Under trying relations with China, Canada is getting a better appreciation of how China’s state-owned enterprises (SOEs) can damage foreign economies and threaten national security.
Duanjie Chen, a senior fellow with the Macdonald-Laurier Institute and an expert on China’s SOEs, said in an interview that they are tools the ruling Chinese Communist Party (CCP) uses to achieve its “dream of global hegemony, through which China could rewrite international norms to its liking.” This would mean conducting business not by the rule of law, but by underhanded means like corruption.
With SOEs being the backbone of the Chinese economy, the ruling communist regime can be far more efficient in influencing it, Chen explained.
The Canadian Security Intelligence Service (CSIS) tabled a report on June 20—without mentioning China—about SOE acquisitions in strategic sectors that threaten espionage, foreign influence activities, and illegal transfers of technology and know-how.
“CSIS expects that national security concerns related to foreign investments in Canada will continue, owing to the increasingly prominent role of SOEs and state-linked private entities in the economic strategies of some foreign governments,” according to the report.
Chen says everyone understands CSIS is talking about China. “The fundamental fact is that China is the only country that uses its SOE globalization to build up its government hegemony,” she said. “Only if you could find another country acting like China would you want to question CSIS why it didn’t name names.”
After the Canadian government rejected the takeover of Aecon by a Chinese SOE last year on national security grounds, a new challenge may come in the precious metals sector. On June 20, Bloomberg reported that China National Gold (CNG) was mulling a stake in mid-cap gold miner Iamgold.
CNG’s origins have ties to the People’s Liberation Army—like Huawei. The SOE is the second-largest Chinese gold miner.
Iamgold currently operates four mines, with one being in Canada. It has been a laggard among Canada’s gold miners—its stock down 40 percent in the last year. With the wave of consolidation in the industry, Iamgold has remained standing, likely due to difficulties at its Westwood mine in Quebec. New ownership would have to deal with significant operational challenges.
“It’s easier to grab any foreign company that is in desperation,” said Chen.
Chinese SOEs do not think or act like free market private firms. They aim to gain market share before worrying about profitability, explained Jack Mintz, President’s Fellow at the University of Calgary’s School of Public Policy, in a prior interview.
