Germany’s Chinese investment problem
politico.eu
politico.eu
Now, when the Chineese do the same thing, but in much fairer circumstances (Germany is hardly recovering from a repressive communist regeim), we're crying foul? I do not like foreign investment, but a part of me is satisfied, that the West is finally getting a taste of it's own medicine. Not that it will reverse the damage done, and not that two wrongs make a right.
The production and exports of cars, run by foreign owners, is a key driver of economic growth in the eastern European Union member where wages for skilled workers are well below Western European levels.
Daimler workers in Germany, where wages are much higher, took part in strikes earlier this year, which led to a deal in May to lift wages by 4.8 percent in the metal and electrical engineering sectors in Germany.
http://www.euronews.com/2016/11/24/hungarian-mercedes-worker...
Interesting fact - some people responsible for the sell out to the west have been recently given prominent positions in Ukraine's government structures.
Why you have created another account just to write that?
You wrote the same comment as wowoc and deleted it.
I just think that a more moderate, slower, and fairer privitization process would have been better for the citizens of the country, and not that we should have stayed totalitarian/communist.
At the time (during the 90s), most of those companies that had foreign investors/management grew and survived and those that didn't were often tunneled-out by a corrupt management and were closed down. There were definitely some pretty big cases in 90s. Also there was a big public discussion about this at the time, and many politicians were against the foreign investments in general.
So I simply don't think that it's so clear-cut issue and that it's not like most of Czech people are completely unaware of the problem.
But if škoda had gone bankrupt, then that wouldn't have been an end to the Kolín, Mladé Boleslav, Leipzig industrial triangle. Cars would still be made here, given the huge amount of equipment and expertise in the area. But with škoda owned by VW, it cements a market dominance which is hard to shake. In a way, capital ownership is perminant.
A worse case is that of the swiss owned coal mines in the north. We behave as though those are still state owned mines. We kick people out of their houses with the power of the law. But the profits flow across the border to the west. Personally, I think that the government should pass a law that would re-nationalize the mines, without paying anything for them. The Chinese would certainly re-nationalize their mines if they were in the same situation. Right now, we behave as if capitalism is absolute, and democracy is relative to capitalism. The people cannot vote to confiscate the mines, but the companies can certainly bribe elected officials into privatizing them. So privatization is a one way process which puts more power into the hands of capitalists and takes power from the voters.
And now the Chinese are buying assets in democratic countries, and we are sitting here with our hands folded, saying "well, capitalism must come first. Democracy must never be allowed to interfere with the needs of capitalism." Which will be the death of democracy, unless we learn to dissobey capitalism and vote for things that break the rules of absolute and perminant ownership.
In the 1980s Japan went on an international buying spree only to see its economy crash in the late 80s/90s. Eventually even government supported economies crash, and when that happens Chinese companies may regret being so aggressively acquisitive.
There were exactly the same concerns about Japanese investment back in the 80s. Now doing business with Japanese firms and companies like Sony owning major American firms is just natural. They're not weird alien creatures from space anymore, they're our business partners and investors. It's normal. The same will happen with China.
We better make sure we are still relevant by the time the Chinese have some internal chaos.
We have a lot of examples of people protesting and calling for more representation when they're not doing well economically but do we have any examples, any evidence, any indication at all of people doing that when things go well economically?
The potential loss of quality of life associated with such resistance failing is massive and the probability of a failure is high. The people have too much to lose by calling for more representation and honestly not that much to gain.
I don't see this happening in the immediate future, except maybe temporarily due to global economic issues. I'd expect it to take at least a decade until this becomes a problem and as the article shows, China is certainly planning that far ahead and is able to execute these plans.
Making and executing long term plans is definitely something China has a significant advantage in compared to the democracies in the west.
Interestingly, Trump's economic plan will likely have the same effect in the end. High spending and low taxes will inevitable inflate government debt. In the short term that will create economic stimulus, the current generation of Americans might benefit, but America may well be looking at persistent stagnation for a generation or more after.
