Thank you very much.
I will say at the outset that while I am not an expert on Canadian investment law, I believe I have the necessary expertise to speak on the threat of state-owned investment.
Ladies and gentlemen of the committee, thank you for giving me this opportunity to talk with you today on a topic that I believe is of great importance in the world today. I say this as an economist and as a citizen of a democratic country concerned about the influence of authoritarian states across a variety of sectors.
By intellectual belief, barriers to trade, investment and the free flow of labour are an anathema to me. I have spent most of my career working in Asia and teaching at universities promoting these ideals and values. I believe open liberal democracies benefit from their openness.
However, after working for nine years at Peking University HSBC Business School in China as a public employee, I was mugged by the reality of modern China and strong-armed authoritarianism. Modern China under Chairman Xi stands in stark opposition to the values that Canada, as an open liberal democracy, holds dear.
How do we balance the demands of open markets with the very real threat of predatory subsidized state-owned enterprises? To answer this question, we must first answer the question about the threat posed by expansionary authoritarian-controlled, state-owned enterprises. These are companies that are using public funds to target strategic enterprises and control key resources, assets or technology.
In China, we see many examples of state-owned or -linked companies receiving enormous state largesse to help them expand abroad. Whether that is providing vendor financing that would not be allowed under OECD rules, state-backed finance to make acquisitions or industries targeted by political leaders, state-owned and -linked enterprises from authoritarian states receive significant benefits that private enterprises in the rest of the world do not receive. They also target assets, whether in natural resources or technology, that are prioritized by political leaders rather than market forces. We have seen examples where China buys foreign technology companies and attempts to move the entire operation back to China. This is not market-force behaviour or even the behaviour of a trustworthy counterparty.
Arguably more worrying, we have seen examples where China tries different methods to avoid scrutiny of its investment activity and uses a variety of measures to disguise its activity, whether it is third party investment via various funds or whether it is failure to submit foreign investments for regulatory scrutiny, which later require forced divestment. In other examples, they have offered enticements to strike deals, offering opening the Chinese market if technology is transferred to them.
We have evidence that China keeps detailed records about intellectual property held by firms, with a range of related information that value the asset. It is clear that China has a targeted list with a hierarchy of technologies and intellectual property assets. All these behaviours raise valid concerns about the authoritarian Chinese state as a trustworthy counterparty in international investment.
Given the clear risks we see associated with investment from China, I believe it is in the best interest of Canada to seriously think about the risks associated with a country that has demonstrated a clear pattern of threatening and predatory investment behaviour.
I will be willing to take questions from the committee.
Thank you very much.