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Innovation, Science and Industry Minister Francois-Philippe Champagne rises during Question Period in Ottawa on Oct. 31.Adrian Wyld/The Canadian Press

Beijing is accusing Canada of “suppressing Chinese companies” by forcing three of its state-controlled corporations to sell their stakes in Canadian critical minerals businesses.

On Wednesday, Ottawa ordered Chinese state-owned companies to immediately divest their interests in three Canadian critical minerals companies. The federal government had faced an avalanche of criticism earlier this year for allowing too much investment from the Asian superpower in Canada’s domestic mining sector.

Innovation Minister François-Philippe Champagne cited national security and protecting supply chains in announcing the order.

The targeted companies are Sinomine (Hong Kong) Rare Metals Resources Co., Ltd., Chengze Lithium International Ltd. and Zangge Mining Investment (Chengdu) Co., Ltd. They must sell their stakes in Power Metals Corp., Lithium Chile Inc. and Ultra Lithium Inc., respectively.

This crackdown on Chinese investment in a critical mineral comes as Canada-China relations remain in a deep freeze with no signs of warming up. Beijing locked up two Canadians in 2018 after Ottawa arrested a Chinese tech executive on a U.S. request. While this dispute has been resolved, relations between the West and China have worsened over its treatment of Uyghurs, its quashing of dissent in Hong Kong and its menacing of Taiwan.

Mr. Champagne himself a few weeks ago talked about how the West needs an economic “decoupling” from China and other authoritarian states.

A spokesman for the Chinese government on Thursday accused Canada of exaggerating national security concerns to justify the forced divestments.

“The Canadian side has overstretched the concept of national security and placed arbitrary curbs on normal trade and investment co-operation between China and Canadian companies,” Zhao Lijian, deputy director of the Chinese Ministry of Foreign Affairs Information Department, told reporters at a briefing in Beijing.

The Chinese official said Canada is discriminating against companies from China.

“China urges the Canadian side to stop suppressing Chinese companies,” Mr. Zhao said. “We call for a fair, just and non-discriminatory environment for Chinese companies doing business in Canada.”

He made no mention of the restrictions China itself places on foreign investment but talked of how Canada is supposed to be in favour of a free economy. “This is against the principle of market economy and international economic and trading rules the Canadian side has been talking about,” Mr. Zhao said of Ottawa’s divestment order.

Wesley Wark, senior fellow at the Centre for International Governance Innovation, said in an interview that the response from the Chinese is “slightly double-faced,” given its claim that it operates as a fair player in a global market economy.

“China isn’t a champion of open global trading,” Mr. Wark said.

He added that in its totality the tone of the Chinese response was quite moderate and equated to a “pretty gentle slap on the wrist” for Canada.

Ottawa’s decision to force Chinese investors to sell their interests in three very small Canadian critical minerals is also raising questions as to why much bigger Canadian companies with substantial Chinese interest, such as Vancouver’s Ivanhoe Mines Ltd., were not targeted.

Mr. Wark said that he’d like to see Innovation, Science and Economic Development Canada (ISED) conduct a 10-year review of Chinese investment into Canada’s critical minerals industry, and identify other sizable transactions where questionable decisions over allowing Chinese investment were made, and possibly Ottawa should force other divestitures.

This year, Mr. Champagne allowed the acquisition of Canadian lithium company Neo Lithium by China’s Zijin Mining without an in-depth security review. That was widely criticized by national security experts, and precipitated parliamentary hearings.

Three years ago, the federal government allowed the acquisition of the Tanco mine in Manitoba by China’s Sinomine. Earlier this year, Sinomine started producing lithium at the site and shipping it back to China for use in its domestic electric-vehicle industry. Several critical minerals investors called the decision to allow that deal a mistake.

Sinomine was one of the Chinese companies that was targeted by the government this week in its crackdown. However, Ottawa is not rolling back the clock in its purchase of Tanco. It is instead forcing Sinomine to sell its much smaller equity interest in Power Metals Corp, a Vancouver-based cesium, lithium and tantalum exploration company, whose entire market value is only $27.5-million.

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