Being Eaten by the Dragon: The Economist’s Whining

An article in this week’s The Economist shows the growing concern US businessmen are having around the growing influence and power of China around the world. The article warns of the growing power China may soon has because of its currency reserves and partial state planning. This kind of piece is expected given the current situation America is in right now with its trade deficit and currency aggression against China.

The article begins with a little dramatised story of an American company being bought out by a Chinese owned company. The description was right out of an 80’s cyberpunk movie where the evil Japanese corporations were taking over America. Overly dramatic or not, it certainly reflects the perception the business elites have in their head.

From there they go on to describe just how much influence China has gained in the last ten years. In fact today Chinese state owned companies account for more than a tenth of global stock market values. China also has a huge amount of savings. These are made up of company owned cash surpluses and bank surplus deposits.

The threat is that these profits made form the First World is sent back to the First World through sovereign-wealth funds. Not only that, but the Central bank of China is acting as the portfolio investor mainly grabbing up bonds. The trend now is to shift those funds into purchasing raw materials and land, as well as gaining access for foreign markets. Traditionally we radical leftists have called this imperialism. This is dirty word that the elite don’t care to mention although the accusation against China for it is there.

The hypocrisy in this accusation is astounding. The US has been building an global empire since the end of World War 2. It seems that if anyone else does it, it is a crime. The Economist complains that Chinese executes are not being honest when they say these deals are for profits and not for politics. Especially when these deals are made by state owned enterprises. Of course these are political moves as well as for gaining profits, its transparent. I’m hard press to find any example of any American company admit that a foreign investment or acquisition was intended for a political purpose.

Many of the new steps into Western companies and acquisitions have been considered difficult. The Economist blames this on “cultural differences” and the role of the Chinese government. I find this comment amusing, citing “cultural differences” as some kind of barrier. I could have sworn all capitalists were out for the same thing.

The real annoyance is the role of the state. You see there is this dirty little secret the capitalist class doesn’t want you to know about and will go to great lengths to hide… a government regulation of the economy, to varying degrees, does work. Ask anyone of these high power executives and they’ll give a shout out to the free market alongside the Mises cultists. But in private they know what is going on. They know very well that China’s rise to power is due in major part to the government keeping the reins on business to keep it from duplicating the idiocies of the many US economy crises. They hate to admit it, but a regulated economy does work, and even capitalist China is living proof of it.

The article then moves onto describe what they call “being eaten by the dragon”, meaning what it is like to be bought out by a Chinese firm. Among the things they are reported as having “epic” PowerPoint presentations in front of many people, banquets and people trying to get you drunk. To me this sounds a lot like the “entertainment expenses” written off by corporations to woo investors and avoid paying taxes on a night out with the boys.

Essentially the article was a complaint about what its likes doing business with a semi-autonomous Chinese firm. They complain that the government in China has too much influence over the direction of investments. A common complaint was that a Chinese firm taking over a mining group in Brazil changed the focus from profit making to efficiency. The real complaint was that often there was more of a political agenda than money making one.

I find this opinion put out by the elite to be nothing short of a joke. We’re supposed to believe the Chinese are bad because they have these supposedly under handed tactics while conducting business. Well, last I heard that’s called capitalism. Sure a billion people when hungry last year, so what? This Chinese firm was as forthcoming as they should be to us. Forgive me if I shed no tears for the executives.

If the best they can complain about is people getting them drunk to do business deals then they should be glad. When large American firms want an economy opened up to them along with access to its resources, an accusation of having Weapons of Mass Destruction, or claiming the country is behind a “terrorist attack”. Poor you American elite, someone took you out for dinner and got you drunk. At least China didn’t invade you and kill three million people to get their foot in the door for business.

In the end, to me there is really only one difference between the way Chinese firms and US firms do things in the economy. In the US the business elite tell the government leaders where the economy is going to go. In China the government tells the business leaders in which direction the economy is going to go. Keep in mind who caused the recent global economic crisis and resulting currency war and who didn’t.