Date: Friday, 11-January-2008
New rules unlikely to affect Chinese takeovers of Canadian companies: Emerson
BEIJING (CP) - The new national security test on foreign takeovers in Canada should have little impact on China's ability to buy out Canadian firms, including in the much-eyed resource sector, International Trade Minister David Emerson said Tuesday.
The minister told reporters in a conference call from Bejing that he assured Chinese officials during his visit there that the new guidelines proposed by Industry Minister Jim Prentice were not designed to thwart Chinese investment in Canada.
"Canada is anxious to have Chinese investments in Canada, including investments from the (state-owned) China Investment Corp.," he said, adding that Chinese officials welcomed his reassurance.
He said the rules outlined by Prentice in December were not meant to discourage acquisitions from state-owned corporations, but only to ensure these companies "are operating as economic and commercial companies not as a political arm or corporate arm that is simply delivering a political strategy in another country."
Although he did not elaborate, Emerson appeared to signal that he considers Chinese investments through its sovereign wealth fund to be primarily business related, rather than political.
Responding to the high level of foreign takeovers in Canada during the past few years, the government appointed a blue-ribbon panel to study the issue last summer, but also announced in December that it would take a closer look at state-owned takeovers as part of a national security test.
Prentice announced that the guidelines would apply on the "rare occasions when foreign investments by state-owned enterprises with non-commercial objectives and unclear corporate governance and reporting may not benefit Canadians."
He gave no examples of such takeovers, but many interpreted the new rules as being directed mostly at China, a government that Prime Minister Stephen Harper had openly criticized for its human rights record.
Among other things, the guidelines will assess whether a Canadian business to be acquired by a non-Canadian, state-owned enterprise will continue to have the ability to operate on a commercial basis regarding:
-the participation of Canadians in its operations in Canada and elsewhere;
-support of ongoing innovation, research and development; and
-the appropriate level of capital expenditures to maintain the Canadian business in a globally competitive position.
The government will also consider whether Canadians will be appointed as independent directors, employed in senior management positions and whether the Canadian business or its new foreign owner lists shares on a Canadian stock exchange.
Emerson, who wrapped up his visit to China on Tuesday before heading to Mongolia, also expressed optimism that a tourism agreement with China can be signed.
But if China keeps stalling, he said, Canada will have no choice but to launch a complaint to the World Trade Organization because he said China's Approved Destination Status agreement with the U.S. and 132 other countries discriminates against Canada.
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