Behaviour of Chinese SOEs: Implications for Investment and Cooperation in Canada

Published: February 2012    |    By: Margaret Cornish

Summary

After decades of expansion into emerging markets around the world, Chinese firms (both SOEs and entrepreneurial) are seeking to invest in OECD countries across a wide range of industries. The relative scale of the capital available for overseas investment, the interest in resource assets, and the importance of our trade with China all make this a critical issue for Canada. Misconceptions about the nature of Chinese state-owned enterprises (SOEs) delay and undermine efforts of both Canadians and Chinese sides to promote mutual understanding. The popular debate reflected in the media suggests widespread, if not clearly articulated, uncertainty about the purpose and operations of SOEs. In China these assumptions are challenged by a range of business people, industry observers, and government officials. Far from exerting unfair advantage over global competitors, Chinese SOEs are perceived to have faced undue resistance in OECD markets based on misconceptions of their purpose and behaviour. At the policy level, misperceptions about SOEs can influence the analysis of net benefit. These same misperceptions have an unproductive impact in commercial relationships as well.

The purpose of this paper is to narrow the range of misunderstanding. To the extent the purpose and behaviour of Chinese SOEs correspond to that of foreign investors, they should be treated in a like manner. To the extent that the ways in which they differ pose risks to Canada and local communities, even potentially, remedies should be considered. Investments in Canadian resources by Chinese SOEs offer an opportunity to Canadian firms (and governments) to accelerate this adaptive process of augmenting existing supply chains, managerial networks, and sources of technology. At the same time, Canada is in a position to assist Chinese resource SOEs in demonstrating that they are able to successfully operate in an OECD-level regulatory system for environmental protection, labour standards, and health and safety.

About the Author

Margaret Cornish serves as Senior Advisor (China) and Beijing Chief Representative of Bennett Jones Commercial Consulting Inc. Based in Beijing, she helps assess opportunities to serve clients and prospective clients in Canada- China investment, trade and other transactions, and provides liaison and a point of contact in Beijing. Margaret began her career with the Canadian foreign service. Her postings abroad included Beijing, New York and Brussels. She subsequently joined the Bank of Nova Scotia where she worked on sovereign debt restructuring. Margaret later joined Scotia Capital Markets where she provided award-winning research coverage on a wide range of Canadian industrial companies in the manufacturing, automotive, steel, building products, engineering and heavy equipment industries. From 2003 to 2007 Margaret served as Executive Director of the Canada China Business Council, the leading Canadian bilateral business organization dealing with China. Margaret has served as a member of the Economic Council of Canada and has been an adjunct professor in the business schools at Queen’s University and Wilfred Laurier University.