Canadian International Council

Canadian International Council

February 21, 2012 12:32 ET

Chinese State-Owned Enterprises Are Motivated by Profit, Not National Interest, Study Concludes

TORONTO, ONTARIO--(Marketwire - Feb. 21, 2012) - Multinational corporations owned by the Chinese government typically operate not as puppets of the state or the Chinese Communist Party but like any other commercial firm, a new study concludes.

In fact, Chinese state-owned enterprises (SOEs) are "profit-driven to their core", writes Margaret Cornish, a former Canadian foreign service officer who is now based in Beijing as Chief Representative and Senior Advisor of Bennett Jones Commercial Consulting Inc.

In a report published jointly today by the Canadian Council of Chief Executives (CCCE) and the Canadian International Council (CIC), Cornish challenges the widespread perception that Chinese SOEs are primarily motivated to serve Chinese national interests and foreign policy.

For example, critics often suggest that Chinese state-owned energy and mining companies are less concerned with generating profits than with locking up supplies of national resources for China's own use.

In practice, Chinese SOEs operate much like their private sector counterparts in Canada and elsewhere - buying and selling oil and minerals on a regional basis to the highest bidder "rather than automatically directing product to their home market," Cornish says.

In the past two years, state-owned Chinese companies such as PetroChina, Sinopec and China National Petroleum Corp. have invested more than $10-billion in the Canadian oil and gas sector, bringing the total stock of Chinese foreign direct investment (FDI) in Canada to $14.1 billion. In December, the federal government approved Sinopec's $2.2-billion bid for Calgary-based Daylight Energy, the first time a Chinese SOE has succeeded in a 100% takeover of a Canadian oil and gas producer.

A recent Canadian Press-Harris Decima survey found that 71 per cent of Canadians disapprove of Chinese companies taking majority control of an existing Canadian-owned company. Forty-nine per cent were opposed to Chinese takeovers of foreign-owned companies operating in Canada.

In her study, Cornish argues that Chinese companies are an important and much-needed source of capital investment. Canada has the laws and administrative enforcement capacity to ensure its interests are protected should that protection ever be needed.

"In light of the degree of misperception of SOE behaviour revealed in this study, it is incumbent on the Canadian side to avoid politicization of the [foreign investment approval] process to the extent possible," says the paper, "Behaviour of Chinese SOEs: Implications for Investment and Cooperation in Canada."

The paper can be downloaded at: and

The CCCE is Canada's senior business association, representing the chief executives and entrepreneurs of 150 leading Canadian companies. The CIC is an independent, member-based council established to strengthen Canada's role in international affairs.

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