I respectfully disagree. There is no need to do it as long as near total control over information is possible - and it is . Western, money-and-profit-oriented business don't see or don't care that any help they deliver in exchange for money will kill them later when internal-external asymmetry of Chinese economical and political system becomes too cumbersome to deal with.
China is positioning itself as a global monopoly externally but cutthroat capitalism internally. External players are allowed in only if they bring more than they take out - again, they might not notice or not think it's a problem.
I have been there. I went on a business trip to visit our offshore development office in Beijing. A few of the devs went sightseeing with me one weekend and we ended up going to see the forbidden city. The cab dropped us off at Tienamen Square and I asked if we could spend some time there before going across the street. There was general consternation as to why I was interested in such a boring place. I said I wanted to see where the iconic photo of the man standing in front of the tank was taken, just to pay my respects to such an act of bravery. Not one of the six Chinese devs had ever seen that photo or had any knowledge of what happened there. That history has been censored so completely that very few Chinese are aware of it.
You can't be democratic with that level of censorship. A functioning democracy requires and informed electorate. For proof of this, look no further than the recent US presidential election.
Even if it's not in the history textbook and it's not allowed to be discussed in the public, most of the Chinese citizens who were alive in 1989 have heard of this event. I can't say children in next generations would remember it, but at least in 2016, Chinese people do remember it.
Do you talk to Germans by starting off discussing how Hitler killed millions of people? Do you talk to Japanese people about WW2 and how was the experience being bombed by nukes after saying hello? Do you expect non-US citizens to start talking to you about the massacres of indigenous peoples of the Americas during the first meeting?
You don't go to a country just to re-visit their dark history. Regardless of how bad the censorship is, that is just rude behavior. Show some respect first, if you are really interested, make friends with them, then talk about it, they'd be happy to discuss it with a friend but not a stranger.
The last time I heard, Japanese is trying to modify their textbook to downplay its involvement in WW2: https://en.wikipedia.org/wiki/Japanese_history_textbook_cont...
How's US history lesson? Do you all get taught about the genocides of native Americans? https://en.wikipedia.org/wiki/Genocides_in_history#Americas
Bottomline is, every country has its own unpleasant history, maybe China has more of those and is not willing to share them with its citizens. But as a foreigner visiting China, is it a nice gesture to poke about it with people you barely know?
Sorry for being awfully off-topic. Just had to type this out. Won't reply to anything further.
Government brainwash is not exclusive to communist countries.
When I was in Uni, the Tiananmen square videos are all over the university intranet, including the documentary shot by Hongkong journalist and some shorter documentaries made by the west in later times. Everyone in my class has watched them and we all know what happened on 04/06/1989.
The censorship power of chinese government has been greatly over estimated.
Censorship being soft and porous does not help - it keeps the outrage from bubbling over as the 5% of smart potential leaders who could give a voice to discontent will (a) work around the censors in ways that the 95% can't or don't bother [VPN etc] and their discontent has an outlet, and (b) these 2% can be kept in line by offering or refusing career opportunities based on compliance to the mainstream party line... [if you speak out against current policy, you won't get that professorship or that managerial role or your company returns will be tax audited in a way your corrupt competitors aren't]
Don't get me wrong, I'm not pro censorship. But you and many in the west assume people in China are all brain washed and incapable of seeing their own history. Sure, a large part of the population can't be bothered, but I'd bet it's not 95% as you assumed, and they have increasingly less influence in today's China.
And speaking of which, you don't think the west is ruled by 2% of elites and manipulate the media to tame the rest?
I don't think this is unique to China and I think it happens to some extent in the US. I think people, especially the right wing Republican voters, are shielded from the viewpoints of the rest of the world on many topics. Having been outside the US for almost the entire election cycle, I don't think most voters in the US realize just how much Trump is ridiculed outside of the US. In the US, the comparison with Clinton is roughly 50-50. Outside the US, I've yet to meet one person who doesn't believe that Trump could be a serious choice. There's recognition that Clinton isn't perfect and we should have nominated someone better, but there's general consternation that our country could have made the choice that it did. Granted, I've been mostly in Asian, Muslim countries where Trump's rhetoric about Muslims has an even greater ring of ignorance to it. But the US media has contextualized a lot of what went on in the election cycle very differently from the way the media in the rest of the world has.
