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Written by Nayan Chanda
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Wednesday, 01 July 2009 |
 The doors open to Chinese exports, but close to its global investments
Globalization is frequently described as the product of a borderless
world. It conjures up an image of an idyllic world where ideas, goods,
capital and people move freely across the continents. The reality, of
course, is more prosaic. Thanks to the information revolution, ideas
have moved relatively freely (excepting North Korea or Cuba), and
decreasing transport costs and falling tariff barriers have eased the
flow of goods.
More relaxed regulations have created a global
capital market, but the movement of people in search of a better life
has encountered massive barriers. Even the flow of capital is running
up against an invisible blockade that runs along the state's
territorial boundaries: it is called national security. The recent
rejection of a Chinese company's bid to buy large chunks of an
Australian mining giant offers the latest example of a bordered world.
The
definition of national security has changed with the permeability of
capital and technology. Both facilitate closer integration between
countries as well as increasing the vulnerability of sovereign states.
Aside from defense technology, foreign investments are also tightly
controlled in energy and key minerals and telecommunication systems.
Chinese
investments, though, present a different type of concern. Its 115,000
state-owned companies, especially its 150 mega-corporations, are often
seen as entities directly controlled by the Chinese Communist Party.
They are considered to be tools in the service of China's strategic
objectives. Though the Australian rejection of the state-owned China's
Chinalco's $19-billion bid to acquire a large chunk of Rio Tinto was
presented as a "commercial" decision, it was most likely a decision
based on political considerations.
Ever since the Chinese bid
became public, there has been a media frenzy about Australian resources
falling under the control of an authoritarian China, which also posed a
military challenge to Australia. Ideological opponents, alarmed by the
Rudd administration's accommodating approach to China, mounted a
campaign against ceding valuable resources to an antithetical regime
and human rights violator. Rudd's office is undoubtedly pleased that
the decision to pull the plug came from the Australian firm rather than
from the government committee that supervises foreign investment,
enabling it to sidestep further criticism of its purportedly
"pro-Peking" stance.
Commercial considerations about selling a
major equity stake to the leading Chinese buyer of iron ore at a time
of rising prices was certainly a factor, but fears about losing control
of a prime national resource to a Communist government trumped all.
Similar
concerns have sunk other important deals in recent years. For example,
in 2005, the US cancelled a proposed Chinese national oil company's
purchase of American oil major Unocal. Allowing a Chinese Communist
Party-controlled entity hold over a strategic commodity such as oil was
seen as a risky to national security. The recent effort by Huawei,
China's military-linked telecom manufacturer, to secure a major telecom
contract in India has similarly run into opposition from New Delhi's
intelligence agencies. Such security concern in 2006 led the Indian
government to deny contracts to a major China-linked port management
company.
Recent experiences show that national security has
not been the sole factor in restricting foreign investments. Economic
nationalism, the desire to protect a nation's crown jewels or defend
againt monopoly by another nation's enterprise, have prevailed over
capitalist principles of profitability or efficiency.
Only
months earlier, China blocked the sale of China's Huiyuan Juice Group
for US$2.4 billion to Coca-Cola. As Huiyuan controlled over a tenth of
the Chinese fruit and vegetable juice market, the government worried
that ceding it to Coca-Cola, which accounted for 60 per cent of China's
soft-drink market would give the US giant enormous power in another
segment of the beverage market. Pre-emption of a future monopolistic
threat from Coca-Cola could have been valid ground for rejection, but
the real reason is believed to be Chinese reluctance to let a
well-known Chinese brand go under foreign control — pure economic
nationalism.
The rise of ideological and political barriers to
Chinese investments are in sharp contrast to the increasingly open
border to exports that allowed China to emerge as the world's factory
and to build up its record pile of $2.9-trillion reserve. It certainly
won't be a borderless world if China is denied a role as the world's
investor as well.
Nayan Chanda is director of publications at the Yale Center for the Study of Globalization and Editor of YaleGlobal Online.
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Economics/Business 
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An irrelevant former guerilla wants to go home to Malaysia to die
Africa's poor don't see China as a great power
Westerners are encourage to come in and take over the bankrupt state companies.