Home
Spectators
Alan Kohler

Robert Gottliebsen

Stephen Bartholomeusz

Stephen Koukoulas

Jessica Irvine

Rob Burgess

Steve Keen

Michael Gawenda

Oliver Marc Hartwich

Ben Potter

John Lee

Tristan Edis

Supratim Adhikari

Jackson Hewett

The Distillery

Scoreboard

Keith Orchison

The Conversation
Alan Kohler
Alan Kohler is one of Australia’s most experienced commentators and journalists. Alan is the founder of Eureka Report, Australia’s most successful investment newsletter, and Business Spectator, a 24-hour free business news and commentary website. He also hosts Inside Business, a half-hour Sunday programme on the ABC, is the finance presenter on the ABC News - and producer of the nightly graph (or two).
Economy
Australian News

Global News
European Crisis

Global Financial Crisis

US Economy

Asian Economy

China

Commodities

Interest Rates

Tax

Productivity

Leadership

Innovation

Reserve Bank of Australia
Latest stories
INSIDE INVESTOR: How central banks created the stock market rally
The debate on Reserve Bank cuts is alive again. On the one hand rate cuts have boosted the stock market, but many parts of the economy remain weak.
Why fiscal faults should not spell Europe's doom
Solely economic arguments for the European Union are largely futile, but politically and sentimentally the union still makes a lot of sense.
Markets
ASX
ASX Indices

Major ASX stocks

Markets Spectator

Breakfast Deals

Currency

ETFs
Latest stories
MARKETS SPECTATOR: Rotation restraint
State Global Advisors says it’s not yet time to rotate out of banks and into resources, even if valuations look stretched for the big four.
SCOREBOARD: QE confusion
Uncertainty over US economic policy continues to confuse markets, but Fed speeches this week should bring more clarity.
Politics
Australian Election

Federal Budget

International News
Asia

Europe

USA

National Affairs
Latest stories
Is a Combet vs Shorten battle brewing?
The first shot may have been fired ahead of a potential post-election Labor leadership battle between likely candidates Bill Shorten and Greg Combet – and the battlefront could be climate policy.
Educated hopes for Gillard’s Gonski reforms
Barry O'Farrell's support gives some hope for the Gonski reforms, but Labor’s message is diminished by what's now generally assumed to be its terminal position.
Technology
NBN Buzz

Mobility

BYOD

Smart Devices

Emerging Tech

Applications

Big Data

Cloud Computing

Data Management

Reviews

Social Media

Start-ups

Security

Data Security

Identity Management

Wireless Security

Telecommunication
Latest stories
Making sense of Yahoo's Tumblr acquisition
Yahoo's $1.1bn acquisition of Tumblr is more than an attempt to "buy hipsters". In fact, Yahoo needs content platforms to fuel its growth and it seems Tumblr proved to be a prime candidate.
REVIEW: Samsung Galaxy S4
Samsung's latest smartphone is full of tips and tricks to help differentiate it from the sea of other Android-operated devices. Yet these "key features" come off more as marketing gimmicks than advances in smartphone technology.
Climate
Carbon markets

Energy markets

Renewable energy

Resources

Solar energy

Wind power

CleanTech

Science & Environment

Green Deals

Policy & Politics

Smart Energy
Latest stories
Small glaciers, big impact
Studies show there's another ice reserve to worry about besides the vast Greenland and Antarctic ice sheets.
Energy industry: Solar households freeloading off the poor
The industry body for the energy supply sector has launched a withering attack on solar, one riddled with myths and short on facts.
Industries
Advertising and Marketing

Agribusiness

Automotive

Aviation

Construction and Engineering

Education

Family Business

Financial Services

Food and Beverages

Gaming and Racing

Health and Pharmaceuticals

HR

Industrial relations

Information Technology

Infrastructure

Insurance

Manufacturing

Media and Digital

Resources and Energy

Professional Services

Property

Retail

Telecommunications

Transport and Logistics

Small Business (SME)

Tourism
Video
CEO Hub

KGBTV

Leadership Lab

Management Insights

Young Leaders

EurekaTV
Latest videos

How to build a service business in China

King and Wood Malleson's China Partner David Olsson explains how Australian companies can tap into the huge demand...

KGB: ANZ CEO , Mike Smith

KGB: Mike Smith
Knowledge Centre
Investment Tips

Webinars

eBooks
Featured stories
Download the December CEO Pulse survey
CEOs outline changing views on corporate spending and profits, their economic expectations and political dissatisfaction, including advice for Julia Gillard and Tony Abbott.

TECHNOLOGY SPECTATOR: The audacious app trying to take over TV
UK-based Zeebox wants to be the intermediary for all social media-television interactions. It will not only have to lure viewers, but the networks themselves.

Putting the squeeze on Chinese investment

Christopher Mason10 Dec 2012, 10:33 AM

CNOOC just landed a $14.6 billion takeover of Canada’s Nexen, but Australia will be watching closely to see if new Canadian rules for state-owned enterprises chill the flow of foreign capital.

You must be logged in to read this article

Not a member yet? Register today ›

Business Spectator is available on all of your devices so you can access the latest news and commentary where and how you like

Register now ›

Australian politicians grappling with how to answer the Chinese foreign investment question were presented with an interesting case study over the weekend.

The Canadian government approved the $C15.1 billion ($A14.6 billion) takeover bid by state-owned China National Offshore Oil Corp for Canadian oil and gas producer Nexen Inc, which marks China's largest-ever foreign deal. In the same stroke it approved a $C5.2 ($A5.0 billion) billion bid by Malaysia's state-owned Petronas for Canadian natural gas producer Progress Energy Resources Corp.

