be taken into consideration."

Later, he suggested the Potash Corp. case was blown out of proportion. "Most people understand there have been 1,689 acquisitions that have come before a review board in the last 23 years and two have been turned down. I believe Canada boasts the strongest record of democratic countries in terms of looking for investment," Mr. Day said in an interview.

"The opportunity is real, the potential to bring prosperity to their investors and to thousands of workers is a reality," Mr. Day said.

But critics cite the 2005 case of China Minmetals , also a state-owned enterprise, which was believed to have backed away from its interest in Falconbridge Ltd. over concerns of a lengthy review process. The Toronto-based company was later taken over by Switzerland's Xstrata.

"It will be helpful for the government to be clear on what its policy is going to be," said John Manley, a former federal industry minister who is now president of the Canadian Council of Chief Executives. "You don't want to surprise the Chinese government with what your intentions are."

The business council's Mr. Harder said a rational review process under the Investment Canada Act is essential. "The problem I had with the Potash decision is that it was so baldly political," he said. "It would be important to get back to a rational review process even if we didn't have clarification on the rules. … Another perceived political decision would have a very negative impact on the marketplace."

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