China abroad 中国的海外投资
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America needs to worry about the contrast between its attitude to China and Europe’s
Jun 30th 2011 | from the print edition
IN EUROPE, the red carpet. In America, a red mist. This week’s tour of European capitals by Wen Jiabao, China’s prime minister, underlined the stark transatlantic difference in responses to China’s economic clout. European leaders, caught up in the euro area’s crisis, want China to buy more of their debt; American politicians worry that it owns too much of theirs. For European politicians the value of the yuan is one worry among many; it sometimes feels like Americans can think of little else. In Europe, Chinese firms are broadly welcome; in America, they are often viewed with suspicion.
Europe’s receptiveness to China is born partly of weakness. Delegations from peripheral euro-zone countries have been flying into Beijing to seek buyers of their debt. Fixers working for Chinese companies report a steady stream of inquiries from cash-strapped European firms. But even among Europe’s stronger economies, the political bias is to promote investment from China, not deter it.
That stance will have big consequences. China’s foreign direct investment to date has focused on securing the energy and resources that its industrialising economy craves. Chinese money has been visible in Asia, Africa and Latin America, buying up everything from copper mines in Peru and farmland in Tanzania to aluminium smelters in Australia. But the next stage in China’s emergence is under way and it will centre on Europe.
To understand why, consider each of the world’s three largest economic powers in turn. China wants to climb the development ladder. Its burgeoning domestic markets are fiercely contested, so its firms want new sources of advantage like Western brands and marketing expertise. Its export-oriented firms want to lock in closer ties with end-customers.
America is the natural place for China to turn to but the economic relationship between the superpower and the dragon breathing down its neck is fraught. Ever since CNOOC, a state-controlled Chinese oil firm, was forced out of the bidding for California’s Unocal in 2005 by congressional and media critics, many big Chinese companies have regarded America as fundamentally hostile to their investments.
This perception is not entirely fair. The process for screening inward investments into America on security grounds does not appear to discriminate against China. But Chinese companies wanting to buy American assets must be prepared to risk public attacks by wealthy lobby groups and frothing congressmen. Many choose to avoid America instead. A report by the Asia Society in Washington, DC, says that scaremongering about China could lead America to forfeit a share of $1 trillion-worth of outward Chinese direct investment by 2020.
More of that cash is instead heading to Europe. Investment bankers there are now sure to dial Chinese clients if they hear that a firm is a possible bid target. Chinese banks are rapidly increasing their presence in Europe. Mainlanders are snapping up central London residences. Chinese direct investment abroad has increased faster in Europe than in any other region.
The Europeans get more than just money. A Chinese partner is a good way for a European brand to gain access to the world’s soon-to-be-biggest economy. Ask France’s Club Med, which now has a big Chinese shareholder and recently opened its first holiday resort in the country. Or CIFA, an Italian construction-equipment maker whose products are now marketed as a premium brand by its Chinese owner. Or Sweden’s Volvo, which was bought by Geely, a Chinese carmaker, in 2010 and now calls China its “second home market”.
European voters are less happy about all this than their leaders: polls show that they view Chinese investments nearly as negatively as Americans do. Three worries predominate. The first is that China will strip Europe of technology and jobs. It is true that Chinese firms are often interested in buying European companies to use their know-how in China (or worse, to steal it). But Chinese firms want to conquer markets abroad as well as at home, and to do that in Europe, they must create jobs there. The second fear is that the Chinese are buying European jewels on the cheap. But there’s no evidence for that. Indeed, they are more likely to overpay: countries and firms with excess savings nearly always do. The third concern is that investments in assets like utilities and mobile technology threaten Europe’s security. But processes exist to screen foreign investments on those grounds. There’s no reason to think that they are wanting, and no reason to tighten them until that changes.
China’s outward march certainly argues for vigilance, for it is the consequence of a huge shift in the balance of power, and change always involves risk. But the opportunities are greater than the dangers. In welcoming China, Europe is swimming with the tide of history; America is struggling against it.