During his visit to China in February, Prime Minister Stephen Harper had two things on his mind: pandas and oil.

For Canada, the trip was a success. Harper had his picture taken with two of China's cutest inhabitants, and told China's leaders often and loudly that Canada's oil and gas companies are open for business and for investment.

His hosts indicated they are almost as keen to buy Canadian oil and gas as he is to sell it, and that Chinese companies will be delighted to take up his invitation to invest in Canadian natural resources.

Fast forward to this week and China put its money where its mouth is with a$15-billion offer by the China National Offshore Oil Company to buy Calgary-based oil producer Nexen Inc.

It's one of the biggest foreign takeovers China has ever attempted and one of the biggest in this country as well.

So now Canada has to decide whether it really means what Harper said when he was in Beijing.

'Net benefit'

The Investment Canada Act requires the minister of industry, in this case Christian Paradis, to determine whether any foreign takeover worth more than $330 million provides a "net benefit" for Canada.

Would we have to give back the pandas? The prime minister and his wife Laureen get up close and personal with one of the two pandas who will call the Toronto zoo home for the next 10 years. (Adrian Wyld / Canadian Press)

Luckily for Paradis, the provisions of the act are sufficiently vague that it allows him to decide pretty much whatever the prime minister tells him to.

Having laid out such a large and inviting welcome mat back in February, it seems highly unlikely that Harper will want to slam the door in China's face, unless he wants to give back the pandas and have relations return to the deep freeze.

In making its decision, Ottawa will be helped by the fact that CNOOC, which was rebuffed by the U.S. when it tried to take over Unocal for $18-billion in 2005, has done its homework this time.

As the first Chinese company to make important minority acquisitions in Canadian oil firms, CNOOC has seven years experience here already and is often said to have good connections in Ottawa, courtesy perhaps of Hill and Knowlton, the giant international PR firm that was hired to advise on the bid.

What's more, by offering at least 61 per cent more for Nexen's shares than the previous day's closing price, CNOOC's bid is extremely generous and includes several promises that are clearly designed to satisfy the "net benefit" requirement.

It will keep Calgary as the headquarters of operations for North and Central America; Nexen's current management will stay in place; CNOOC will list on the Toronto Stock Exchange; and CNOOC will invest heavily in existing assets.

It will also be hard for opponents to portray the deal as a sell-off of Canada's birthright since only one third of the oil Nexen produces is from here.

The rest is in the North Sea, the Gulf of Mexico, Yemen and off the coast of Nigeria, not places usually seen as part of Canada's heritage.

On the face of it, this seems like the kind of deal that would normally sail through the review process. That is, if only CNOOC did not have the word China in its name, and was not owned and operated by the Chinese Communist Party.

Fear the dragon?

In a prescient research study, Fear the Dragon?, issued just last month, the Conference Board of Canada called for changes in the Investment Canada Act to make the review process more effective and transparent.

The study also contains a section titled "Dear China, we have trust issues," in which the authors cite a Harris-Decima poll taken in February around the time of Harper's China trip.

"Just one in 10 respondents thought Chinese companies taking a majority controlling interest and/or taking over an existing Canadian operation is a good thing," the poll found.

Clearly, it would seem that Canadians have greater concerns about China's economic ambitions than their federal government does, perhaps based on the way Beijing has tended to disregard workers' rights and environmental standards at home.

Or perhaps it is based on the fear that large state-owned Chinese companies will use their muscle in the interests of China to the detriment of Canada; or that, when push comes to shove, the Chinese government will throw its weight about in support of their companies, demanding concessions from Canada on their behalf.

In a column in her local newspaper, Island Tides, last week, the energetic Green Party leader Elizabeth May, recalled the old argument that stronger trade ties would promote political reform in China.

"In the last few years, direct ownership of the Alberta oil sands by Chinese state-owned oil companies has gone from nearly nothing to over $12-billion," she wrote.

"So back to that wonderful transmission of values through trade. It seems to be working," she added, in a slap at the Harper government. "Canada is absorbing Chinese values respecting human rights, labour laws and environmental protection."

The counter-argument, made by the Conference Board, is that Chinese companies respect the rule of law in host countries, and deserve a clearer law here that will "make them aware of Canadian sensitivities and requirements" and "balance Canada's desire for Chinese investment with the Canadian national interest."

So where is that law?

Greater transparency

Two years ago, Christian Paradis' predecessor as industry minister, Tony Clement, blocked the Australian mining company BHP Billiton from taking over Potash Corp. of Saskatchewan (for almost $40-billion).

China National Offshore Oil Company Ltd. Chairman Wang Yilin, the next boss of Calgary-based oil and gas producer Nexen, if shareholders and the federal government agree. (Kin Cheung / Associated Press)

At the time he, and the prime minister, promised to draw up new guidelines so that foreign investors know exactly what they need to do to comply with Canada's "net benefit" rule.

But that promise has not been kept, and the system remains almost as arbitrary and opaque as the one Canadian companies have to deal with when investing in China.

Right now, China is seeking to turn its mountain of cash into greater ownership of resources, seeing these as a better investment for its economic future than U.S. treasury bonds and their almost zero return.

In this regard, Canada is a natural place to look and China's leaders are sure to see this bid as a test case for more to come.

Indeed, so will the many Canadians who have suspicions about the wisdom of the deal.

Both sides would benefit from greater transparency and a wider airing of the issues involved.

And before Canada makes a decision about whether to approve the deal, it would be nice to know just who made $30 million with what Reuters reports was "a number of well-timed bullish bets" on Nexen options last week, just days before the CNOOC deal was announced.

The news agency quotes one stock analyst as saying, "This is probably the most compelling and suspicious order flow I've seen in a takeover in several years."