Originally published at www.CanadianBusiness.com on November 3, 2011.

Until now, China has moved cautiously in the Canadian oilsands, preferring to take minority interests in resource companies and development projects. Perhaps emboldened by Foreign Affairs Minister John Baird’s claim that China is a “friend and ally,” the Chinese appear to be putting this to the test. The current $2.2-billion bid by Chinese state-owned Sinopec for Calgary’s Daylight Energy marks the first time a Chinese company has attempted a 100% takeover of a Canadian oil and gas producer. The all-cash bid also represents the first real test of what’s effectively Prime Minister Stephen Harper’s newly announced policy on foreign direct investment.

In a recent interview, Harper laid out new policy considerations that form part of the “net benefit test” for proposed foreign acquisitions. The prime minister said he didn’t want the Canadian economy to be owned and operated from “every place but Canada,” and underscored the importance of reciprocity, apparently welcoming investment from countries on the same terms they grant Canadian investors in their country. (On last year’s attempted purchase of Potash Corp. by Australia-based BHP Billington, he said that, “if this had been in Australia, to put the shoe on the other foot, I don’t believe that takeover would have been approved.”)

Then came the kicker. Harper said the government “welcomed investment by China and other countries, so long as the acquisitions were economic in nature and don’t have other strategic and political connections.”

Set against this policy, the Daylight acquisition is no slam dunk. Yes, while the company is a producer, it is still in a development phase. And, it is a small enough acquisition that Canada’s ownership of its energy resources is not threatened. There is no major loss of jobs or of a headquarters at stake, and the need for capital to develop oil and gas properties should trump other considerations. But foreign takeovers of Chinese companies are few, and laws exist that limit foreign takeovers without Chinese government approval. It isn’t clear that this bid satisfies the reciprocity test.

Meanwhile, the U.S. State Department will be following this transaction closely, as it’s another in a growing list of Chinese investments in Canadian companies. At the moment, Canada is captive to the U.S. market when it comes to selling oil and gas. With the prospect of serious Chinese investment in Canada now a reality, however, Harper is signalling that American environmental concerns about our oil are “all the more reason” for Canada to look at trade diversification, particularly diversification of energy exports.

Sen. Lyndsey Graham has made clear the U.S. dilemma. “Canada is going to sell this product,” he said. “The question is whether they will sell it to us or to China.” A South Carolina Republican and member of the U.S. Senate’s armed services, budget and appropriations committees, Graham added that if it’s not the U.S., “it will be one of the biggest energy blunders in our history.” But parts of American energy security policies are at odds with influential elements in President Obama’s Democratic Party, who want to curtail what they perceive to be Canada’s “dirty crude” from the oilsands—witness the continuing uncertainty over the future of the Keystone XL Pipeline.

While the investment in Daylight should be welcomed, it will raise concerns about China’s potential to snap up larger Canadian companies. The Harper government may ultimately decide that approving relatively small Chinese acquisitions like this one will be accepted at home while sending a message to Americans that Canada will develop its oilsands with or without them.

The U.S. has the right to buy oil and gas from whomever it likes, but it can’t put restrictions around oilsands imports while fretting that Canada might sell to the Chinese instead. If the Sinopec deal gets the green light, it will send a clear message to Washington: create too many obstacles to importing Canadian energy, and we’ll look elsewhere—even to China.