What do Volvo, the port of the Piraeus, and the Château Viaud vineyard and winery in
Bordeaux have in common with Spanish debt and bonds issued by the European Financial Stability
Facility (EFSF)? They are all owned by Chinese investors.
In addition to the massive amounts of European sovereign debt and portfolio assets already
in Chinese hands, private and state-owned Chinese companies have
embarked on a shopping spree
in Europe over the past four years. Chinese foreign direct investment (FDI) is still minute compared
to other sources of FDI in Europe -- a mere 0.2% of all foreign investment stock in Europe according
to recent calculations by the Rhodium Group. But Chinese direct investment is already present in all
27 European Union member states and will likely continue to grow as Chinese firms are encouraged
to go abroad, pushed by their own government and incentivized by their own bottom line.
Will Chinese direct investment transform the political economy of Europe, and, if so, is this a
real cause of concern for Europeans? Could Chinese investment threaten European unity?
This is a novel situation for European countries more accustomed to investing in emerging,
problematic economies than being treated like one of them. Throughout the 20th century, direct
investment flowed almost exclusively from developed to developing economies. Europe and the
United States were, and still are, the largest investors worldwide and the largest stakeholders in
each others' economies. However, outward direct investment originating in developing countries
exploded in the past decade, mainly in the direction of other emerging economies, such as India
investing in Brazil or China in Africa. A much more recent phenomenon is that emerging countries,
chief among them China, are now starting to invest in developed countries. The combination of the
global financial crisis, massive currency reserves accumulated by China, and the sovereign debt
crises in Europe has turned China into a potential savior perhaps -- but also a potential predator for
the embattled European economies.
The savior narrative comes from China seemingly dropping "helicopter money" in national
economies that have few alternative prospects of cash influx. Swedish automaker Saab just won a
reprieve after two Chinese carmakers agreed to buy the company hours before a court could have
forced its factories to close forever. Klaus Regling, head of the EFSF,
went to Beijing as soon as the
European rescue package was put together, begging for Chinese investment in the fund.
On the other hand, China has also been portrayed in the media and in some political rhetoric
as a predator. In this scenario, it begins by preying on the weaker EU countries before insidiously
penetrating the rich European economies, using sovereign debt purchases and direct investment as
part of its master plan to take over the world. Respected magazines all over Europe have used on
their cover pages menacing images of fiery dragons spewing banknotes or contemporary Maos with
imperialistic designs on the continent.
In any case, whether China is seen as a deus ex machina or a devil to whom weak European
economies have sold their souls, the increasing willingness of Chinese entities to invest in Europe,
directly and indirectly, raises a multiplicity of unanswered political questions. Will it lead to
European dependency and Chinese leverage? Does Chinese investment come with strings attached,
and can it act as a Trojan Horse affecting European norms and policies, from labor rights to the
environment? Are there security implications to Chinese investment, especially when it comes to
potential technology transfers?
European policymakers and publics are for the moment ambiguous towards this
unprecedented situation. Opinion polls show that Europeans are split when it comes to viewing
China as an opportunity or a threat. Of individuals in the twelve EU countries surveyed in the 2011
edition of the Transatlantic Trends poll, 41% see the Chinese economy as a threat while 46% see
it as an opportunity. This reflects vast differences among countries, the French at one end of the
spectrum with 56% seeing China as a threat, the Dutch on the other end with only 22% interpreting
China as a threat. Similar splits were reflected in the immediate reactions to the announcement that
the EFSF was looking to China to secure some of the bailout funds.
Probably the biggest concern right now is that with the current political fragility of the EU,
there is a real potential for Chinese investment to exploit and exacerbate European disunity. First,
opinion is split in Europe when it comes to the desirability of Chinese investment, with objections
ranging from the political to the cultural. Second, no mechanism exists right now at the EU level for
vetting foreign investments (on grounds other than competition policy). Third, European nations
will logically compete with each other to attract Chinese investment with all sorts of incentives. All
of this could combine into a perfect storm shattering European unity.
The predicted surge of Chinese investment in Europe presents great opportunities; after
all, it is better for the EU if Chinese companies come to Europe and employ local workers than if
European companies go East to employ Chinese workers. But in order for this investment to truly
rescue European economies, Europeans have to be careful to present a unified response so that
China does not end up ruling by dividing, carving out concessions in the heart of Europe as an irony
of history.
Sophie Meunier is a Research Scholar in Public and International Affairs at the Woodrow Wilson
School and Co-Director of the EU Program at Princeton University. She is the author of Trading
Voices: The European Union in International Commercial Negotiations (2005) and The French
Challenge: Adapting to Globalization (2001), as well as editor of Europe and the Management of
Globalization (2010).
