The proposed $7-billion takeover of Noranda Inc., Canada's largest mining company, by China Minmetals Corp., a Chinese state-owned enterprise, has sparked a loud outcry.
The Minmetals-Noranda takeover is not simply the latest episode in Canada's ongoing debate about foreign investment: It involves the critical question of how best to respond to the new China. Like Pierre Trudeau's decision to recognize the People's Republic in 1970, Canada's decision will be an important precedent.
The world is undergoing a power shift from west to east. Few nations have changed as dramatically as China: With annual growth rates of 10 per cent, Chinese exports grew eightfold to $380-billion (U.S.) from 1990 to 2002, foreign investment, including $700-million (Cdn.) from Canada flooded into the country.
Millions of Chinese emerged from poverty. Not as dramatic as China's economic surge, but growing in momentum has been its recent active diplomacy. China has moved from seeing itself as a victim to a new confidence that it has regained the Great Power status it has enjoyed for most of the past 5,000 years. China surprised many by leapfrogging Japan in proposing a free-trade pact with members of the Association of Southeast Asian Nations (ASEAN). And China is probably the key to any peaceful resolution of North Korea's nuclear threat.
A new, well-travelled, university-trained political leadership has also emerged. Rather than veterans of the Long March, they are veterans of the Deng Xiaoping-inspired economic liberalization. Hu Jintao became Secretary-General of the Communist Party in 2002, state President in 2003 and last month replaced former president Jiang Zemin as head of the Central Military Commission.
Mr. Hu's problem is that he presides over an economy inspired by Adam Smith and a party structure borrowed form Joseph Stalin. China has usually resisted ideas from the West; it's a tragedy that the only one it ever enthusiastically adopted -- Marxist-Leninism -- was the worst of the lot.
There are hopes that President Hu will be a political reformer but the early signs are not good: On Sept. 12, he said that democracy was a "blind alley."
Beyond rhetoric, the actions of the Hu regime on Hong Kong's evolution have been a steady march backward. In April, without consulting Hong Kong authorities, Beijing intervened to reinterpret the Basic Law by refusing to allow elections for the chief executive and a more democratic franchise for the Legislature. In July, half a million citizens of Hong Kong demonstrated against Beijing's reluctance to allow democracy.
The Communist Party of China controls all aspects of organized life in that country, including every organ of government, the judiciary, the unions, the media and business. With more than 300,000 detainees, the regime has jailed members of the China Democracy Party, journalists, Internet users and religious minorities. China executes more people than the rest of the world combined. In January, 2003, it executed a Tibetan monk, Lobsang Dhondup, and a senior lama, Tenzin Rinpoche, received a suspended death sentence.
Meanwhile, state-owned companies like Minmetals must develop alliances with the Communist hierarchy. George Gilboy, a senior multinational manager in Beijing, writes about the business-Communist Party system in the August edition of Foreign Affairs: "Chinese firms routinely focus on obtaining exceptional treatment from key officials." Politically, then, China is very much a work in progress.
There are intense debates within the Communist Party about allowing contested elections in more local governments, and about how best to extend the rule of law. The outcome of this debate is most crucial to the fate of the 1.2 billion Chinese, but also to the future of Taiwan and to peaceful relations with the United States. The three are irrevocably linked: If there is a real possibility in the 21st century for a peaceful reconciliation between Taiwan and China, it will only occur if China becomes a democracy. Taiwan is the first Chinese society in 5,000 years to establish a full democracy and its citizens are united in their belief in it. The United States is Taiwan's defender; a democratic China is the precondition for ensuring Taiwan does not become a flashpoint.
The Chinese alone will settle their fate, but well-wishers like Canada can contribute by tipping the debate through incentives or penalties. In the internal debate between reformers and old-style Leninists, a price should be paid for clinging to the authoritarian faith. Getting along with the Communist Party should never mean going along with its worst practices. The lessons of the Soviet Union are instructive: It collapsed because of containment, which prevented aggression; détente, which proved the West need not be an enemy; and heroes like Andrei Sakharov who told the truth about the system.
The Helsinki Accords of 1975 forced the Soviets to tolerate dissidents. With China, our policy likewise should be one of engagement and truth-telling. The leadership of China must realize that it cannot enjoy full participation in free economies and open societies until it becomes one, too. As a state-owned agency of an authoritarian government, China Minmetals should not be allowed to own the assets of our free society until China itself joins the community of the free.
Thomas S. Axworthy is chairman of the Centre for the Study of Democracy at Queen's University.