OTTAWA \u2014 While saying a rejection of the proposed acquisition of Aecon Group Inc. would spur a \u201csharp reaction\u201d from China, the former director of the Canadian Security Intelligence Service (CSIS) warned that the deal would threaten Canada\u2019s national security.<\/p>\n
Ward Elcock said Wednesday that it would be extremely hard for Ottawa to draw specific parameters around the $1.5-billion Aecon deal that would both act as a fail-safe against national security threats while also allowing the company to operate in Canada\u2019s free market system.<\/p>\n
\u201cIn that context it seems to me that it\u2019s very difficult for the government to approve the Aecon acquisition without incurring significant risk to national security,\u201d he said. <\/p>\n
Elcock said it would \u201ccertainly not be my recommendation\u201d to allow the deal to move ahead, and pushed back against the notion that Canada could effectively monitor the proposed Chinese buyer of Aecon through intelligent policy restrictions that effectively limit its powers.<\/p>\n
\u201cIt will not make them anything other than an opaque entity operated entirely in accordance with the goals of the state of China,\u201d he said.<\/p>\n
Experts say Chinese state-owned enterprises (SOEs) function directly as an arm of the Communist Party of China in its broader geopolitical manoeuvring, and that those enterprises are compelled to act on behalf of the state if asked.<\/p>\n
Aecon has repeatedly rejected fears around the proposed takeover, saying Canada’s construction sector is already inundated with foreign conglomerates from Europe, the U.S., South Korea and elsewhere. <\/p>\n
China Communications Construction Co. (CCCC) proposed to buy the Canadian construction firm late in 2017, kicking off heated debate in Ottawa over whether the deal would give the SOE access to sensitive national data. Canadian construction firms also say the takeover would allow the company to use its state-backed financial heft to outbid local companies on key contracts.<\/p>\n
Cabinet subjected the deal to a full national security review in February.<\/p>\n
Elcock also said a rejection of the deal could lead to a \u201csharp\u201d response by China, potentially through soft moves like restricting Chinese residents from visiting Canada, in turn damaging its China-dependent tourism industry. Other experts warn that it would lead to a broader pullback of Chinese capital investment into the country, or that it could sour Canada-China free trade talks, which have yet to begin in earnest.<\/p>\n
His comments came as part of a panel discussion hosted Wednesday by Ottawa-based think-tank Macdonald-Laurier Institute (MLI).<\/p>\n
Duanjie Chen, a senior fellow at the MLI who has closely studied past Chinese takeovers, warned that China has \u201ccreated monsters\u201d over recent decades in the form of SOEs with the explicit intention of expanding its reach into developed countries through acquisitions.<\/p>\n
\u201cIt\u2019s not aiming at profit but market share \u2014 particularly in developed countries,\u201d she said.<\/p>\n
A growing number of developed nations including Canada, Australia, the U.K. and others, have levelled allegations against China in recent years for influence peddling and political bribery. SOEs often lay the groundwork for that influence, experts warn.<\/p>\n
\u201cWe could harm ourselves if we insist on opening our doors widely to a state who does not believe in the private property rights and free market system, but is using its SOEs in the disguise of commercial entities.\u201d<\/p>\n
China\u2019s centrally-owned enterprises have grown rapidly in recent decades, with the value of its overseas assets growing from around US$79 billion in the 1990s to more than US$900 billion today.<\/p>\n
That growth is part of a mammoth plan by China in recent years to expand its global influence, most visible in its Belt and Road initiative that aims to dramatically expand its road, rail and sea ties with the rest of the world.<\/p>\n
CCCC is central to the undertaking, according to analyst reports, and is China\u2019s largest financial beneficiary of the plan.<\/p>\n
Charles Burton, an associate professor at Brock University and a former Canadian diplomat who served in China, said Canada could suffer financially if it rejected outright any foreign investments by Chinese SOEs. <\/p>\n
\u201cThat said, clearly we need to exercise more caution than the current government is currently exercising,\u201d he said.<\/p>\n
Burton also pointed to the checkered history of CCCC’s operations abroad, which has been used as an argument against the deal. In 2011, CCCC was barred from bidding on any World Bank-backed road or bridge projects due to various fraudulent practices. <\/p>\n
In a speech this month, Chinese ambassador to Canada Lu Shaye called on Ottawa not to \u201cdemonize\u201d Chinese SOEs, saying there was \u201cextreme nervousness\u201d around the Aecon takeover. He said Canada viewed Chinese takeovers with \u201ctinted glasses\u201d and said it ought to \u201creplace stereotype with a realistic attitude\u201d toward China.<\/p>\n
In an earlier interview, Lu insisted China would not punish Canada if the deal was rejected, but said it would expect a detailed explanation for the decision.<\/p>\n","protected":false},"excerpt":{"rendered":"
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