Canadian “First Nations” appeal to Chinese government

Two days ago, the New York Times published a story on how representatives of Canadian “First Nations” sent an open letter to Chairman Hu Jintao stating their rights, guaranteed under the Canadian constitution, to be consulted before work on a number of planned Chinese-financed developments through their territory begins. Previously, they had visited the head of the China Investment Corporation, the Chinese sovereign wealth fund.

The letter was timed to the signing of a bilateral investment treaty and an agreement between Canada’s Canaccord investment bank and China’s state-owned Export-Import Bank to to establish a $1bn fund to invest in Canadian natural resources.

The authors focus on the way such developments challenge China’s non-interference policy in that they drag Chinese investors into domestic disputes. They link this story to the recent kidnappings of Chinese workers by various African armed opposition groups, which share with the Canadians the claim to be fighting for indigenous rights but which Chinese media often usually describe as insurgents and sometimes as terrorists. In the Canadian case, this is trickier, since the “indigenous” cause has much traction.

It seems to me that the non-interference question is not the most interesting angle, even though parallels with Tibetan groups’ appeals to Western governments are certainly titillating. (Footnote: In 2008, Chinese Internet posters, indignant with Western media’s perceived support for Tibetan “splittism,” suggested organising demonstrations supporting the Scottish independence movement for the 2012 Olympics in London. Let’s see if they do.)

There is, too, the reminder that “development” does not always happen in poor countries; the rich West has its own poor areas, and Chinese inestors are beginning to change them.

But what I find more intriguing is this thought: the logic of special rights for ethnic minorities is in fact a familiar one to Chinese leaders, as is the language of development balanced with the protection of the environment and culture, couched in morally charged terms, and the need to deal with “traditional leaders.” One might even suggest that the ideology of indigenous exceptionalism fits better with the current Chinese idea of “harmonious development,” in which the state plays the balancing role (in appeasing competing interests, but also in trying to ensure a minimum of social stability), than with free-market liberalism.

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Two inside views on Chinese acquisitions

With the title “Being eaten by the dragon,” this week’s Economist has a briefing based on a survey of 11 executives of Western companies that have recently been acquired by Chinese state enterprises (and in one case a private one). The picture is what I expected to see: the executives have a variety of opinions, but most of them tend to have a positive view of Chinese managers’ intentions — such as honoring agreements not to fire any previous staff — but a more negative one of their ability to deliver a business strategy, in part because of an opaque and lengthy decision-making process. (The syndrome diagnosed as “state enterprise disease” by Ma Yu. As a result, most companies have been unable to retain their Western staff. As to whether they kept Western executives on for substantive tasks or just for show, opinions differed.

Meanwhile, on 3 November, Zhao Jianfei of the English-language Chinese finance news site Caixin profiled Li Jinhong, Sinopec’s Australia branch director. She (! — how many female managers are there at this level in the oil business?) has had to “to cope with dashed investment expectations, a near-disaster, a contractor dispute and the Australian arbitration process” and “faces a number of challenges, ranging from high labor and equipment costs to an ever-changing policy and political environment.” She

initially planned to bring low-cost labor to Australia from China for construction projects, but found those plans infeasible.

Li said she understands why Australia has been reluctant to open doors to non-Australian labor (…). “Any country would protect their local workforce,” said Li, but adding [sic] that Australia has not specifically barred Chinese exploration teams but has exercised its immigrant labor requirements.

“For instance, there are certain requirements in areas of experience and language proficiency” for imported workers, she said. “Plus, it’s been mandatory to employ a percentage of locals, which offsets the cost advantages of bringing in Chinese teams.”

