As China begins rolling out what amounts to a mini-stimulus package, Ottawa and Beijing have inked an agreement intended to better protect Canadian businesses that might want to capitalize on such opportunities.
And with Ottawa in the midst of evaluating a proposed $15.1-billion takeover of Calgary-based oil and gas producer Nexen Inc. by China’s state-owned China National Offshore Oil Corp., Prime Minister Stephen Harper said he used a Sunday meeting with Chinese President Hu Jintao to nudge him on the issue of greater reciprocity in terms of market access for Canadian investors, who remain locked out of key sectors that Beijing considers “strategic.”
“We did not discuss today, the Chinese side did not raise the issue of the Nexen takeover. I think they understand that that is subject to a Canadian legal process on which, as prime minister, I’m severely restricted in my ability to comment,” Mr. Harper told a press conference that followed the conclusion of the Asia-Pacific Economic Cooperation summit in the Russian port city of Vladivostok. Mr. Harper and Mr. Hu held a one-on-one meeting on the sidelines of APEC.
“However, I did raise with them issues of the relative flows of our trade and investment between Canada and China and the significant imbalance that exists in both. And we had a good and robust discussion on that question.”
It’s unclear how much the Foreign Investment Protection and Promotion Agreement signed on Sunday will help. While the deal was initially announced in February while Mr. Harper was in Beijing, full details have not yet been made public.
A summary of the agreement posted on the website of the Ministry of Foreign Affairs and International Trade says the pact aims to protect investors against “discriminatory and wholly arbitrary practices, [and] to provide adequate and prompt compensation in the event of an expropriation.” It commits the countries to establishing a mechanism for resolving disputes between foreign investors and either government.
What’s not certain is how much an extra piece of paper will help in the real world of Chinese business, where the law is often spottily applied and foreign investors often find themselves with little recourse.
China had $10.9-billion of foreign direct investment in Canada at the end of 2011, according to Statistics Canada. Chinese figures put the amount of Canadian foreign direct investment in China at approximately $8.3-billion.
Mr. Harper defended against criticisms that the investment accord offered no protections to Chinese workers, who often work almost non-stop for pay well below Canadian levels – or include any environmental standards.
"In terms of the Foreign Investment Protection and Promotion Agreement, [it] is an instrument focused precisely on that, and I’m not aware of any such agreements with Canada or with any other countries that try and include other broader issues but those things, as I say, are part of our relationship and dialogue with the Chinese at every opportunity," Mr. Harper said, adding that he raised human rights and consular cases during his discussion with Mr. Hu.
The timing of the agreement could prove fortuitous for Canadian businesses. The Chinese government’s top planning agency – the National Development and Reform Commission – last week approved $154-billion worth of new infrastructure projects around the country, including new airports, highways and subway lines, in what was seen as a bid to boost an economy that has shown signs of stalling.
While Beijing avoided referring to the new spending as a stimulus package, its introduction was seen as proof the government is increasingly worried about the direction of the country’s economy.
New figures released Sunday added to concerns that China – one of the last functioning engines of global growth – may be on the verge of a substantial slowdown. Data from the National Bureau of Statistics showed value-added industrial output 8.9 per cent in August from a year earlier, down from a 9.2-per-cent increase in July, and the slowest growth since the depths of the financial crisis of 2008 and 2009.
Economists blamed the deceleration on swelling inventories at factories around the country, as well as weak domestic demand.
Meanwhile, inflation has begun to creep upwards again, with the Consumer Price Index rising 2 per cent compared to last August, up from 1.8 per cent in July. Food prices were the main driver last month, rising 3.4 per cent compared to a year earlier.
In comments distributed Sunday over the official Xinhua newswire, Liu Yuanchun, deputy head of the School of Economics at Renmin University of China, predicted tough days ahead for the world’s second-largest economy.
“China’s economy is still in the trough and this situation is likely to go on longer than expected,” Prof. Liu was quoted as saying. “Even if we see a recovery in the fourth quarter, it will be a mild one.”
The APEC summit wrapped up Sunday with a final communiqué that expressed concerns about the state of the world economy, growing protectionism and global food security.
The 23 member economies – who collectively account for 54 per cent of global economic output – agreed to slash import duties on green technologies and promised to continue liberalizing trade in the region in order to counter the effects of Europe’s debt crisis.
"The financial markets remain fragile, while high public deficits and debts in some advanced economies are creating strong headwinds to economic recovery globally. The events in Europe are adversely affecting growth in the region," the leaders’ statement said.
"In such circumstances, we are resolved to work collectively to support growth and foster financial stability, and restore confidence."