The NY Times had a solid article called “China’s Expanding Economic Empire” in today’s paper. It describes how China is using its’ state owned companies to expand globally, particularly in Africa, South America, the Middle East, and Asia.
Ultimately, thanks to the deposits of over a billion Chinese savers, China Inc. has been able to acquire strategic assets worldwide.
In addition to using their savings and financial discipline to acquire companies, China has infrastructure capabilities honed from building out their country and is able to bring staff locally to complete projects such as pipelines, railroads, mines and factories, thereby re-cycling their financial investments back into their own service companies.
The article discusses Greenland, where China has proposed to come in and develop their vast resources in return for access to commodities only if the local government by-passes wage laws and other restrictions to allow the Chinese to being in their own labor. Since no one else is offering to develop Greenland and their native workforce is ill-equipped to meet the challenge of modern infrastructure development and operations, it will be China’s by default.
However, the article does not mention anywhere the key variable that keeps Western countries non-competitive in these regions – our own laws against corruption and bribery which are likely the only way to win bids throughout most of the developing world (the Foreign Corrupt Practices Act). China has no compunction about working with anyone and doing whatever it takes to win these bids.
In addition, China doesn’t care about its reputation with the local workforce, unless things get really bad (i.e. people start getting shot). China brings its own value chain end to end, from the initial financing, to awarding bids to Chinese companies, to China pushing their surplus (skilled) labor and their own infrastructure even to support their staff (i.e. bringing in their own food). Western companies try to bring in the local work force and are sensitive to local suppliers on a relative basis.
While the article is generally full of relevant facts and analysis (except for the critical omission of the Foreign Corrupt Practices Act, which basically gave the world to China on a platter), it ends on a completely false two paragraphs.
As China becomes a global player and a fierce competitor… its political system and state capitalist ideology pose a threat. It is therefore essential that Western governments stick to what has been the core of Western prosperity: the rule of law, political freedom, and fair competition… giving up on our commitment to human rights, or being compliant in the face of rapacious state capitalism, will hurt Western countries in the long term. It is China that needs to adapt to the world, not the other way around.
I am frankly astonished that the editor let them add these paragraphs to let the article end on such a false note. There is no evidence that our methods of not complying with local practices is working; in fact the entire article proves that our Western methods are failing.
If a country is led by a strongman you need to deal with a strongman or you won’t be in business; this is obvious, the Chinese know it, and we don’t have a chance in h*ll of competing with it. As a result, we are handing the Chinese the world on a platter. We will ultimately adapt to China, not the other way around.
Cross posted at LITGM