Earlier, Caixin ran a story about Metallurgical Corporation in China, whose shares have been in decline after a series of overseas acquisitions, including in Papua New Guinea, Pakistan, Australia, Argentina, and Afghanistan, have eaten up the company’s operating margins. These projects have suffered numerous setbacks and been criticized as irresponsible. ” Shen Heting, who serves as company president as well as party secretary and vice chairman of MCC’s parent China Metallurgical Group Corp,” listed a number of reasons, including political issues in Afghanistan, “tribal problems and the illegal arrests of Chinese technicians” at the Ramu mine in Papua New Guinea, and high operating costs in Australia, “since Chinese workers are not allowed in.” Shen

thinks the Chinese government should provide additional financial support. MCC is acquiring resources for the country overseas, he said, and should be given a corresponding level of policy support, with cash at the core. … “This business is not only something we want to pursue but something we need to do for the country.”

These comments are interesting since they come at a time when senior officials have been trying to convince Western public opinion that Chinese enterprises are not receiving state help in their projects overseas but pursuing their own objectives. It is likely that there already is a split between older state cadres and younger managers in the state enterprises, although the “privatization of profits and nationalization of losses” has long been a logical pattern in state enterprise operations.

Madagascar coup worries Chinese investor

The Canton-based Yangcheng Wanbao 羊城晚报 reports that Hui Chi Ming 许智明, chairman of the board and shareholder of Sunpec, is concerned concerned about stability in Madagascar, where there has been a military coup this week. Sunpec is listed on the Hong Kong stock exchange, and according to the website, it is mainly active in distributing petrochemical products. Hui, who was born on the mainland, is also, according to the company website, a member of the

National Committee of the Chinese People’s Political Consultative Conference, […] standing member of All China Federation of Industry & Commerce, honorable [i.e. honorary] president of Beijing Federation of Industry & Commerce, president of Hong Kong Association of International Investment [etc]. He has been awarded the Humanity & Peace Promotion Award (推動人類和平進步獎) by the United Nations and accredited as Top Ten Poverty Alleviation Contributor (全國十大扶貧狀元) by the government of the PRC. In honor of Dr. Hui’s contributions to humanity, the International Minor Planet Nomenclature Committee permanently named the minor planet no. 5390 the “Hui, Chi-Ming Planet”.

Sunpec’s board members, including Hui, appear to have lots of Russian connections (honorary doctorates and medals, including from the Institute for Far Eastern Studies in Moscow, an outfit I am familiar with).

Sunpec owns four oilfields in Madagascar, which, according to the article, makes Hui is the first Chinese national to hold a 100% stake in an overseas oilfield.  He is also the controlling shareholder of Madagascar’s second-largest bank, the Madagascar Industry and Trade Bank (this is a translation of the Chinese 马达加斯加工商银行), and Madagascar’s honorary consul in Hong Kong. In the article, Hui describes himself as a friend of both the deposed president, Marc Ravalomanana, and the opposition leader, Andry Rajoelina, and says he had tried to mediate between the two parties (Ravalomanana told him that “his bottom line was the presidential palace”). Although the Antananarivo office of Sunpec’s local venture, Madagascar Energy International, has been looted during the protests, Hui reassured readers that his bank’s headquarters were being guarded by twenty military police.

Sunpec’s fields have not yet started production. Chinese investment in Madagascar has grown rapidly under Ravalomanana’s pro-business presidency. The article notes that Chinese aid to Madagascar has totaled 500 million yuan, most of it since 2006.

More energy investments by China

The weekend’s New York Times (David Barboza, “China gets a warmer welcome for its cash”) reports on further Chinese energy investments abroad following the Rio Tinto and OZ Minmetals deals. Venezuela got a $6 billion loan and agreed to increase oil shipments to China; this brings Chinese investment in the country to $12 billion. Brazil signed a $10 billion oil-backed loan agreement with China, and Russia’s state-owned Rosneft and Transneft oil companies got a $25 billion loan in exchange for 15 million tons of crude oil in the next 20 years.

So the question whether the recession will speed up or slow down Chinese involvement abroad seems to have been answered in favour of the former. It is possible, though, that as Chinese companies now find easier access and better deals in larger, richer countries, some of the traditional client states like Laos and Cambodia will receive less attention.