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Labour + Industry

Notorious Chinese Firm Wins Role in Site C Construction

BC Hydro awards contract as Ottawa reviews takeover of Canadian company.

By Andrew Nikiforuk 22 Jan 2018 |

Andrew Nikiforuk is an award-winning journalist who has been writing about the energy industry for two decades and is a contributing editor to The Tyee. Find his previous stories here.

A notorious Chinese state-owned enterprise now has a 30-per-cent stake in a consortium building Site C dam infrastructure after buying Canadian construction giant Aecon last year.

The China Communications Construction Co. Ltd. has a history of corruption and workplace safety issues in projects around the world.

Canada’s biggest construction firms have pointed to those issues and national security concerns in quietly asking the federal government to reject the takeover as not in the national interest.

According to the Globe and Mail a delegation representing firms such as PCL and Ledcor (all Aecon’s competitors) met with senior Ottawa civil servants to lobby the government to block the sale of Aecon to CCCC, one of the world’s largest infrastructure builders.

Representatives from the construction firms argued that as a Chinese-state controlled enterprise CCCC should not be allowed to build sensitive infrastructure projects such as military bases or nuclear power plants.

Last year CCCC International Holdings, an arm of China Communications Construction Co., purchased Aecon, one of Canada’s largest building and engineering firms, for $1.5 billion. The deal is awaiting federal government review under the Investment Canada Act.

Aecon, a 140-year-old firm, helped to build such landmarks as the CN Tower, Vancouver’s SkyTrain and the Halifax Shipyards.

Shortly after the CCCC’s purchase of the Canadian company, BC Hydro announced that a partnership led by Aecon Group Inc. had been chosen as the preferred bidder for a Site C generating station and spillways contract. The partnership includes three other companies including Dragados Canada Inc.

Under the Investment Canada Act the federal government must study major purchases of Canadian firms by foreign buyers “that could be injurious to national security.” The Trudeau government has been actively courting Chinese investment and B.C. Premier John Horgan is currently in China on a trade mission aimed at increasing exports and attracting investment.

The purchase of Aecon would not only make CCCC a major player in the controversial Site C dam, but give the firm a chance to bid on an expected $185 billion in infrastructure projects planned by Canadian governments over the next decade.

Former Conservative Foreign Affairs minister Peter MacKay says Ottawa should block the deal, which would funnel profits from public infrastructure projects to the Chinese state.

“If Aecon is acquired by CCCI profits from this taxpayer-funded initiative to build and improve the means to enhance Canada’s economic competitiveness — to build our communities for generations to come — would go directly to the government of China.”

The China-Canada investment treaty, which the former Harper government approved by Order in Council in 2012, would also give the CCCC the right to challenge Canadian legislative, executive or judicial decisions in a secret arbitration process outside of Canada’s legal system.

Green Leader and MP Elizabeth May said the treaty adds to the reasons to block the sale.

“Any Chinese company now has superior rights to a Canadian company,” she said. State-owned enterprises run by China’s government should not be able to challenge or undermine public policy in Canada, May added.

“Premier Horgan needs to get out of Site C before 30 per cent of the construction falls into the hands of the Chinese,” said May, MP for Saanich-Gulf Islands, in a Tyee interview.

“CCCC’s poor safety record, weak labour standards and environmental track record should be enough to persuade Premier John Horgan to reverse his ill-advised approval of Site C,” she said.

By any measure the track record of CCCC, like that of many Chinese state-owned enterprises, is bad.

In 2009 the World Bank barred CCCC and its subsidiaries from engaging “in any road and bridge projects financed by the World Bank Group” for seven years after an investigation found that the company “participated in a collusive scheme designed to establish bid prices at artificial, non-competitive levels” on a road-building project in the Philippines.

In Sri Lanka the Chinese company has left a legacy of corruption allegations and white-elephant projects that have left the country indebted to the Chinese government.

Concerns have also been raised about a 2016 decision by the Malaysian government to award CCCC a $12.3-billion rail construction contract with no competitive bidding process.

Charges of bribery and corruption have also dogged the company and other Chinese companies in Africa on building projects in Kenya and Tanzania.

Workplace safety, a big problem in China generally, has also been an issue at work sites operated by CCCC.

CCCC, which claims to be “building a connected world” is part of a huge network of companies run by the Communist Party of China largely to advance political goals.

The Globe and Mail reported that CCCC had filed notice with the Hong Kong Stock Exchange in October that it was adding a Communist Party section to its corporate structure in which the party “organization shall play the core leadership role and core political role, providing direction, managing the overall situation.”

China’s central government owns 106 companies which have become global giants. Forty-seven of these firms ranked in the 2014 Fortune Global 500. At the end of 2013 these state-owned enterprises controlled more than $5.6 trillion in assets, including more than $690 billion in investments abroad.

A 2016 report in Asia Policy described China’s state-owned enterprises as “long plagued by declining performance, rising debt, and serious corruption.”

Lu Shaye, China’s ambassador to Canada, describes the purchase of Aecon as “a very normal business transaction” and says there is no need for a national security review.

But in the National Post, Jack Mintz, a fellow at the University of Calgary’s School of Public Policy, wrote last year that “The last thing Canada should be doing is allowing foreign SOEs to renationalize our industry, making us poorer and weaker for it.”

John Beck, Aecon’s CEO, has tried to assure Canadians that the company will retain its Canadian headquarters, values and employees under Chinese control.

But MacKay notes that Diane Francis, a well-known journalist, has long argued that Canada should not approve Chinese takeovers because Chinese firms don’t play by the rules.

In one article she wrote that “China’s track record in Canada is abysmal and includes a request to the Supreme Court of Canada, by a Chinese engineering giant a handful of years ago, to exempt it from our laws after it breached safety violations and ignored our courts following workers’ deaths. The Court refused to hear the case. Fines were never paid.”

Francis is also Beck’s spouse.  [Tyee]

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