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CALGARY – Bribery, corruption and state interest trumping business logic remain common in China, and Canada must remain keenly aware of those trends as it mulls closer economic ties with the Asian superpower, says a report published Thursday.
The University of Calgary paper, titled Dancing With The Dragon, was released the same day two other reports urged Canada to take steps toward fostering more business relationships between the two countries.
As the federal government reviews China’s $15-billion bid for Canada’s Nexen Inc. — the largest foreign takeover attempt to date by the Communist country — the three publications together serve as a warning for Ottawa not to trade long-term prosperity for short-term gains.
“Those short-term gains very often create long-term pain in such a terrible way that I [have seen] the suffering of those people [who] were raking in new opportunities and then all of a sudden they dry out,” Josephine Smart, economic anthropology professor at the University of Calgary and author of the report, said in an interview.
“[An example would be] the depletion of local resources to the point where you are left with nothing. In my lifetime I don’t see Canada suffering in that way, but it is going to come eventually.”
Fear of sacrificing the future benefits of Canada’s natural resources is likely a factor in Ottawa’s ambiguous “net benefit” test of CNOOC Ltd.’s proposed buyout of Calgary-based Nexen. Prof. Smart’s paper also raises CNOOC’s status as a state-owned enterprise as a potential cause for concern.
“State influence in [Chinese] SOEs remains, and should be recognized as a significant factor in their business operations and corporate structure in a way that may not match a potential investor’s idea of free enterprise,” she wrote.
“There is an implied understanding in China that the state’s mandate must trump business logic in the final analysis.”
What the Chinese call guanxi, which her paper says pertains to “gift-giving, or, in some cases, bribery” in exchange for influence, often causes legal problems in the West. Within two weeks of CNOOC bidding for Nexen, for example, financial regulators in the United States twice froze millions of dollars over allegations of insider trading related to the Calgary company’s shares. Such developments raise questions about how a Chinese state-owned Nexen would operate given China’s “peculiar capitalism with socialist characteristics.”
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