China's acquisition of Nexen won't hurt Canadian industry

Canada has approved China's biggest overseas energy acquisition - a 15.1 billion US dollar takeover by China's state-owned CNOOC of Canadian oil and gas giant Nexen.

The deal has provoked some worries that Canada's strategic industries may be put into foreign hands after this deal. But on the sidelines of a forum held in China's southern Hainan Province, Stockwell Day, Canada's former trade minister told CCTV News that such worries are unnecessary.

The takeover by China's state-owned CNOOC of Canadian oil and gas producer Nexen, to some analysts, marks a bold and essential move that will herald a new chapter in Sino-Canadian economic relations.

But Canada's domestic industries might not agree. The country's Prime Minister vowed to reject any future foreign takeovers in the oil sands sector by state-owned companies. And he's not the only one with concerns.

Concerns have been raised that following the takeover this time, a flood of deals might occur, which will put Canada's vast energy resources sectors into foreign hands. But on the sideline of a forum held in Hainan, I've spoken with Stockwell Day. He is the former minister of international trade of Canada and former president of the treasury board. He said that Canada's complete regulation and legal framework will protect its domestic strategic industries.

Stockwell Day said, "Right they will not be hurt. Because companies from China or anywhere in the world that invested in Canada, they have to play by Canadian rules. And Canadian rules are the stronger than anywhere in the world. So as long as those companies are following those rules, everybody will benefit - the investment side from China, those receiving investment from Canada - exploration will go ahead, jobs will be created. There will be more prosperity in both countries."

Back in July this year, CNOOC announced it was seeking to take over Nexen at 27.5 US dollars per share. Although it's China's largest overseas energy acquisition so far, the road for Chinese companies to expand in foreign markets has been bumpy. CNOOC's previous acquisition bid for Unocal seven years ago was rejected by US lawmakers alleged national security concerns.

But experts say as Mergers and Acquisitions overseas become a trend in future global businesses, Chinese companies should not fear temporary setbacks, as bold risks go hand in hand with prosperity.

Stephen Green, head of China research, Standard Chartered Bank, said, "Obviously, it's a big trend. And the governments are making it easier to buy dollars, shares and other stuffs so that you don't have to write many approvals, so the more the government can get rid of the bureaucracies, the better. And you know, companies, when they go making acquisition, we, as economists, believe that they should be taking their own risks."

As more and more companies from emerging markets are setting foot overseas to reach larger markets, companies from Europe and the US are also exploring potential allies for future cooperation in technology, skills, and R&D sectors.