UPDATE 2-Canada's Flaherty says no direct China talks on M&A reciprocity

Wed Oct 24, 2012 2:23pm EDT
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* Flaherty unaware of China-Canada quid pro quo talks

* Ottawa under pressure to clarify foreign investment rules

* Canada wants China to ease problems of big firms

By David Ljunggren and Jeffrey Jones

OTTAWA/CALGARY, Oct 24 (Reuters) - Canadian Finance Minister Jim Flaherty said on Wednesday he knew of no direct talks between Ottawa and Beijing about making approval of CNOOC Ltd's bid for Nexen Inc conditional on the approval of Canadian deals in China.

Legislators in the ruling Conservative Party, suspicious of allowing Chinese state-owned firms to buy Canadian energy assets, say Canada should demand concessions in return for approving the proposed $15.1 billion purchase.

Officials say the government intends to put pressure on China to resolve delays and problems that companies such as Bank of Nova Scotia and Manulife Financial Corp are experiencing with their Chinese operations.

"There have been no direct discussions on that subject of which I am aware," Flaherty told reporters in response to a question about reciprocity.

The government has come under pressure to clarify its position on foreign investment after a shock decision to block a bid by Petronas for Progress Energy last week. Many saw that veto as raising the risk of CNOOC's bid also being rejected.   Continued...