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Prime Minister Stephen Harper takes part in a toast with Wen Jiabao, Premier of the People's Republic of China, following a signing ceremony at the Great Hall of the People in Beijing, China on Thursday, December 3, 2009.

Sean Kilpatrick/The Canadian Press

Ottawa must deliver on its long-neglected promise to clarify foreign takeover and investment rules if Canada is to fully benefit from a larger trade and economic relationship with China, a joint-government study concludes.

Strengthening Canada's trading relationship with China has become a key goal for the federal Conservative government. Evidence of the shift can be found in Ottawa's vocal support for the proposed Northern Gateway pipeline that would allow production from the Alberta oil sands to be shipped to China and other parts of Asia.

After shunning China for more than five years, Prime Minister Stephen Harper has recently made two high-profile trips to Beijing in hopes of strengthening Canada's economic ties with the world's second-largest economy and top energy consumer.

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But according to a joint economic report conducted by Canadian and Chinese government officials, capricious investment policies and actions from both countries are a major obstacle to increasing trade and investment in the resource sector.

"Canadian and Chinese stakeholders have highlighted the need for increased regulatory clarity, efficiency and predictability in the context of direct investments in each other's countries … Resolution of these obstacles will be essential to improving market access and facilitating two-way trade and investment in the natural resources sector," said the study, released Wednesday.

When Ottawa rejected Australia-based BHP Billiton's proposed $38.6-billion (U.S.) takeover of Potash Corp. of Saskatchewan in late 2010, then-industry minister Tony Clement promised to clearly define the rules under the Investment Canada Act for foreign takeovers of large Canadian firms. Mr. Clement also said he would ask the House of Commons industry committee to study the Act and suggest improvements. Neither Mr. Clement nor new Industry Minister, Christian Paradis, have take any actions to clarify the opaque nature of the Act that allows approval or rejection of foreign takeovers without saying why. Officials from both Industry Canada and the Department of Foreign Affairs and International Trade did not respond to requests for comment on Wednesday.

A key test for Ottawa's tolerance for Chinese investment will be whether it chooses to support or reject Chinese state oil company CNOOC Ltd.'s $15.1-billion bid for Calgary's Nexen Inc.

While Mr. Harper has repeatedly said Canada is open for business with China, Canadians are increasingly concerned about Chinese government influence over Canadian companies. According to a survey conducted for the Asia Pacific Foundation of Canada, only 16 per cent of Canadians said they would support a Chinese state-controlled entity taking over a Canadian company.

In addition to natural resources, the study highlights six other sectors where Canada and China could boost economic ties including agriculture, and clean technology and environmental services.

Ottawa's new-found warmth toward China has helped Canada win agreements about Chinese tourism and uranium sales. However, a long-sought Foreign Investor Protection Agreement has yet to be completed and Ottawa remains uncommitted about China's offer to begin talks on a free-trade deal.

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