Amid the political furor over a Chinese state-owned enterprise's takeover of venerable construction company Aecon Group Inc., it's worth recalling Beijing's last big Canadian adventure.
In 2012, CNOOC Ltd. bought oil sands producer Nexen for $15.1-billion (U.S.) – a deal that then-prime minister Stephen Harper stewed over, but ultimately approved.
CNOOC probably wishes Mr. Harper had blocked the deal. Nexen is now worth a fraction of what the Chinese firm paid.
The takeover was a bonanza for Canadian investors, who got some of their money out of the oil sands before the energy price collapse, recycling billions of dollars into other areas of the economy. And in tough times, China's continued presence in the oil patch is a source of stability.
That is, after all, exactly the way an open, market economy is supposed to work.
"The presumption has to be that this company that's doing the takeover thinks it can get more out of these assets than the Canadian owners can," says Steven Globerman, director of the Center for International Business at Western Washington University and an expert of foreign direct investment. "There is a real cost to blocking these acquisitions, denying [investors] the takeover premium and discouraging investment in the longer run."
And yet many Canadians worry about the nearly $1.5-billion (Canadian) takeover by China Communications Construction Co. Ltd. (CCCC) – not because the acquirer is state-owned, but because it's controlled by the Chinese government.
Under Canada's foreign-investment rules, Ottawa must now determine if the takeover is a "net benefit" to the country. It may also choose to conduct a full national-security review of the transaction.
On the face of it, CCCC will likely pass the first test. Aecon, which has refurbished nuclear reactors in Ontario and done several landmark Canadian projects, including Toronto's CN Tower and Vancouver's SkyTrain, has struggled against other larger, better capitalized construction companies, both in Canada and internationally. As chief executive John Beck put it: "We were too big to be small and too small to be big."
CCCC, one of the largest and most successful infrastructure builders in the world, offers Aecon much of what it doesn't have now, including financial heft, big-project expertise and global reach.
Likewise, there are no obvious grounds for a national security review. Aecon doesn't have much in the way of technology or intellectual property for the Chinese to get their hands on. Nor do the Chinese have much to learn from Aecon about building trains, towers or nuclear reactors.
And yet Chinese state-run enterprises sometimes don't act like other investors, given the country's penchant for mixing business and geopolitics. CCCC, for example, is involved in building contested artificial islands in the South China Sea to prop up Chinese territorial claims. And then there are the country's ambitious plans to extend its influence by financing a network of highways, railways and pipelines linking Asia via the Middle East to Europe and south through Africa – the so-called Belt and Road Initiative.
Likewise, there is the imbalance between Canada's relative openness and China's still heavily protected market for foreign investment and government procurement.
Canada is hardly alone in struggling to figure out what it wants from China without feeling exploited. In 2015, Australia reviewed, but ultimately okayed CCCC's acquisition of construction company John Holland Group Pty. Ltd., arguing that foreign investment is welcome as long as it isn't "contrary" to the national interest.
The key for Canada, experts say, is to use takeovers such as this one to push for more openness in China for Canadian exporters and investors as Ottawa pursues a broader trade and investment treaty.
"We should be focusing on more reciprocity," argues Ron MacIntosh, senior fellow at the University of Alberta's China Institute. "In the medium term, we should connect takeovers like this to what we want in China on procurement and for our engineering firms."
Deals such as the Aecon takeover are an opportunity to gain leverage with the Chinese, according to economist Wendy Dobson, co-director of the Rotman Institute for International Business at the University of Toronto.
"We're pretty small fish in the scheme of things, and they are a pretty big fish," Prof. Dobson points out. "The unsophisticated view on their side is that we should be pleased to do business with them, especially in an area where there aren't obvious national-security implications."
The Aecon takeover, as with Nexen, is not the place to be forging China policy on the fly.
It is, however, a vivid example of why Canada needs better ground rules on trade and investment with China – particularly as it strives to break free of its reliance on U.S. trade.