China Invests in Canadian Energy Sector
MADELEINE BRAND, host:
This is DAY TO DAY. I'm Madeleine Brand.
In a few minutes, getting back to business in New Orleans.
But first, to international business. A Chinese bid to buy the US oil company Unocal earlier this year caused quite a stir. Some people questioned the wisdom of letting foreigners control an American oil company. But in Canada, which is the largest supplier of crude oil to the United States, the Chinese have recently been snapping up oil companies. Richard Reynolds reports from Toronto.
RICHARD REYNOLDS reporting:
Several media pundits here have dubbed this the year of the Chinese takeover. Canadians really began to notice in June when the Chinese government-owned company Minmetals made a bid for Noranda, one of Canada's largest mining companies. This came on the heels of a $2 billion investment by the Chinese National Overseas Oil Company, or CNOOC, into Canada's oil sands. Andrew Willis is one of Canada's leading business journalists. He writes for The Globe and Mail newspaper.
Mr. ANDREW WILLIS (The Globe and Mail): There you had the premier Canadian mining company that suddenly it was going to pass into Chinese control. And I think the staggering thing for a lot of us who date back to an era when Canada was vehemently protectionist was the fact that, first of all, the public didn't seem to mind at all, and secondly, that the government was quite willing to let that deal go through with absolutely no problem.
REYNOLDS: The deal later fell apart over the question of price. Attention was focused even more in June when the Chinese signed a memorandum of understanding to take half the capacity of a new pipeline being built from the oil fields of Alberta to the Pacific Coast and again when CNOOC took over oil firm PetroKazakhstan for $3.75 billion in late August.
The Noranda bid did generate some protest, but the more recent deals went through with hardly any. Andrew Willis.
Mr. WILLIS: There was a sense of trying to connect China's record on human rights and, you know, China's behavior in Tibet, for example, with the Noranda purchase. And it was a difficult argument to make right from the start. So after a day or two of strident blasting and trying to connect what really are seen by most Canadians as unconnected issues, the issue faded away.
REYNOLDS: This is in sharp contrast to the US response over the proposed takeover of Unocal. US lawmakers, including Republican Congressman Richard Pombo of California, backed a measure that delays any Chinese acquisition of a US oil company for at least 120 days. The measure was included in the energy bill which was signed into law last month. In the end, CNOOC abandoned its takeover. In contrast, the Canadian government has thrown the doors wide open to investment from China. This past January, Prime Minister Paul Martin even signed a statement of cooperation with the Chinese that dealt with investment in the oil and resource sectors. Industry Minister David Emerson.
Mr. DAVID EMERSON (Canadian Industry Minister): The government of Canada has taken the position that we do want an increase in international investment into Canada, and China is certainly one of the countries that we hope to see an intensification of our economic relationship with.
REYNOLDS: But energy and resources are central to the Chinese overseas investment strategy. Walid Hejazi is a professor at Toronto's Rotman School of Business and an expert on China. He explains that China has over $800 billion in foreign currency reserves and its economy is growing so fast, it has an almost unquenchable thirst for raw materials.
Professor WALID HEJAZI (Rotman School of Business): So it's a very forward-looking strategy on the part of the Chinese to take this $800 billion and growing reserve of US money to deploy those resources as strategically as possible in order to ensure the growth of their industry in as smooth a possible way.
REYNOLDS: Canada is one of the world's larger oil producers, but it is also rich in coal, iron, copper, nickel, zinc, uranium and lumber, all materials the Chinese need. And as Loren Brandt, an economist at the University of Toronto explains, Canada is also safe.
Mr. LOREN BRANDT (University of Toronto): The Chinese are looking all over for resources. They're looking in Africa. They're looking in Latin America. They're looking in South America, Australia, can--they're looking in Russia. And so some of those countries that I just mentioned are potentially risky, very risky.
REYNOLDS: If Canada is a target for the Chinese, should the US be concerned? Canada is a natural resources storehouse for the US economy. Walid Hejazi believes, as do many Canadian experts, that the US just takes Canadian oil and resources for granted, often forgetting that Canada is the largest and the most stable provider of oil to the United States.
Prof. HEJAZI: For many, many years, the Americans just believe that all of this energy is available in Canada. We can get access to all of this energy, and now you have the Chinese trying to get access to not just energy in Asia or in the Middle East, but also in Canada, and I think that's a real threat to the Americans.
REYNOLDS: Hejazi also believes this is just the beginning. He expects a huge surge of investment overseas by the Chinese in the next few years. Media reports indicate that the Chinese may be planning a bid for Husky Oil, one of Canada's largest oil companies and already owned by Hong Kong billionaire Li Ka-shing. For NPR News, I'm Richard Reynolds in Toronto.
BRAND: More coming up on DAY TO DAY from NPR News.