The Chinese government has warned Canada to abandon “prejudice” against Chinese companies, after Ottawa blocked the acquisition of construction company Aecon Group Inc. by China Communications Construction Co. Ltd, a state-owned firm.

“We are opposed to political interference under the pretext of national security,” said Lu Kang, a spokesman for the Chinese foreign ministry.

“We hope that Canada would cast aside its prejudice and ensure a fair and sound environment for Chinese enterprises.”

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Mr. Lu also delivered a veiled threat that China could consider reprisals, saying “if things come to a stage where our interests are hurt, we will definitely take necessary measures to safeguard our lawful interests.”





Ottawa’s rejection of the $1.5-billion deal came after a national security review concluded the acquisition would not be in Canada’s national security interest, sources told The Globe and Mail.

The deal’s rejection comes amid a rising reconsideration in many foreign capitals of China’s intentions as its deep-pocketed companies, many of them state-controlled, spread across the world in search of assets and technology. In the last two years alone, Chinese companies spent US$290-billion on non-financial foreign investments, according to official statistics, a sum that significantly exceeds overseas investment into China during that period.

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Now, governments in countries like Australia and Germany are questioning the links between Beijing’s spending and its assertion of political influence. Last year, Germany strengthened its foreign investment laws, giving Berlin more power to block overseas acquisitions of firms engaged in “critical infrastructure.“ The White House, meanwhile, has raised global fears of a trade war as it seeks to extract greater trade concessions from China.

On Thursday, Chinese scholars decried what Wang Huiyao, director of the Center for China and Globalization, likened to a spreading “flu” of global skepticism toward China.

“It’s a sentiment that’s not healthy,” he said.

He took particular aim at the blocking of the Aecon deal, which did not involve sophisticated technology or manufacturing expertise. Infrastructure construction “is one of the strongest strengths that China has,” he added, and “construction-wise, China can offer a lot to Canada.”

Blocking the deal “doesn’t sound very positive for Sino-Canadian trade relations,” he said.

Lu Jianzhong, president of the Hong Kong investment arm of CCCC, in a brief e-mailed comment, said: “What’s important is not the message the Canadian government conveys, it’s the way market and investors interpret it.”

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Canadian observers have raised alarm that Aecon’s involvement in building critical projects provides it with access to sensitive information that could be of interest to the Chinese government.

But Zhou Chunsheng, a finance scholar at Cheung Kong Graduate School of Business, pointed to the Canadian decision on Aecon as part of a broader pattern of “discrimination” against China. “Of course this is not a good signal. It means that China and Canada, or sometimes with the United States and Australia — we do not have mutual trust,” he said.

“Most of these countries always want China to import more from them. But they don’t want China to invest in their countries,” he added. “I don’t think this is fair.”

Beijing has shown a willingness to strike back against countries that resist its ambitions. Chinese spending on South Korean goods, including cars and K-pop, fell dramatically during a dispute with Beijing over Seoul’s installation of an anti-missile system. China has similarly acted against Japan and the Philippines during disputes with those countries, and Chinese state media has called for retribution against Australia as that country debates the political influence Beijing has attained.

In the more recent trade frictions with the U.S., China has taken retaliatory steps that have matched measures taken by the White House.

Mr. Lu, the foreign ministry spokesman, said Thursday that China “will pay close attention” to what happens around the Aecon transaction.

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“The nature of China-Canada economic and trade relations should be mutually beneficial,” he said. Beijing encourages its companies “to obey the regulations and laws of countries where when going abroad,” he said, and hopes that in return they receive “good treatment.”

But China under president Xi Jinping “is a very different type of China,” a country that “is very clearly becoming more assertive, and you could even say aggressive, in terms of its international behaviour,” said Peter Jennings, a former top-level Australian strategic advisor who is now executive director of the Australian Strategic Policy Institute.

As a result, “there’s a greater sense of caution globally about how do we deal with this,” he said.

Worry is particularly acute on the issue of critical infrastructure, he said.

“That’s informed by a concern that if you allow your grid, or your gas pipelines or ports and airports to be owned by Chinese companies, then you create a risk that the operations of these facilities might be damaged or shut down at moments when countries might find themselves being coerced by China — or, worse still, in conflict situations,” he said.

“Countries are asking, ‘can we really rely on China to be just another business presence in our country?’ And I think quite often the answer to that is no. There’s strings attached that link Chinese businesses back to the Communist party and to Chinese intelligence services that worry western governments.”

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