You have to be deeply, deeply worried for Canada’s future well-being when more than 150 of this country’s most powerful business leaders endorse a report that says our government shouldn’t interfere with Chinese state-owned enterprises (SOEs) gobbling up Canadian resource assets.
A study released by the Canadian Council of Chief Executives today (Tuesday) says there’s nothing to worry about because Chinese SOEs “are motivated by profit, not national interest,” to quote the CCCE press release.
(There’s a link in the press release to download the full study if you want to read it all.)
Quite apart from the fact that profit motive is no justification for allowing another nation to gain control of our various resource sectors, the conclusion of the study is just flat-out, eye-poppingly WRONG.
I can understand the report’s author being biased in favour of that view. Margaret Cornish is described in the press release as “a former Canadian foreign service officer who is now based in Beijing as Chief Representative and Senior Advisor of Bennett Jones Commercial Consulting Inc.”
Bennett Jones Commercial Consulting, by the way, is a creature of Calgary’s Bennett Jones law firm, one of the biggest legal players in Canada’s energy sector with a ton of heavy-hitting politicos in the boardroom and with hundreds of lawyers in branch offices in the Gulf States as well as across Canada and in China.
So it’s Margaret Cornish’s JOB to drum up business in Beijing and it’s Bennett Jones’ BUSINESS to encourage all those Chinese SOEs (with their billions of trade-surplus dollars to invest) to come to Canada and make profitable use of BJ’s expertise in Canadian law and the oil patch.
But why o why o why would the 150 most savvy business executives in Canada — bank heads, the country’s major manufacturers, presidents and CEOs of oil and mining companies, the honchos of financial conglomerates and telecom consortiums — buy into it?
I’m talking about people like Scotiabank CEO Richard Waugh, Bell Canada CEO George Cope, Barrick Gold CEO Aaron Regent, Bombardier chairman Laurent Beaudoin, Cadillac Fairview CEO John Sullivan, CPR CEO Fred Green, Chrysler Canada CEO Reid Bigland …I’m out of breath already and I’ve only scratched the surface of A, B and C in the list of CCCE members.
The list goes on and on: Deloitte & Touche, Dow Chemical Canada, du Pont Canada, Ford Canada, GE Canada, Husky Energy, IBM Canada, Imperial Oil, Loblaw, 3M Canada, Manulife, Power Corporation, Rio Tinto Alcan, Royal Bank, Shell Canada, SNC-Lavalin, The Woodbridge Company (Thomsons, you know).
And more than 120 other major players in corporate Canada.
These men and women are supposed to KNOW the inner workings of the real world of finance and economics and markets and monopolies and profit and power. And they have well-paid advisors to tell them what they don’t already know.
And yet they put their stamp of approval on a study that concludes that China’s SOEs are just good, old-fashioned, money-grubbing capitalists who are “profit-driven to their core” and are “much like their private sector counterparts in Canada?”
They’re promoting a study that “challenges the widespread perception that Chinese SOEs are primarily motivated to serve Chinese national interests and foreign policy” and urges the federal government “to avoid politicization of the (foreign investment approval) process.”
Surely these Canadian business leaders know that China’s national interests are a central driving force of the SOEs that are pumping billions into the Canadian oil and gas sector and trying to gain control of other resource areas like Saskatchewan’s potash mining industry.
By calling it “a widespread perception” the report is suggesting the “perception” is false; it’s not. And the use of the word “politicization” is trying to make prudent government oversight of Canada’s natural resource sectors seem somehow tainted and unwholesome.
Of course China’s state-owned enterprises are profit-oriented too. But their timeframe for making a profit isn’t one or two quarters in 2012 or even two or three years down the road. Their timeframe is decades, half-centuries in some cases of long-term planning. Right now, China’s economic focus is on growth. Profit will come later.
The scale and rapidity of China’s economic growth is unbelievable — and its appetite for energy and raw materials to feed that growth is ravenous.
Canada’s not the only resource-rich country on China’s wish list: Chinese SOEs are investing heavily in the U.S. gas and oil sector, in Indonesia, in Brazil, in the Congo — everywhere that has mineral and energy resources for sale.
Don’t Canada’s CEOs even read Forbes magazine? I thought that was recreational reading for anyone with an MBA.
Here’s a Forbes.com headline from Feb. 12: “China Is Hoarding Copper. Why?”
Turns out that even though China has a glut of refined copper and its industrial demand for the metal is currently falling, Chinese SOEs are buying up more and more copper at inflated prices.
Why? Well maybe it’s because China’s master planners foresee a longterm shortage or maybe it’s because China would rather invest in hard metal and crude oil than soft U.S. treasury bonds and even squishier Euro Zone paper.
But Forbes is suggesting the buying spree in copper and other metals has more to do with China’s enormous trade surplus and next-leader Xi Jinping’s just-concluded state visit to the U.S. where the Obama administration put heavy pressure on Xi to buy more of anything to temper that trade surplus at least a little bit.
“Those discussions would be more troublesome for Xi if it were not for China’s large copper purchases, because then its trade surplus would have been even more off-the-charts,” Gordon G. Chang writes in Forbes. ”And so it’s no surprise that, at the moment, Chinese enterprises are on buying sprees for other commodities, especially crude oil.”
Who does Beijing turn to when they want to make adjustments to China’s “national interests and foreign policy” on such issues as trade imbalance? Why, those “profit-driven-to-their-core” state-owned enterprises, of course.
There’s a reason why the state OWNS them, you know. It’s because the state CONTROLS them. They are, for all intents and purposes, part of the government. They are instruments of Chinese government policy and do what they are told.
That’s just a fact and anyone with half a brain should know and accept that.
Doesn’t mean you have to like it or even do business with a SOE, but you really have to accept the reality of the situation.
Now I can see why the report’s author might find reasons to take a different view.
But I honestly can’t see why the CEOs of Canada’s largest, most sophisticated, most powerful corporations would go along with the gag.
They should know better.
And we should be asking what they’re doing running the country’s economy if they don’t.