Democracy Gone Astray

Democracy, being a human construct, needs to be thought of as directionality rather than an object. As such, to understand it requires not so much a description of existing structures and/or other related phenomena but a declaration of intentionality.
This blog aims at creating labeled lists of published infringements of such intentionality, of points in time where democracy strays from its intended directionality. In addition to outright infringements, this blog also collects important contemporary information and/or discussions that impact our socio-political landscape.

All the posts here were published in the electronic media – main-stream as well as fringe, and maintain links to the original texts.

[NOTE: Due to changes I haven't caught on time in the blogging software, all of the 'Original Article' links were nullified between September 11, 2012 and December 11, 2012. My apologies.]

Monday, December 26, 2016

Germany’s Chinese investment problem

HAMBURG, Germany — In the conflict between Beijing, Berlin and Brussels over skyrocketing investment by Chinese firms in European high-tech industries, China has a major advantage: It has a plan.

Germany doesn’t. Neither does the European Union.

While trade experts warn that a recent spending spree by Chinese companies — many of them supported by the Chinese government — will harm the competitiveness of European business in the long-term, Berlin and Brussels are struggling to come up with a political response.

“As we don’t have EU-owned companies we cannot [behave] the same [as China],” European Commission Vice President Jyrki Katainen told POLITICO.

It doesn’t make things easier that European businesses have little incentive to put a stop to the billions flowing out of China, which provide them with capital in the short term and help them secure access to the growing Chinese market.

“To have a major Chinese shareholder is a huge benefit in opening doors,” Gordon Riske, CEO of Germany-based Kion, parts of which were acquired by Chinese state-owned Weichai Power in 2012, said during this week’s Hamburg Summit, a conference on EU-China economic relations.

As European officials, business leaders and lobbyists met with their Chinese counterparts inside the grandiose Hamburg Chamber of Commerce for two days of talks, they reaffirmed that Chinese investment was still welcome in Europe. That’s despite warnings last month from German Economy Minister Sigmar Gabriel that Germany was sacrificing “its companies on the altar of free markets.”

“We are well aware that investment and openness are the elements that drive our economy forward,” former Chancellor Gerhard Schröder said in a speech at the event. “Germany should therefore not take a defensive approach to Chinese investment in our economy.”

He echoed calls by business officials like Nathalie Errand, senior vice president of Airbus Group in Belgium, who assured Chinese business delegates that “We as Airbus … don’t like protectionism.”

Made in China

China’s mission to buy up companies in Europe is part of a plan called “Made in China 2025,” designed to turn the country into a manufacturing superpower.

“We don’t want to fight a trade war because this will benefit nobody,” Chinese Premier Li Keqiang told German Chancellor Angela Merkel in a press conference last June, when she was in Beijing.

Behind the scenes, however, conflict is growing. And while Chinese investors target countries across Europe, Germany has become the primary battleground.

“Germany is the center of Europe,” Nan Cunhui, chairman of Chinese electrical company Chint Group, told the audience in Hamburg. “Brands, manufacturing technologies, in every aspect Germany is the leader. Other countries, they need to learn from Germany. Germany is the big brother of Europe, and it needs to play a leading role.”

During the first six months of 2016, Chinese businesses made more investments in Germany than in the past five years combined, according to accountancy company EY.

Overall, Chinese investment in Europe could top €27 billion this year, the European Commission estimates. Katainen, who is the commissioner for jobs, growth, investment and competitiveness, stressed that, in general, foreign investment is positive for the European economy.

“Where Chinese capital is creating new industrial companies or things like that, it is a completely positive thing,” he said.

However, critics say that with some of its recent investments, China is distorting competition.

“China uses an outbound industrial policy, using government capital and highly opaque investor networks to facilitate high-tech acquisition abroad,” a report by the Mercator Institute for China Studies, to be published in December, states.

Gabriel strikes back

When Gabriel’s office announced in the fall that it would withdraw its previous approval of the acquisition of German firm Aixtron SE by China’s Grand Chip Investment, it was widely seen as a way of telling Beijing that Berlin is monitoring what’s happening closely.

But Gabriel’s hands are tied, with limited ability to block a merger or acquisition. Under its Foreign Trade Act, Germany can only intervene if an investment poses a threat to national security.

Gabriel’s plan is to expand the definition of threat. However, such a change would most likely have to implemented at European level.

That means that Gabriel will need the support of other EU countries for his mission to take on the Chinese. It won’t be easy. In many Central and Eastern European countries, Chinese investment is considered a “silver bullet” for their faltering economies.

What is certain is that Gabriel can’t count on the support of the European Commission.

“We cannot interfere with these sensitive issues, so we just try to create the general rule base,” said Katainen.

Eastern promise

“Made in China 2025” will, at least in its early stages, create massive business opportunities in China for foreign investors who deliver cutting-edge industrial equipment and core technologies.

European companies want their slice of the cake, but there is increasing criticism of the Chinese government for granting only limited access to foreign investors, while planning to eventually push them out of the market.

“Yes we are welcome there — up to a point,” said Mauro Petriccione, deputy director general in the European Commission’s trade department. “But how much guarantee do we have that this welcome will stay, in spite of inevitable change in Chinese policy?”

When it comes to investment, both abroad and at home, the Chinese have a plan, and they seem determined to stick to it.

“One aim of ‘Made in China 2025’ is to replace foreign technology with Chinese technology,” said Jost Wübbecke of Mercator Institute for China Studies,  “And that’s okay if it’s based on market rules, but if it’s based on political interference, then it becomes problematic.”

Original Article

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