Business Flying Whales: Ottawa fears China will spy

Flying Whales: Ottawa fears China will spy

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Investissement Québec made its $ 30 million investment in the Flying Whales company even if the controversial airship project is still blocked by Ottawa, which has been weighing up the risks of industrial espionage for a powerful Chinese partner for months.

Investissement Québec (IQ) recently confirmed to our Investigation Office that the amounts were disbursed, without specifying the date.

The state-owned company thus officially became a minority partner of the parent company Flying Whales SAS, headquartered in France, and of the Quebec subsidiary, which will notably carry out research and development for the airship production project.

IQ also confirmed that the Federal Ministry of Innovation, Science and Economic Development (ISDEC) has still not given its operating license to the Quebec subsidiary.

This procedure is mandatory for the start-up of any business that is not majority owned by Canadian capital, as is the case for Flying Whales Quebec. But the delays have multiplied. ((see text below).

Shareholding

IQ spokesperson Isabelle Fontaine said that the federal authorities are questioning the shareholding of the French parent company, which includes the Chinese state-owned company AVIC, a giant in the aeronautical sector. .

«[Un des contrôles] is the subject of a further study, which was expected given the shareholding of the parent company of Flying Whales Quebec, “said Ms. Fontaine.

In the United States, AVIC is in the crosshairs of the federal government, according to which the powerful conglomerate is controlled by the Chinese army.

The FBI has identified Chinese industrial espionage as a recurring threat to US national security.

IQ did not disclose the date on which its request for authorization was sent to ISDEC. The Investment Canada Act provides that a business can apply before making its investment or within 30 days of the transaction.

The office of the federal Minister of Industry, Navdeep Bains, explained that the authorization procedure, which is confidential, determines whether foreign investments are beneficial to the Canadian economy or not.

“The law also provides for the review of all foreign investment in order to preserve national security,” said councilor John Power, refusing to comment directly on the Flying Whales case.

Spying

In November, the Minister of the Economy, Pierre Fitzgibbon, was aware of the questions that could arise from the presence of AVIC.

“Of course we should look, as we mentioned, at the whole industrial espionage side,” he said.

However, he had ruled out any risk that the Chinese would recover technology from Quebec.

“The Chinese are not shareholders of the Quebec operation,” he said.

– With Jean-François Gibeault

Federal delays are increasing

Prolonged analysis of Ottawa hovers “a sword of Damocles” on the Quebec subsidiary of Flying Whales, recognizes the boss of the company.

Sébastien Bougon, president and chief executive officer of Flying Whales SAS, the parent company of the Quebec subsidiary, explains that the federal authorities have extended the initial 45-day deadline for examining the project “three or four times” , which also provides for the construction and operation of airships in Quebec.

A first federal authorization, however, would have enabled the partners to still invest in the Quebec subsidiary, said Mr. Bougon in an interview.

“We received a first green light that helped unblock the operation,” he said. A second procedure provided for by law has been launched, which is to control the question of the Chinese investor in the parent company. ”

Waterproof subsidiary

Mr. Bougon said that the federal authorities have asked for “more detailed explanations on the structure of shareholding in France”.

The objective is to ensure that research and development projects planned in Quebec will not be exposed to theft of intellectual property.

“They verify that there is no transfer from Quebec to France and then from France to China,” he said.

Certain of being able to reassure Ottawa, Mr. Bougon recalls that the Chinese are only shareholders of the French parent company.

“Flying Whales Quebec is waterproof,” said the CEO.

He is anxious all the same that Ottawa dissipates the last uncertainties. “Somewhere, it’s always a little sword of Damocles, always a small risk,” he admits.

If necessary, Mr. Bougon is ready to reduce the research and development program in Quebec. “If the federal government said to me:” Look, we don’t really want you to do it in Quebec “, we will do it in France.”

In February, given the risks associated with the project, the Liberal opposition in Quebec City had worried about the government’s financial participation.

Prime Minister François Legault then vouched for the results. “Skeptics will be confused,” he said.

The Chinese lend a helping hand

The Chinese aeronautical giant AVIC has put its employees and its technical knowledge at the service of the Flying Whales aircraft project.

The expertise of the state-owned company played a decisive role in the start-up of the project for transporting heavy loads by airship from the parent company Flying Whales SAS.

Articles published in 2016 in Chinese media indicate that employees of the aeronautical giant have been placed at the service of the young French company.

The website of Huanqiu, a national daily newspaper printed in 2 million copies, reported in particular that they would go to work in France.

“A group of excellent Chinese engineers will also be sent to join the team of the Flying Whales Company in Paris in order to participate in the research and development of the project in a global way”, indicates a French translation of the report.

The Qianlong news site also said they would be 25 engineers assigned “to improve the design, management of joint ventures, post-production and airship preparation.”

According to Huanqiu, the chairman and chief executive officer of Flying Whales, Sébastien Bougon, underlined the contribution of the Chinese in the field of airships.

“I saw the enthusiasm of AVIC engineers to participate in the project,” he said in the report.

Know how

In an exchange with our Investigation Office, Mr. Bougon confirmed that the contribution of AVIC, minority shareholder of Flying Whales SAS, was decisive for the French company, whose headquarters are in the suburbs of Paris.

“We had cooperated with the AVIC airship subsidiary to acquire their advice and knowledge on the subject since France had lost this know-how for a long time”, he declared.

Mr. Bougon did not want to specify how many engineers he received or whether they are still on his teams.

Mystery

In addition, Flying Whales leaves the mystery hovering over the professional past of a director of its Quebec subsidiary.

Xu Mingxuan is one of the five members of the board of directors of Flying Whales Quebec.

Mr. Bougon, member, president and secretary of the board of directors of the Quebec subsidiary, said that Xu Mingxuan represents his company.

“He’s an employee of Flying Whales, absolutely. He is very kind, very intelligent. He has a good scientific culture, ”he said.

Mr. Bougon did not rule out the possibility that Mr. Mingxuan was a former AVIC employee.

“He is not an AVIC employee today,” he just replied.

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