Bribery and state interference are some of the major challenges Canada faces both in investing in China and managing Chinese investment into Canada, warns a new report from a Calgary-based foreign policy expert.
The report, “Dancing with the Dragon,” is authored by Josephine Smart, an anthropology professor at University of Calgary who specializes in Chinese economics.
With China’s thirst for strategic resources expected to bring about increasingly more investment into Canada, and with Ottawa forging ever-stronger ties with Beijing, Canada needs to clearly understand China’s particular brand of “capitalism with socialist characteristics,” Smart says.
“If they are coming into Canada to invest, then I think indeed the investor needs to respect our rules of the game, and vice versa,” she says.
“If you allow foreign companies to buy and own your strategic resources without any condition and constraint, then eventually in the end your own strategic interests are going to be quickly diminished because your strategic resources are foreign-owned and controlled.”
Cultural awareness becomes especially important when it comes to common Chinese business practices such as guanxi—which means gift-giving but often becomes bribery—to develop interpersonal networks and influence. There’s a strong link between guanxi practices and corruption in Chinese society, the report points out.
The communist state’s influence on corporate decisions—both direct and indirect—also represents a major investment risk, Smart says.
“There is an implied understanding in China that the state’s mandate must trump business logic in the final analysis,” she writes in the report.
