Reins loosened for Chinese firms, expert says
Chinese state-owned enterprises will have more discretion on where and how to invest around the world —including the Canadian oil patch— thanks to new importance accorded private markets, an expert says.
Robert Kuhn, an American who has advised the Chinese government and wrote the book How China’s Leaders Think, told a Calgary audience Wednesday that sweeping changes to Communist Party’s policies announced last week involved more than just easing the one-child policy in place since 1979.
The party also declared for the first time that the market would take a “decisive role” in the Chinese economy but, a seeming contradiction, that the state would retain its dominance.
“I think there is and there will be fewer government directives than in the past,” Kuhn told reporters after his speech. “So it is going to be more individual companies deciding what they want to do and how they want to do it.”
He said the state dominance directive is seen as a political statement made as a balm to those who oppose change and fear civil unrest.
Chinese reaction to Ottawa’s move last year to limit foreign takeovers of Canadian companies by stateowned enterprises will therefore vary, Kuhn noted. Prime Minister Stephen Harper allowed the takeover of Calgary-based NexenInc. by China-based CNOOC for $15.1 billion but said future oilsands company purchases would be allowed only in “exceptional circumstances.”
“I would say there was a time when Canada had a favoured position because of energy. It’s less of a favoured position now,” Kuhn said.
“That’s not really a negative. It’s just that other areas are also now stressed, whether it’s Africa or Latin America or Southeast Asia. China has a broader agenda these days.”
Kuhn said there is a growing class of rich individuals in China and those people are willing to consider attractive foreign investments without necessarily having control.
He said they might even strike reciprocal deals where they would take a minority financial position in a Canadian company in return for that company contributing cash or intellectual property for a venture in China.
Kuhn’s speech was sponsored by private Calgary energy services company Packers Plus. He said he is involved in “China-related” consulting with them, without being specific. China is seeking to balance finding new sources of growth with sustaining the Communist Party’s grip on power as President Xi Jinping faces challenges from debt and demographics.