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The state-owned company has also been linked to the construction of artificial islands in the South China Sea, which has created high tension between China and several Asian countries.

The government says it will review the offer to decide if there is a “net benefit” to Canada as required, but has not made clear whether a national security test will be imposed on the company. Prime Minister Justin Trudeau has said the deal will be reviewed “very carefully” under the Canada Investment Act.

Rejecting the deal would anger China, which is anxious to start free trade talks with Canada, and maintains that an eventual deal would provide more certainty for its potential investors in Canada.

David Mulroney, a former Canadian ambassador to China, urged the government to keep its guard up in the face of shifting circumstances with Beijing.

“We can’t make every decision with a view to making the Chinese happy. The more you do that, the more bad deals come your way from China,” said Mulroney.

“You have to show there are limits to our flexibility. We have real standards and we will live up to them.”

Canada needs to pursue free trade talks with China otherwise it will become “hostage to an American negotiating strategy and the fate of NAFTA,” said Paul Evans, of the School of Public Policy and Global Affairs at the University of British Columbia.

But the government needs to exercise caution when it weighs all investment bids by China, he said.