Buying Canadian lithium firm part of China's aim to dominate high-tech manufacturing, MPs told

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Buying Canadian lithium firm part of China's aim to dominate high-tech manufacturing, MPs told
© Provided by National Post Arcadia Lithium mine in Zimbabwe, which a Chinese company offered more than US$400 million to buy in December.

China buying a Canadian lithium mining company is part of a wider strategy by the Chinese to become “dominant in global high-tech manufacturing,” an analyst told a parliamentary committee Wednesday.

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“Securing access to lithium and other critical mineral reserves is essential to the achievement” of that industrial policy, said Jeff Kucharski, a senior fellow at the Macdonald-Laurier Institute and adjunct professor at Royal Roads University.

China’s industrial policy “seeks to make China dominant in global high tech manufacturing,” and it aims include “mobilizing state-owned enterprises to acquire intellectual property, technologies and assets abroad, with the overall aim to surpass Western countries,” he said.

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The Canadian mining company Neo-Lithium, which has a lithium mine in Argentina, announced it was being bought by the Zijin Mining Group in October. The House of Commons industry committee launched a study of the $960-million acquisition after the Conservatives criticized the government earlier this month for not holding a national security review of the transaction.

Kucharski said the Neo-Lithium deal follows at least two other acquisitions of Canadian lithium companies by Chinese companies in the past few years, and the process under which the government considers each transaction on its own merits misses the big picture.

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“How can Canada build a lithium supply chain or any other critical mineral for that matter, when it allows the assets of Canadian companies to be acquired by a country that seeks to cement its dominance in this sector?” he said.

  • Canada’s mineral policy in need of a critical review
  • Chinese takeover of lithium company not a security issue, Liberals say

Kucharski said he’s not “arguing that this deal should have been denied because the lithium from this company would have necessarily have been used in Canada. We currently don’t have a lithium industry here to use it…But we never will if we allow all of our lithium companies to be sold off.”

While the Canadian government can’t and shouldn’t compel a company like Neo-Lithium to send their lithium to Canada, companies like these are “building blocks for building a supply chain,” he argued.

Guy Saint-Jacques, a former Canadian ambassador to China, said that since the early 2000s, China has encouraged its state-owned companies to invest in other countries in order to secure long-term supplies of resources including critical minerals.

He noted that given Neo-Lithium’s mine project is in Argentina, “I must say that it is not obvious to me to see how Canadian national security would be directly threatened by this acquisition.”

Saint-Jacques said the case “raises a more general and important question” about what the Canadian government’s policy is to support domestic production of critical minerals, and what concrete actions Canada can take on the issue by working with allies. “That should be where we need more attention and more efforts,” he said.

The government maintains that the fact a national security review of the Neo-Lithium transaction wasn’t triggered under the Investment Canada Act doesn’t mean it didn’t consider national security implications of the transaction.

A spokesperson said that all transactions involving “critical minerals are systematically and thoroughly scrutinized by the Investment Review Division in concert with the responsible government departments and Canada’s security and intelligence community.”

It’s only if that review process finds the transaction to be “of potential concern” that a national security review is triggered.

iberal MP Andy Fillmore, parliamentary secretary to the industry minister, has also argued that Neo-Lithium isn’t really a Canadian company, and only registered on the TSX to raise money.

Wesley Wark, senior fellow at the Centre for International Governance Innovation, said the government should have taken more time for that initial review process that determines whether to go ahead with a national security review. He called the decision not to trigger that formal review under the Investment Canada Act a “mistake.”

He said by selling a company that trades in Canada and is based at least partially in Canada, “we’re losing future capabilities, we’re losing intellectual property, we’re losing technological know how, we’re losing an unknowable future.”

Lithium is classified as a critical mineral by the Canadian government, and is significant due to its use in batteries, especially as industries like the auto industry move toward electrification.

Flavio Volpe, president of the Automotive Parts Manufacturers’ Association, told the committee under the Canada-United States-Mexico Agreement, “Canada’s auto industry and its supplier industry does not benefit from sourcing lithium from outside of North America.”

Volpe said it’s more important to focus on working on mining potential and extraction in Canada. “There are many, many ways to do our part in combating China’s increased dominance in this space. Picking a fight over assets on the other side of the world is not an action that our industry would recommend,” he said.

Nikos Tsafos, of the Washington-based Center for Strategic and International Studies, told the committee that one day, trade in critical minerals will supersede the trade in fossil fuels.

“China has already built a commanding position in critical minerals,” he said. “Critical minerals and the industries they enable are too important to be left alone. Western governments should tackle these questions together, because the stakes are too high for any other approach.”

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