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An oil field pumpjack owned by Daylight Energy: Ottawa approved Sinopec’s acquisition of Daylight in December. It has promising assets, but no production.Larry MacDougal for The Globe and Mail

Chinese state-owned companies are winning some key domestic allies in their desire for a wide-open investment field that would allow them to make major acquisitions in Canada.

A new study to be released Tuesday by the Canadian Council of Chief Executives and the Canadian International Council argues that publicly traded state-owned companies in China operate strictly on a commercial basis around the world, and should face no more investment barriers than other foreign corporations.

Despite Prime Minister Stephen Harper's recent courting of Chinese investment, Beijing-based companies still face an uncertain political climate in Canada, and the potential for highly politicized opposition should they seek to acquire a major Canadian firm.

In a recent poll, 71 per cent of respondents disapproved of Chinese state-owned enterprises taking majority control of existing Canadian companies, and 49 per cent opposed such takeovers of foreign-owned firms operating in Canada.

But much of that opposition is based on misperceptions that Chinese oil companies operate as policy arms of the Communist government, and are primarily driven by the desire to ship raw resources to China for processing, says the study by Margaret Cornish, the former executive director of the Canada China Business Council and now chief representative of Bennett Jones LLB's Beijing consulting office.

The major China oil companies like PetroChina Company Ltd., China National Offshore Oil Company (CNOOC) and China Petroleum & Chemical Corp. are "profit-driven to their core," despite being majority-owned by the national government, Ms. Cornish said in her report.

Rather than pursuing a co-ordinated plan to acquire strategic resources, the companies are vying with one another to become as sophisticated and global in their reach as Western oil majors, she said in an interview from Beijing.

"What the state wants the oil companies to do is compete, compete, compete," she said.

There is a common assumption that Chinese energy companies are securing access to crude for the sole purpose of shipping it back to the homeland, a strategy that implies geopolitical competition for scarce resources.

But Ms. Cornish said there is no evidence for that pattern of trade, noting that the companies sell the oil they produce in Africa and elsewhere into the most attractive market. Beijing does, however, have an interest in diversifying its supply mix by developing export capacity from Western Canada.

She also rejected the notion that Chinese firms have an unfair advantage because they have access to the state treasury. Borrowing costs for the state-owned oil companies are roughly comparable to those of their international competitors, Ms. Cornish said.

Her analysis echoes a 2011 report from the Paris-based International Energy Agency, which said the Chinese companies have gained considerable independence from the government department to which they formally report.

The IEA said investments by state-owned enterprises are "driven by a strong commercial interest, not the whim of the state." And while senior company executives are appointed by the Communist Party – and are senior members of it – they thrive by making sophisticated business decisions that do not antagonize trading partners.

To date, Chinese companies have been cautious in their acquisitions in Canada, typically preferring to take minority stakes in assets that require further investment before producing oil or natural gas. Chinese investment in the oil and gas sector to date amounts to about $10-billion, a relative pittance compared to their activity in Africa, South America and Australia.

In December, Ottawa did approve Sinopec's $2.2-billion acquisition of Daylight Energy, an oil and gas company that had promising assets but no production. For the first time, a Chinese company is now an operator in Canada's oil patch.

During his visit to China earlier this month, Mr. Harper announced the two governments have agreed in principle on an investment protection agreement that would give companies from both countries greater confidence that they will be fairly treated in one another's home market.

The federal government will still subject takeovers by Chinese companies to the additional screen Ottawa adopted in 2010 to ensure state-owned companies are operating in a commercial manner.

For future reviews, Ms. Cornish's study – backed by the prestigious business councils that are releasing it Tuesday – and the IEA report will provide strong evidence that Chinese state-owned energy companies are indeed driven by commercial interests. But that does not provide carte blanche for takeovers of major Canadian producing companies, particularly hostile ones. The Harper government has already established a track record for rejecting controversial deals, notably BHP Billiton's bid for Potash Corp. of Saskatchewan Inc., and the Prime Minister has said hostile takeovers of key Canadian businesses are not in the national interest.

Like any other foreign investor, Chinese companies are going to have to come to terms with this government's deliberately opaque foreign investment policy before taking their acquisition strategies to the next level.

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