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Originally Posted by Vipal Monga WSJ
Canada blocked Chinese state-owned Shandong Gold Mining Co. from buying a gold mine in the Canadian Arctic as Prime Minister Justin Trudeau faces growing pressure to curb Beijing's rising influence in the country and the polar region.
Monday's decision was the second time Mr. Trudeau has vetoed a China-led deal since coming to power in late 2015, backtracking in part on his Liberal administration's initial policy goal of developing closer economic ties with China.
The move could worsen relations between the two countries, which are already strained over Canada's role in the arrest of senior Huawei Technologies Co. executive Meng Wanzhou, the daughter of Huawei's founder, in Vancouver in 2018 over the company's alleged violations of U.S. sanctions on Iran.
China subsequently detained two Canadians for allegedly violating national-security laws, which Mr. Trudeau has described as retaliation for Ms. Meng's arrest.
Shandong, one of the world's largest gold miners, had proposed buying TMAC Resources Inc., which owns a mine almost 120 miles north of the Arctic Circle, for roughly $150 million.
But former Canadian national security and military officials came out against the deal. They argued that it would give China too much access to the Arctic, a sensitive region where China has been investing because of its growing importance as a shipping route and a source of valuable minerals.
Under Canadian law, the government must review any acquisition by a foreign state-owned enterprise and can block it to protect national security, a term that is left undefined in law to give officials some flexibility on how to use the veto.
Although it doesn't have any oversight authority on acquisitions in Canada, the U.S. Senate Energy and Natural Resources Committee also was tracking developments on the proposed TMAC deal.
TMAC said late Monday that the government had completed its review and blocked the deal from going ahead. "TMAC and Shandong are in discussions regarding termination of the transaction," the Canadian company said.
A spokesman for the Canadian minister in charge of investment policy confirmed the transaction was vetoed, but declined to comment further. Shandong didn't respond to an email seeking comment. A representative for the Chinese embassy in Ottawa didn't respond to a request for comment.
The first time Mr. Trudeau's government vetoed a Chinese deal was in 2018. Canada blocked the proposed acquisition of Toronto-based Aecon Group Inc. by CCCC International Holding Ltd., citing national security concerns.
Monday's decision reflects a quickening recalibration of the Trudeau administration's stance toward Beijing. Former diplomats and foreign-policy analysts have said it has focused for too long on protecting commercial interests -- from food exporters to miners and financial services -- and failed to take account of China's more aggressive global role under the leadership of President Xi Jinping.
"Everyone needs to be a little wiser in understanding the tools that the Chinese government is willing to use that go outside the bounds of the normal rules that we are used to working amongst with like-minded allies, " Mr. Trudeau said in an interview with The Wall Street Journal earlier this month.
His foreign minister, François-Philippe Champagne, has also promised a new policy on China but warned about adopting the more bellicose approach that some of Mr. Trudeau's political rivals seek. "Let's not fall into the temptation of tough and irresponsible rhetoric that will generate no tangible results," he said.
An end to the extradition case involving Ms. Meng, the Huawei executive, could provide Canada space to harden its approach to China.
Lawyers for Ms. Meng have spoken to U.S. Justice Department officials in recent weeks about an agreement in which she would be required to admit to some of the allegations against her, the Journal previously reported. In exchange, prosecutors would agree to potentially defer and later drop charges if she cooperated, according to people familiar with the matter.
A deal involving Ms. Meng could pave the way for China to return the two men, Michael Kovrig, Canadian diplomat who was on leave, and businessman Michael Spavor, who have been in custody for more than two years, and is said to be a factor motivating the U.S.-led talks. Mr. Trudeau has declined to comment on a possible deal.
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