China’s Canadian Woes
Image Credit: Office of the Prime Minister: Canada (Flickr)

China’s Canadian Woes

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On January 24th, SSEC Canada Ltd, the Canadian subsidiary of Sinopec Shanghai Engineering, was fined $1.5 million (CAD) after pleading guilty to workplace safety breaches that resulted in the deaths of two Chinese temporary workers in Alberta in 2007. It was the largest penalty ever imposed by a judge in the province on workplace safety charges. On January 27th, HD Mining International announced that it was sending home 16 Chinese temporary mine workers who had become the center of a high-profile dispute over whether the company was bringing in Chinese miners instead of hiring Canadians.

As Chinese companies, state-owned or otherwise, become significant players in Western countries, especially in the resource sector, they are finding themselves subjected to unprecedented level of scrutiny over issues like their ownership, governance, management and personnel practices.

China’s National Overseas Oil Corporation (CNOOC) was required to provide significant commitments to win Canadian government approval for its acquisition of Canadian oil exploration company Nexen. CNOOC was willing to make these commitments because it allowed them to conclude the $15 billion acquisition and,in doing so, gain significant exposure to oil sands technology. Even so, the Canadian government announced that its approval of the acquisition was an exception and that going forward, such acquisitions by state owned companies would face much tougher scrutiny.

While CNOOC managed to navigate the tricky waters of official bureaucracy and public opinion, another Chinese company, HD Mining International, has not had been so successful. The company, incorporated in Canada, is a private corporation formed by two majority partners, Huiyong Holdings and Canadian Dehua LvLiang International Mining Corporation.

According to the company, “Huiyong Holding Group (HHG)… is a private company based in China and a respected leader in underground coal mining.”

But the United Steelworkers of America (USW) argues there are strong reasons to believe that Huiyong Holdings may be a shell company (i.e. a corporation that is vehicle for business transactions without having any significant assets or operations).

Researchers employed by the USW claim that the ultimate ownership lies with Chinese state-owned companies operated by the Assets Supervision and Administration Commission of the State Council.The union ensured this information was given wide distribution as part of its campaign against the company.

Given the extent of local government involvement in many Chinese enterprises, especially in the resources field, it would not be surprising to find ultimate ownership resting in the hands of some local or provincial government entity. This alone, however, hardly makes HD Mining or Huiyong Holdings a verifiable arm of the Chinese government. Instead, the USW is likely using this as a convenient way to complicate the company and its operations in Canada.

This is all taking place in the context of HD Mining being under high-level scrutiny in Canada for its plan to import Chinese miners to exploit the company’s underground coal mining property in Tumbler Ridge, British Columbia. Claiming that it was unable to recruit any Canadian miners experienced in the “long-wall” mining technique needed, HD secured approval from the Canadian government to bring in 200 Chinese miners as temporary foreign workers (TFW). The TFW program has faced growing criticism recently in Canada owing to the fact that it has grown commensurate with the high rate of unemployment in the country.

HD seems to have become the lightning rod for much of this discontent from unionized workers. Two unions, the International Union of Operating Engineers and the Construction and Specialized Workers Union have asked the Federal Court for a judicial review of the federal government’s decision to grant HD Mining permits to bring in 201 temporary foreign workers. They also took the company to court to demand the release of the resumes of the Canadian workers who applied for jobs with HD.

At first, the company tried to withhold this information but eventually relented. After the details of the resumes of the rejected applicants were released, the unions involved turned up the heat, claiming it was not credible that HD could not find a single qualified applicant among almost 300 applications in order to justify bringing in the Chinese miners. Under increasing fire, the company has now sent the first batch of Chinese miners home, and has said that it will not bring in any more until the situation becomes clearer. Meanwhile the Canadian government has said that it will review the decision to allow the Chinese miners into Canada as temporary foreign workers.

Whether HD Mining has received fair treatment from the Canadian media and unions is a valid question, although the company does not appear to have played its hand particularly well. The company has said that it played by the rules in obtaining permission to bring in the Chinese miners, and that over the longer term it will train Canadian workers to replace them. This process could, however, take up to fourteen years.

The company has also tried to counter the criticism in other ways. For instance, a number of businesses operating in Tumbler Ridge issued a statement welcoming the miners as contributing to the local economy. Similarly, HD Mining’s Chairman publicly explained why the kind of specialized exploratory mining it needs requires experienced workers from China. This failed to appease many of the company’s critics in Canada.

HD Mining is hardly the only company in Canada to operate mostly with temporary foreign workers. Rather, the criticism it has seen is reflective of the fact that many Canadians remain uneasy about Chinese companies—especially those with ties to the government in Beijing.

This is partly due to HD Mining and other Chinese companies’ operations in the developing world such as in Africa, where their less than stellar management and personnel practices are well known.The kind of practices that Chinese companies have adopted in Africa simply won’t fly in North America. In fact, fairly or not, in many respects Chinese companies are likely to be held to even higher standards than domestic companies in Canada and elsewhere in North America.

Hugh L. Stephens is Executive in Residence at the Asia Pacific Foundation of Canada, in Vancouver, with 35 years of government and business experience in Asia. He is also principal of Trans-Pacific Connections.

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