Report carries warning to Canada about China's state-owned enterprises

CALGARY, June 6, 2013 /CNW/ - Many of China's state-owned enterprises (SOEs) are among the world's most powerful companies. One such company, CNOOC, recently received federal approval for the acquisition of Canada's Nexen Inc. But SOEs are enigmatic, as shown by a report published today by The School of Public Policy.  Author Duanjie Chen reveals the make-up of these government-controlled businesses and argues that Canada should avoid fostering their growth.

Chen describes SOEs as "a very powerful tool of the Chinese government's industrial policy, which is aimed at a ruthless expansion of its global economic empire." SOEs have seen spectacular growth over the last two decades, driven by the Chinese government, which provides cheap or free business inputs in order to create globally dominant corporate powers in areas of strategic importance to the country. However, Chen argues that strategy comes at a high price: lower priority on human rights, the environment, social justice and corporate rectitude. This disregard is not something the Canadian government should encourage, she argues.

Chen also challenges the claim that SOEs can be likened to Canadian Crown corporations. For one, Crown corporations are created to remedy market failures for essential services; China's SOEs are meant to chase profits. Chinese SOEs also aren't publicly accountable the way Crown corporations are.

As a matter of policy, Chen advises the Canadian government to uphold the position it announced following the CNOOC-Nexen deal: to end the trend of takeovers of Canadian businesses by SOEs. Rejecting these acquisition attempts would reflect Canadian business principles.

"Canada's business sector should contribute to market-driven economic growth, through efficient management and upright corporate behaviour. It should not be allowed to become an instrument in China's distorted and often disreputable drive toward global hegemony," Chen writes.

The report can be found at www.policyschool.ucalgary.ca/publications

SOURCE: The School of Public Policy - University of Calgary

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