He was in a position to know when he visited the University of Alberta last week to deliver its 2006 annual Eldon D. Foote Lecture in International Business.

Balloch served as Canada's ambassador to China in 2001-06. He still mixes with Beijing masters. He is president of Balloch Group, an investment bank that builds bridges between state enterprises of the People's Republic and the capitalist West. He is also vice-chairman of the Canada China Business Council in Beijing.

One of Beijing's worst-kept secrets is that a 2005 campaign by its industrialists to expand into Canada and the United States failed badly, but also taught the Chinese lessons for their next venture in North America, Balloch reported.

He pointed to unsuccessful Chinese takeover bids for Ontario mining giants Falconbridge and Inco, which fell instead into the hands of Swiss and Brazilian buyers.

The oilsands deals were modest successes by China National Offshore Oil Corp. and Sinopec with two capital-hungry industry juniors, MEG Energy and Synenco Energy, compared to much bigger game that Beijing hoped to catch, Balloch indicated.

The Chinese shopping trip to Alberta was mostly private, with no counterpart to a noisy U.S. bidding war for Unocal, which Chevron Corp. won with help from economic nationalists in Washington, D.C.

But Alberta's quieter business and government leadership taught Beijing industrialists the same lesson as the American experience. The Chinese heritage of state enterprise breeds weaknesses in international economic arenas.

Oilsands overtures were largely rebuffed last year because corporate giants that dominate the Alberta field were not desperate for outside capital and regarded the Chinese as difficult partners, Balloch said.

Beijing discovered that foreign expansion spawns confrontation and friction. That requires business leaders to be persuaders with skills in public and government relations that have not been native to China for its long history of authoritarian regimes, Balloch pointed out.

The legacy also survives in rules that handcuff Chinese industrialists when they have to compete with capitalist rivals for international investments or takeovers, he added.

Beijing's enterprises require approval by a national development commission to take actions deemed to involve state money, which in practice means any significant move. Deals worth more than $1 billion must obtain approval from the national cabinet, Balloch reported.

The approval process takes two or three months and is no formality, he said. Wary Chinese government officials refuse even to consider proposed transactions unless all details are nailed down in advance.

New skills and methods will be learned. The evolution of the world's most populous country gives its industrial officer class no choice.

"We are continuing an unleashing of repressed appetites and desires," Balloch said.

China's "great pragmatic revolution" -- which after the 1976 death of Mao Zedong created a hybrid society, mixing economic freedoms such as property ownership and personal mobility with one-party political rule -- has had spectacular results, Balloch reported.

In 1978, China had 17 cities of four million or more and 80 per cent of the national population was still rural, tied to ancient forms of manual labour in agriculture.

Three decades later, China has 50 cities of more than four million. Internal migration to urban centres and jobs in industry, trade and commerce continues at a rate of 25 million people per year.

The change is not a case of merely exchanging urban for rural poverty. A new society of middle-class consumers is emerging on a large scale.

At the time of Mao's death, only a tiny number of the most powerful and privileged Chinese had disposable income. Virtually all struggled to afford essential food, clothing and shelter.

Thirty years later, the population with 20 per cent or more of household income available to spend on consumer items from cars and travel services to electronic appliances and fashion wear has mushroomed to 160 million, Balloch said.

China's consumer society is growing as fast as its cities, helping to sustain annual average economic growth of 10 per cent and booms in construction, retail sales and demand for every commodity from iron to oil.

Even if Beijing industrialists take a long time to acquire skills and procedures needed to compete for Alberta resources on a large scale, Balloch expects the province to feel their power.

After contributing indirectly to the oilsands rush by helping annual average oil prices triple since the 1990s to about $68 US a barrel so far this year, Chinese demand and global competition for supplies is bound to keep on accelerating, Balloch predicted.