As to non-domestic powers owning large portions of sovereign debt - this is cause for concern. As Bill Clinton once said "we can't get tough with the Chinese because the Chinese are our bankers - you can't get tough with your bankers." When we keep going deeper and deeper into debt, we give others leverage over us..... Foreign investors owning large portions of our debt is a bad thing - it gives them power over us.
So they are really two different issues.
The negative International Trade Deficits must be corrected by any means possible in order to generate more NATIONAL WEALTH and stop the flow of title to in-country located privately owned assets (businesses, factories, casinos, hotels, farms, land, ports, refineries, forests, ports, breweries, distilleries, and other NATIONAL WEALTH) that are leaving the de-industrialized nations to pay for the things that we import from foreign manufacturers, and also to pay for increasing government expenses, such as stimulus for infrastructure expenses. The Trade Deficit is the basic structural economic foundation problem that will destroy the US economic miracle because title to US located assets are also leaving the USA to pay for the things that we import in addition to US government expenses.
Brazil, Russia, India, China, Pakistan, South Korea, and other industrialized countries of the world with a positive net foreign trade balance are NET CREATORS of NATIONAL WEALTH for their nations and the de-industrialized nations with a negative net trade balance are NET CONSUMERS (DESTROYERS) of their existing NATIONAL WEALTH.
The US government refers to these sales of existing US assets to foreigners to pay for the imported products that the US consumes and US federal government activities as "INVESTING IN AMERICA"
This is "sort-of like" US citizens selling our body parts to keep from working!
US citizens are racing to sell title to everything in the USA of value that was created by previous working generations of US citizens in order to keep US citizens from working today to make the things that US citizens purchase and consume.
This will keep the USA from re-industrializing and allow US citizens to not work as required to produce the things that US citizens consume until the USA has no more assets to pay for our imported products and our government expenses.
Foreign individuals in foreign industrial nations that create wealth will eventually own everything of value in the USA as they redeem their US dollars that they earned by manufacturing US consumer products for title to privately owned wealth and assets located in the USA (that were created by previous US generations prior to de-industrialization) that are located in the USA.
The US population will then become employees; possibly indentured servants; or maybe even beg to become slaves or indentured servants owned by the foreign countries and/or foreign individuals that will own everything of value in the USA in the very near future if the US government continues to destroy the US economy and the purchasing power of the US dollar with deficit federal government spending.
US citizens apparently believe that we are entitled to sit idle and not work in some dirty factory making the things that US citizens consume, when US citizens can borrow money and obligate our children and unborn grandchildren to work and pay off our US Treasury Bond debts that we accumulate while we continue our easy non-productive lifestyle.
This current situation of using borrowed money for (unlimited) US government expenses might end when the USA runs out of privately owned US property and other assets that foreigners will accept in return for the US dollars that US citizens paid to those foreign workers in foreign factories to make the things that US citizens purchased and consumed.
If you look at the figures of investment dollars from 3rd world nations though, it's still just a tiny portion of the European economy. In other words, the whole issue is overblown.
China is a brutal G_dless communist dictatorship.
The junk papers (CDS) banks worldwide bought from the USA are a much bigger threat to European safety than Chinese investing in Europe. And still the USA and the UK want no regulation on banks. Go figure.
And if you think China is peaceful then I suppose you think Soviet Russia was peaceful.
By lying to its people and teaching them that God and goodness are unnecessary, the cruel Party has eliminated the morality that used to be there.
The cruel Party has murdered 80 million of its own people since 1949 and is now attempting the genocide of tens of millions of innocent Falun Gong practitioners.
The gangster regime uses torture, slavery, organ harvesting and murder in its paranoid struggle to maintain control of its people.
Human rights, issues that the West use to cherish but has now turned its back on for financial gains.
This is just my understanding.
Fact. China has raised 400 million people out of poverty over the past ten years. How many millions has the US shoved into poverty in the same period. First look to your own s**thole of a country before critisizing an other.
Perhaps Greece could lease a few of its islands to help with its debt crisis in lieu of repayment of its foreign debt. Britain leased Hong Kong for 99 years...or was that 150 years. In any case, a Greek island under the control of Germany would have a much higher probability of being run on a profitable basis than being left part of the Greek nation. After 99 years the Greeks would get back an island which would be very productive. Everyone wins.
If the Chinese take over a few Greek, Italian, Spanish islands, they could fill them with excess population and, with any luck, eventually take over Europe. That would handle the declining population in that area of the world. Might even result in the Westernization of China... or vice versa..
Now here in Canada we have huge frozen Arctic islands which are almost totally uninhabited ...for a good reason. It's really really cold most of the time. Other than for the vast oil and mineral resources which they contain... ? Well maybe they would be interested.