Translation: There is no downside selling to foreign capital

Original: 张五常:外资收购何害之有? 6/2006

Here is the translation:

There is no downside selling to foreign capital -- Ng-sheung Cheung

Three years ago anti-trust law was passed proposed by Beijing, it was supposed to go into effect on 1st Nov 2003. While reading it, I thought, there were many good things in US to learn from but you got this, anti-trust in American style; what kind of people would copy this from some so-called textbook? I wrote 10 essays in a row, it seemed that repelled it. Last year I read again that Beijing was going for anti-trust again, with another methodoloy. Not knowing the details, I thought, maybe it is good this time. So many SOEs rely on monopoly to survive, seems fun to go against them. One problem, the monopolies are protected by the state, isn't this left hand fighting right hand?

Recently anti-trust got on news again in the mainland, reportedly it was already 'preliminarily passed' [passed one stage]. [The content seems] Not easy to understand, it seems that the most important item is anti-merger, i.e. anti-merger by foreign capital. I may not have the precise interpretation, but [from what I understood] it basically says, for enterprises or groups with annual sales over RMB12bn, unless the deal is approved, cannot acquire another with sales over RMB0.8bn [is this a typo? should be 8bn?]. In recent months many commentaries flow around the internet are against foreign capital taking over Chinese enterprise -- concerned about so-called 'control', so-called 'drifting away fo assets', etc -- showing co-incidental similarities [with this part of the anti-trust law].

These are my opinions:
1) Anti-mergers is not a simple task, because there are many ways to get around it. It you really want to control this, you may need to go for litigation, and litigation may cause severe headache. If not done properly, this would only increase the transaction cost of merger and acquisition, or encourage splitting into smaller entities just to be merged in a number of transactions of smaller sizes [to get arounf the rules]. This does nothing good for the economic of the country.

2) When foreign capital acquires a Chinese company, for example, if the company suffers from capital squeeze when there is upheaval in China's economic cycle or macro-control, it will not be surprising that they may get a good deal. There is no need to be jealous, I do not know a single Chinese entrepreneur who is stupid [enough as to sell cheaply]. On the one hand, the foreign capitals are the best of the best in their home country, on the other, "a fierce tiger from foreign land may not rival a local bug' as Cantonese saying goes. I would put my money on the 'local bug'. [Harbin Brewery comes to mind]

3) For foreign companies operating in China [including the acquired companies], they will have to hire [some] Chinese managers. Knowledge, expertise and technology move into China accordingly. We should not care about the skin color of the big boss in these cases. Will the capital be withrawn later? As long as China maintains its current investment environment, they won't, more will come in instead. If the environment is unfavorable, everyone (not juse t thforeigners) will flee. As for the worry about foreign capital controlling Chinese economy, what a strange thought! Not even Beijing is able to control Chinese economy! Whoever has such phobia need to talk more to the young entrepreneurs in China today.

4) Globalization has been a hot topic for some time already. Back and forth it has been about internet, international exchange, trade growth, and gadgets like such. True examples of globalization can only (begin to) be observed in China: along the Yangtze delta, almost all of the factories are world class - this scene cannot be seen in any other country in the world. I once took a few Gweilo for a visit, they were all surprised and awed at waht they saw. On true globalization, China scored first. I do not recommend China to fight for those so-called leadership position -- do not ever try that -- but "honor is given by others, humility is caused by self", as the Cantonese saying goes, if today honor is delivered to us, it is wrong not to receive it.

5) Lastly, I need to say something about international politics which I know nothing about. I feel something is wrong. American military is unrivalled in the world, no one can counter. But some people are working somewhere on nuke, some others on terrorism. Such 'polarization' in the beginning of this millenium, who knows how to deal with them? Only god know how it would evolve into after so many years. I personally feel, there is possibility that it would go really bad.
China is still under reform, still needs to focus on economy, improve the livelihood of the people. To do this political upheaval has to be avoided, not to mention war. A safe investment environment is important. We cannot buy insurance for this, but we can try to assure it, by encouraging foreigners to invest and build factories in China. The more foreign investment in China, the more safe China will be. Economical interdependency and mutual interests are the best assurance of safety.
Australia, Canada and Russia are friendly toward China, because China's demand for the natural resources supported many people in their countries. Korea is friendly, because Samsung and the likes are making big money in China. Heads of Japan are talkative, perhaps due to political motives. But Japanese has a lot of investment in China and they have been quite courteous. Over two years ago there was even some strange theories called "Japan-Japan trade" [one of the "Japan" refers to Japanese company in China]. The theory thanks China. What about France and Germany? the so-called luxury brands (there are genuine goods besides the counter-feits), machinery, auto, etc. are ubiquitous in China. Boeing is secretly laughing whenever they hear the word 'China'. Microsfot also begins to smile now.
There is only one stupid boy: Chen Shui-Bian. There are 3000+ Taiwanese-owned factories in Kunshan [near Shangahai], even if you are psychotic you do not have to shout "Taiwan independence" so loud every day do you? [To be fair, perhaps none of these 3000 businesses voted for CSB, but then isn't that a vicious circle? In a broader sense, should a politician answer for all voters or only those who voted for him?]














bobby fletcher said...

Hmmm, isn't large % foreign ownership of demoestic production bad?

I seem to remember back in the 80's when America cried out about Japan practiclly owning Hawaii (never mind Hawaii's lease-hold system) and Congress stepped in on Japanese acquisition of US company.

Not trying to compare, but it reminded me of opposition to Chinese companies acquisition spree in US.

Seem nobody welcome this sort of things.

Sun Bin said...


but even in US there are some people arguing selling Unocal to China holds Chinese hostage in US.

IMO it was US who lost by forbidding the sales. and in 1980s US made a lot of money selling Rockefeller Center & Columbia to the Japanese at inflated price (and later bought back Rockefeller at a bargain i think?)

i guess it comes down to these quetions
1) do you get a good deal (selling it)?
2) does this harm your national security at all? (don't you have the ultimate control if they are lcoated on your soil?)

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