The difference, of course, is that the recontextualizing in China is at the behest of the Chinese government. It's disturbing and dangerous no matter how it happens. But it's undemocratic when the government is the one doing it.
Inside China, educated people tend to be familiar with the event but discussing it with a tourist is absolutely the last thing they are going to do.
There are many possible interpretations of your anecdote, but I wouldn't read too much into it. With all due respect, you brought up a minor (to them) and yet sensitive point of Chinese history, and your guests, reasonably enough, declined to discuss it with you. Another way of saying it might be that you committed a social faux pas and they changed the topic in a way that saved as much face as possible for everyone.
A bit like how some countries gloss over wars they lost or ended in a true....China takes it to the next level for some reason...it's not like the tank ran over the dude.
https://en.wikipedia.org/wiki/History_of_China
China has had a central government for a long time. Before Roman civilization was more than a bunch of farmers.
"people will start calling for more representation"
No, people seldom have started calling for more representation. Rather, a portion of the intelligentsia has yearned for a system with more representation, based either on ideals originating in philosophy (europe) or out of spite of colonial masters (americas).
Now, the question is - based on what philosophical framework would the intelligentsia base their request?
I'm not saying you are wrong. I'm just pointing out that a european or american view of history will skew the political intuition around a framework that can lack a basis once one leaves these spheres of influence.
Maybe Russia or USA will plant some seeds of doubt in the popuplation and China will be split up in the next 50 years.
You mean the next super-power?
The government had cleared the deal on Sept. 8 but Aixtron said that the Economy Ministry had now canceled the clearance certificate for Fujian Grand Chip Investment Fund LP (FGC), a Chinese investment fund controlled by businessman Zhendong Liu, and planned to reopen a review of the takeover. The decision to rescind the approval was based on “previously unknown security-related information,” Germany’s Deputy Economy Minister Matthias Machnig told German daily newspaper Die Welt, without being more specific.
From Aixtron's website on November 17 [1]:
>CFIUS [Committee on Foreign Investment in the United States] informed the parties that it plans to recommend to the U.S. President that the transaction be prohibited based on CFIUS’ conclusion that there would be no reasonable way to mitigate the U.S. national security risks perceived by CFIUS on the basis of the mitigation proposals submitted by the parties to date.
> Both, GCI and AIXTRON have decided not to follow such recommendation as a result of which the matter has been referred to the U.S. President for decision in line with CFIUS statutes.
If I understand that correctly, Aixtron SE has investments in the USA and the CFIUS is now moving to block the acquisition because they think if GCI owns these investments that the national security is threatened.
Or am I misreading something?
[1] http://www.aixtron.com/en/press/press-releases/detail/aixtro...
So there is definitely something fishy going on, and China as a state is wielding its money to gain all of the technology for itself.
For all the fears raised recently about rising Western nationalism and protectionism, the Chinese regime is blatantly and unashamedly nationalist and protectionist as a matter of course. The state decides who wins and who loses, and they will simply not allow foreign companies to gain a dominant market position in any significant sector. All market activity, including foreign investment, is tolerated only so long as it is subservient to the nationalist goal of Chinese hegemony.
For years, Western politicians and businesses have turned a blind eye to China's flagrant disregard for the basic rules of free global trade. Partly out of greed for Chinese money and market access, and partly due to an entirely wishful assumption that this is only a phase, and that China will eventually start playing by the rules and acting like a "normal" free market economy.
This delusion demonstrates a fundamental misunderstanding of how autocratic regimes like China operate. Just as they cannot, and will not, tolerate any significant internal competition to their own authority, they will, in the long term, not tolerate any external competition either, either political, military or economic. The Chinese state will never be satisfied being one powerful economic actor amongst others, all playing by the rules of a global market. They will never accept being checked by laws of trade or other country's interests, any more than they will tolerate being checked by democratic accountability or rule of law.