The bids had been hanging in the balance for months as the Canadian government struggled to reconcile how it would approach growing state-owned foreign investment interest in its energy sector, and deal with what was predicted to be a flood of Chinese foreign investment into Canada if the CNOOC bid was approved.

The solution it came up with represents a bold attempt to draw a line in the sand on state-owned foreign investment that is worth noting for those watching China's moves on Australian energy and agricultural assets.

Canadian Prime Minister Stephen Harper said the CNOOC and Petronas deals would mark an end to state-owned foreign companies being treated the same as private foreign companies. In the future, takeover offers from state-owned foreign companies will face a higher threshold for approval compared with takeover offers from private companies.

"Canadians generally, and investors specifically, should understand that these decisions are not the beginning of a trend, but rather the end of a trend,” Harper said at a hastily-organised press conference. "When we say that Canada is open for business, we do not mean that Canada is for sale to foreign governments.”

Under the new plan, privately-operated foreign companies will face a government net benefit review if a takeover is valued at $C1 billion or more. But state-owned companies will face government reviews for deals worth $C330 million or more.

Also, state-owned companies will have to satisfy the Canadian government that their investments in all sectors are commercially oriented and free from political influence. They will have to adhere to Canadian laws and implement standards and practices for "sound corporate governance and transparency”, as well as agreeing to make "positive contributions ... to the productivity and industrial efficiency of the Canadian business.”

This all comes as a response to the fact that foreign state-owned companies represented 20 per cent of all takeovers reviewed by the Canadian government in 2011, up from nearly zero in 2008.

The Chinese government in particular will be pressured to remove barriers preventing Canadian companies from moving into the Chinese market.

Harper is trying to send a clear message to investors, that although Canada's oil sands are in need of significant foreign capital, Canada will be picky in choosing where that capital comes from.

"To be blunt, Canadians have not spent years reducing the ownership of sectors of the economy by our own governments, only to see them bought and controlled by foreign governments instead,” he said. "The government's concern and discomfort for some time has been that very quickly, a series of large-scale controlling transactions by foreign-owned companies could rapidly transform this [energy] industry from one that is essentially a free market to one that is effectively under control of a foreign government.”

Currently, Canada's oil sands account for 60 per cent of the world's oil production that is not under the control of national oil companies. As assets in other parts of the world are snapped up, Canada fully expects state-owned companies elsewhere to increasingly turn their attention to Canada.

"The government of Canada has determined that foreign state control of oil sands development has reached the point at which further such foreign state control would not be of net benefit to Canada,” he added.

While there is a segment of Australians who would love to hear those words coming from the mouth of Prime Minister Julia Gillard, Canada's stance on this issue comes with significant hurdles.

For one, Harper has made bolstering economic relations with Asia – and China specifically – a major focus of his government. This decision will presumably dampen the flow of Chinese capital into Canada and cause a number of Chinese business and political leaders to question the mixed signals coming from Canada.

One keen observer of Chinese investment in Canada is Felix Chee, who heads the China Investment Corp's Toronto office. He convinced the CIC that the massive sovereign wealth fund should open their first overseas branch in Canada, over Australia, the United States and Britain, and is a major player in determining the outlook of Chinese foreign investment in Canada.

"I am pleased to see the [Nexen and Progress] deals approved,” Chee told the Globe and Mail newspaper. "But going forward one would expect Chinese companies to re-evaluate their investment plans in Canada to ensure they can still make desirable investments under the new rules. What remains to be seen is whether the flow of inbound investment from China will be lower.”

Also, in targeting Asian state-owned enterprises, Harper risks casting the net too wide. Because the new rules apply to all state-owned companies, firms such as Norway's Statoil will fall under the new rules. Statoil has major investments in North America and hasn't previously ruffled Canadian feathers with its activities. But a company like Statoil may give Canada a second thought if it feels Norwegian capital is not welcome.

Harper has been under pressure to clarify Canada's foreign takeover rules since he blocked the sale of Potash Corp to BHP Billiton in 2010. Although this latest move stakes out Harper's ground on the issue of state-owned foreign investment, it leaves a great deal of uncertainty about how that will be carried out.

It will also do little to appease corporate Canada, which has been pushing for clear and predictable rules that would allow businesses to assess their chances of getting approval before initiating a takeover.

That hasn't yet happened. But for Australians trying to determine how domestic policies on Chinese foreign investment will affect Australia's role in the 'Asian Century', China's next move in Canada will be worth watching.

The Spectators

Nothing terminal in a US gas export eruption
Stephen Bartholomeusz 17 min ago
Fears that the US liberalising of natural gas exports poses a dire threat to Australian LNG projects are likely overblown, with the gap between American and international prices set to narrow.
MARKETS SPECTATOR: Rotation restraint
Brett Cole 2 hours ago
State Global Advisors says it’s not yet time to rotate out of banks and into resources, even if valuations look stretched for the big four.
Energy ideas under the burner in Brisbane
Keith Orchison 2 hours ago
Energy industry eyes turn to Brisbane this week where the sector will seek answers from Gary Gray on why developments are being burdened by government.

Index	Last	Chg	% Chg
DOW JONES	15354.40	+121.2	+0.8
S&P 500	1667.47	+17	+1
NASDAQ	3498.97	+33.7	+1
FTSE 100	6723.06	+35.3	+0.5
NIKKEI	15138.12	+100.9	+0.7
Hang Seng	23082.68	+38.4	+0.2

Latest stories

Latest stories

Latest stories

Latest stories

Latest stories

Latest videos

Featured stories

Putting the squeeze on Chinese investment

You must be logged in to read this article

Not a member yet? Register today ›

Already a member? Sign in here

More from Christopher Mason

Related articles

More from Business Spectator

Information

Policies

Advertising

BS Main menu

User login