CNOOC pledge small step for China transparency, sceptics abound

Sun Dec 9, 2012 4:00pm EST
 

By Rachel Armstrong and Michael Flaherty

SINGAPORE/HONG KONG Dec 10 (Reuters) - CNOOC's promise of transparency, pledged to win approval from Canada for its $15.1 billion purchase of Nexen Inc, looks like a positive step on the face of it but is unlikely to represent a sea change in Chinese business practices.

To be sure, the details of commitment are not clear. The state-controlled energy firm has promised the Canadian government an annual compliance report on all its commitments that are part of its takeover of Nexen Inc, China's biggest ever takeover. These include listing shares on Toronto stock exchange, which comes with certain disclosure requirements.

But when capital is king, cash-rich Chinese state-owned enterprises have the balance of power in any acquisition talks, leaving doubts about the real potency of transparency pledges.

"On the transparency side, I believe there will be efforts from foreign governments to get more information, but it's still a question of how far China is willing to give," said Robert Lewis, a partner at Zhong Lun law firm in Beijing.

"Twenty years ago it was all about foreign capital coming into China and that foreign capital having the leverage in negotiations. Now it's the other way round, so China will not have to give as much on the transparency side as some might suspect".

The international community has demanded greater transparency from China on a number of fronts for years, wary of its intentions as the country grew to become the second-biggest economy in the world and symbolic of a shift in global power to emerging nations.

On the latest front, U.S. securities regulators are in an intense stand-off with their Chinese counterparts over access to Chinese audit documents. Separately, a U.S. congressional advisory panel described Chinese investment in the United States as a "potential Trojan horse."

China's state-secrets laws, massive bureaucracy and cronyism make it difficult to get key, verifiable information from Chinese companies.   Continued...