The same could be said about the US i guess. It's the EU that looks like a naive child on the World Stage...
Sad but true. As a European I feel embarassed seeing that American, Russian, and Chinese leaders are all carefully protecting their practical interests whereas European leaders seem more concerned with pushing their idealogical dream.
Come again? Try switching off the news for a while.
The world doesn't need an elite to run, the plebes run it just fine.
There isn't a "World Stage".
If the owners of a shop sell it, they can't complain they are forbidden to open a shop on a private land somewhere, whether or not the buyer happens to be the same.
Same happens on a larger scale too.
Sure, you can complain is not ethical, but capitalistic? This is capitalism itself in its final amalgamated state where countries and big multinationals control large swat of resources.
Who will stop them? It was all fun and games when corporations were small and countries not experienced in the game, capitalism seems natural in that environment. Nowadays, this is the new reality.
The goal was capitalist efficiency gains without loss of control. So, yea plenty of people competing to sell lunch, nobody competing supply electricity.
In contrast, we get a pretty good deal. We get Chinese investment and better access to Chinese markets. Win-win.
These were the terms of the deal between Western and Chinese governing "elite". The West's gamble was that the Chinese would not (could not) maintain their ideological stance when exposed to Western societal norms. The Chinese gamble was that they would catch up and reach technological parity while maintaining their hold on the Chinese nation. No use complaining about it now.
You come across as a apologist for the current regime.
When I lived in Asia, I noticed this Bullshit and locals believed it was OK because they see it as a David versus Goliath battle.
Too be fair, in a free market, GE or Philips and other big western firms would have crushed or bought out their Asian competitors decades ago.
As private individuals, we don't mind being bought out by Chinese. As members of societies, I believe it is important to know that there is a concerted plan by China that is at best neutral, and at worst, hostile to Western economic interests. Individual gain at the long term loss of the society we form part is not really in anybody's interest.
We should still trade with China, obviously, and even sell companies, but the terms of trade should not be one-sided: Western companies should get the same market access as Chinese companies do.
Misery is relative. What is misery to us, was a god send to Chinese peasants who flocked in their millions to work in factories that promised at least some security as opposed to the utter misery of toiling in the fields. Those exports to the West helped lifted hundreds of millions of Chinese out of poverty.
China is full of zombie construction companies that are worthless investments; Large businesses in China are trying to diversify as fast as possible (often to a laughable extent) and this is mostly fueled by debt. All this will come to a head in 2017-18.
[0, in German] https://www.welt.de/finanzen/article157037250/Chinesen-kaufe...
However, Soviet Union economic growth peaked in 1959. It was primarily based on catch up growth: recovery from WW 2 and moving ppl from agriculture to industry.
Is China similar story? http://blogs.ft.com/beyond-brics/2015/12/09/like-soviet-russ...
A good read on that: https://www.amazon.com/Why-Nations-Fail-Origins-Prosperity/d...
I give 50/50 chance to China will avoid this fate, but not more.
Russia was wedded to an ideology; the Chinese are pragmatist and practicing corporate capitalism. China will not only avoid the same fate, they will almost certainly come to dominate by sheer force of numbers.
China is practicing the economics equivalance of embrace (buy Western technology), extend (their own 3G standards for instance), and eventually extinguish (locking the West out of their market)
That's before you add any Warsaw Pact countries..
In the case of the US this is incentivized by the goverment (maybe indirectly) because US-based companies have to pay taxes for money they move to the US: in this case it is cheaper to use that money to buy invest overseas and get more market share.
China might not have a plan, but they actually have cash in hand and they are pushed to invest somewhere else because they cannot have that money at rest. They need to recycle that benefits and buying in europe makes sense because is a big market that makes easy to keep money flowing in a global scale.
