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China: Giant Seeks to Play Superman

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China: Giant Seeks to Play Superman

Post  TBQ on Thu Jul 08, 2010 12:27 pm

Analysis by Antoaneta Becker (London) ,
July 08, 2010,

As China's aggressive acquisitions in Europe and beyond create ripples of unease in a global economy gripped by fear of another recession, many commentators are discerning a unified strategy for expansion orchestrated by Beijing.

Think-tanks in Washington and commentators in Taipei are warning that Chinese acquisitions are designed to exploit the economic downturn and to position the Chinese economy for future global dominance.

'China is developing into a neo-colonial power,' said a signed opinion in the Taipei Times. 'With its long historical memories of how it was all but dismembered by Western colonial powers, China might not be averse to now lording it over the same European countries.'

China's recent foray into Greece has been seen by some in Washington as part of a bigger game by Beijing to gain foothold in a recession-hit continent and expand the country's global leverage. Beijing has discussed investment opportunities with several other European countries such as Romania and Bulgaria where the European sovereign debt crisis has squeezed investment, and with Ireland where politicians are struggling with financial burdens.

Beijing has indeed encouraged Chinese companies to 'go out' and invest globally but there remain doubts if this amounts to a coherent national strategy for global dominance, according to some experts.

'Rather than implementing a grand strategy, we are likely to see Chinese companies exploit opportunities where they find them, so long as they believe rewards will outweigh risks,' says Duncan Freeman, senior research fellow with the Brussels Institute of Contemporary China Studies.

China's investment in the less-developed parts of Europe has until now been negligible. Had there been a grand master plan, one could have expected that Chinese companies would use these countries as an entry point to Europe, which has not really happened, according to Freeman. 'This may change if they see opportunities,' he adds.

From the very beginning of the global economic downturn there have been those in Beijing that have insisted the crisis is China's 'one in a century' opportunity to reverse the tide of western dominance and re-establish itself as a global player, which it used to be before its imperial power went into decline.

Economist He Xuelin, referred to as 'China's master strategist', had penned a letter to premier Wen Jiabao and the all-powerful Politburo of the communist party insisting Beijing should actively pursue global acquisitions to increase its leverage.

The letter -- now enlarged and published as a book titled 'The Huge Business Opportunity', argues that China should embrace the strategy of 'buying at the bottom' and venture into markets that have once been off its reach.

'Mergers and acquisitions are the only way to avoid the danger that our accumulated foreign reserves will suffer depreciation,' He argues in the book. 'We must swap our piles of cash for valuable global assets and top global brands. With boldness and courage we shall win this economic 'world war'. China will emerge as the new superpower!'

Yet other analysts have urged caution in the face of the crisis, warning that China is beset with internal problems and should not risk jeopardising its economic growth with risky overseas investments and strategies.

In an equally talked about book titled 'Geostrategy, author Ding Li argues China should stick with its long-term strategy of cautious expansion, known as 'crossing the river by touching the stones.'

'I don't think there is any clear-cut 'China strategy' to speak of,' he says. 'China is not clear yet about its own place in the world and what exactly it wants. We should be careful not to be misled by those who insist on aggressive expansion of our national power. Today the U.S. power is in decline and China's is on the rise but who knows what will happen next.'

As much was admitted by premier Wen Jiabao too this week when he said that the country's economic health was still at risk by a 'complicated' global environment.

'The severity of the international financial crisis and the difficulties of economic recovery have surpassed people's expectations,' Wen said in a report posted on the central government's website Sunday. 'We need to solve some existing and urgent problems,' he added without elaborating.

Thanks to generous lending by the state banks and a huge government stimulus package, China has emerged relatively unscathed from the global crisis. But as an export-driven economy, it remains vulnerable to downturns in global trade and demand. Moreover, it is saddled with huge internal debt accumulated by local governments and their investment companies.

Inadvertently or not, the crisis has resulted in a surge of overseas investment deals and takeovers by Chinese companies. Over the last three years China has become the leading Asian market for mergers and acquisitions, after Japan.

China has also publicised plans to double the volume of its foreign trade in the next ten years. The Ministry of Commerce has commissioned research on 'Strategies for boosting China's post-crisis foreign trade', which awaits review by the State Council, China's cabinet, according to a Jul. 2 report in the 21st Century Business Herald newspaper.

To achieve its target of doubling foreign trade, Beijing is said to have encouraged investment in overseas infrastructure and other works to facilitate the exports of its goods to more markets.

In Greece for instance, after taking control of one of the piers of Piraeus port, Beijing is talking about plans to create a logistics hub at Attica, near the port, to distribute Chinese goods in the Balkans and to the rest of the continent.

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