Actually, that is not entirely correct. US companies are incentivised to invert and redomicile abroad (often in the EU), because that way they can avoid the global taxation penalty the US imposes. More often than not, an EU company acquiring a US competitor will be able to achieve more tax synergies than a US company acquiring a US competitor.
Given any company has freedom to structure transactions in any way they want, it's only normal to go for the most tax efficient way of generating profits. As if you would pay 35% corporate tax if there is a simple legal way to only, say, pay 20%?
Let's say there are two ways to book a profit: royalty income is taxed at 15% and normal corporate income is taxed at 30%. You develop a software product. If the tax code allows you to book all of your (software) income as royalty income, why wouldn't you?
Honestly, people frequently see evasion and avoidance in the same way, but they are not. If a tax law framework exists, and you stay within it, I don't see how you're doing anything wrong. Change the laws. Avoidance is only possible due to bad legislating. It's all too easy for politicians to shame companies while they are the ones doing a poor job.
Some countries are proactive in closing avoidance techniques, others are not. This is entirely dependant on the politicians in charge and the policy set out.
To companies, legality is just an expression of power. If the counter party (the government) is strong, the company either focuses on legal avoidance (GM) or avoids the reach of the strong party (Ericsson avoiding US jurisdiction). If the counter party is weak (south american governments) they can be illegaly manipulated (Ericsson). If the government has strong local enforcement but little resources and incentive to go after international shady deals, the country can be used as an operations base but with no illegal activity taking place in THAT country. (Sweden and Telia Sonera, Ericsson.)
Concretely, this means that you can forget doing business with the Chinese gov. Or prepare to be canned up any time.
Now couple this with the wild investments China is conducting on a cash-hungry Europe. And of course it is state-driven, because outbound capital flows are heavily restricted in China otherwise.
However it looks like Chinese acquisitions in EU not only play toward China's long-term goals to rebrand their production (and eventually make money off of our own market). You can also see it as a modern cold-war with the USA, where the stake is industrial predominance and the means is influence over Europe. Just like the old USA vs USSR times. The USA try to make deals with us, while the Chinese outright buy us.
Europe has mainly two choices, take a side or become the third pole. I think bot are politically valid choices, however what is really astonishing and enraging, and the article conveys it very well, is that EU has the political energy to do neither. It's not that our political agenda gets crushed by either side. Is that we have none. And this to me means that the European Union at the end of the story will be the only one true big loser, and we as Europeans will follow along. [/rant]
TXV: Not a law about the role of legal representative in general, right, but that industries that are defined as 'protected' are not open to foreign owned companies?
The role of the legal representative is to represent the company in civil law. The legal representative also has a supervisor or board of supervisors, so their actions can be kept in check. This in indeed one of the main roles of the supervisor/board of supervisors: to make sure the legal representative does not run away with the company's cash.
I agree that the terminology is not very clear, as customary of Chinese laws. It states that the physical person or the legal entity investing in the company must be Chinese, where the term you cited /'fa ren' 法人 refers to the legal entity (e.g. a company) and the legal representative I cited is the physical person investing in the company (the president or the owner, which if I'm not mistaken is the same guy who represents the company before the law).
Terminology aside, it goes even further. It even states that 工作人员仅限于中国公民 the workers of that company must be Chinese nationals!
China was never a equal trade partner to the west. In fact, I don't think any of the developing countries can be equal trade partners to the developed countries. When you are weak, open your market completely to western multinational companies with huge capital and technology advantage is economical suicide, and it will benefit no one but the rich and powerful at the very top on both sides.
I for one don't want to support oligarchs in People's Republic of China exploiting people who have to work 16 hour days for six days per week for low pay. We had that in Europe in the 19th century, and we learned that it leads to really low standard of living. It's exploitation.
My concern is that those doors might only open in one direction though from China into another country. Will any of these acquisitions result in Germany having an easier time doing business in mainland China?
That's obviously what your citation says.
There is an apparent trend of Planet Earth turning into Planet China recently.
Whether this trend is real, whether it will continue, whether you or I believe in it - who knows.
Not planet earth, Planet US.