China’s Economic Empire

China Go GlobalThe combination of a strong, rising China and an economic stagnation in Europe and America is making the West increasingly very uncomfortable. While China is not taking over the world militarily, it seems to be steadily taking it over commercially. In just the past week, Chinese companies and investors have sought to buy two iconic Western companies, Smithfield Foods, American pork producer, and Club Med, French resort company. Europeans and Americans tend to fret over Beijing’s assertiveness in the South China Sea, its territorial disputes with Japan, and cyberattacks on Western firms, but all of this is much less important than a phenomenon is less visible but more disturbing: aggressive worldwide push of Chinese state capitalism. By buying companies, exploiting the natural resources, building infrastructure, giving loans all over the world, China is pursuing a soft but unstoppable form of economic domination. Beijing’s essentially unlimited financial resources allow the country to be a big game-changing force in both developed and developing world, one that threatens to obliterate competitive edge of Western firms, kill jobs in Europe and America and blunt criticism of human rights abuses in China. Ultimately, thanks to deposits of over a billion Chinese savers, China Inc. has been able to acquire strategic assets worldwide. This is possible because those deposits are financially repressed, savers receive negative returns because of interest rates below the inflation rate and strict capital controls that prevent savers from investing their money in more profitable investments abroad. Consequently, Chinese government now controls oil and gas pipelines from Turkmenistan to China and from South Sudan to Red Sea. Another pipeline, from the Indian Ocean to the Chinese city of Kunming, running through Myanmar, is scheduled to be completed soon, yet another, from Siberia to northern China, has already been built. China has also invested heavily in building infrastructure, undertaking huge hydroelectric projects like Merowe Dam on the Nile in Sudan, biggest Chinese engineering project in Africa, Ecuador’s $2.3 billion Coca Codo Sinclair Dam. And China is currently involved in building of more than 200 other dams across the planet, according to International Rivers, a non-profit environmental organization. China has become the world’s leading exporter; it also surpassed United States as the world’s biggest trading nation in 2012. In the span of just a few years, China has become the leading trading partner of countries like Australia, Brazil and Chile as it seeks resources like iron ore, soybeans, copper. Lower tariffs and China’s booming economy explain this exponential growth. Buying mainly natural resources and food, China is ensuring that two of the country’s economic engines, urbanization and export sector, are securely supplied with the needed resources. In Europe and North America, the China’s arrival on the scene has been more recent but figures clearly show a growing trend: annual investment from China to European Union grew from less than $1 billion annually before 2008 to more than $10 billion in the past two years. And in the United States, investment surged from less than $1 billion in 2008 to a record high of $6.7 billion in 2012, according to the Rhodium Group, an economic research firm. Last year, Europe was the destination for 33% of China’s foreign direct investment (…..)



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Consultor Internacional

7 Responses to China’s Economic Empire

  1. Professor Uziel Nogueira says: Articles about China fall into two categories: (a) how China is conquering the world economy; (b) China does not play by the (old) economic and political rules set by the Anglo-saxon world. China is conquering markets and expanding its influence by combining the strength of one party system with state led capitalism. Two questions are not being properly addressed by writers like Cardenal and Araujo.

    First, why state-led one party Chinese model is proving to be superior to the market-led two party US political system. Chinese leadership make things happen while American leadership complains.

    Second, Germany’s economy is not only successful in facing Chinese economic competition but is thriving despite serious problems in the eurozone. Chancellor Angela Merkel never mentions ‘unfair’ Chinese competition when talking about the state of affairs in her country. Finally, the Chinese model cannot be replicate in the so called emerging economies. Brazil has experienced with state led capitalism for decades and has failed miserably. The same is true for the remaining countries in LA. The reason is Brazil’s ruling elite not being prepared to play in the major league of nations. They always make wrong policy decisions in critical moments. This time is no different. After a brief period of economic growth, the economy is now stagnated and pressed by high rates of inflation. The brief moment of being awake by the ‘sleep giant ‘ of South America appears to be over.

  2. Since the American-led invasion of 2003, Iraq has become one of the world’s top oil producers, and China is now its biggest customer. China already buys nearly half the oil that Iraq produces, nearly 1.5 million barrels a day, and is angling for an even bigger share, bidding for a stake now owned by Exxon Mobil in one of Iraq’s largest oil fields. “The Chinese are the biggest beneficiary of this post-Saddam oil boom in Iraq,” said Denise Natali, a Middle East expert at the National Defense University in Washington. “They need energy, and they want to get into the market.” Before the invasion, Iraq’s oil industry was sputtering, largely walled off from world markets by international sanctions against the government of Saddam Hussein, so his overthrow always carried the promise of renewed access to the country’s immense reserves. Chinese state-owned companies seized the opportunity, pouring more than $2 billion a year and hundreds of workers into Iraq, and just as important, showing a willingness to play by the new Iraqi government’s rules and to accept lower profits to win contracts. “We lost out,” said Michael Makovsky, a former Defense Department official in the Bush administration who worked on Iraq oil policy. “The Chinese had nothing to do with the war, but from an economic standpoint they are benefiting from it, and our Fifth Fleet and air forces are helping to assure their supply.” The depth of China’s commitment here is evident in details large and small. In the desert near the Iranian border, China recently built its own airport to ferry workers to Iraq’s southern oil fields, and there are plans to begin direct flights from Beijing and Shanghai to Baghdad soon. In fancy hotels in the port city of Basra, Chinese executives impress their hosts not just by speaking Arabic, but Iraqi-accented Arabic.

    Notably, what the Chinese are not doing is complaining. Unlike the executives of Western oil giants like Exxon Mobil, the Chinese happily accept the strict terms of Iraq’s oil contracts, which yield only minimal profits. China is more interested in energy to fuel its economy than profits to enrich its oil giants. Chinese companies do not have to answer to shareholders, pay dividends or even generate profits. They are tools of Beijing’s foreign policy of securing a supply of energy for its increasingly prosperous and energy hungry population. “We don’t have any problems with them,” said Abdul Mahdi al-Meedi, an Iraqi Oil Ministry official who handles contracts with foreign oil companies. “They are very cooperative. There’s a big difference, the Chinese companies are state companies, while Exxon or BP or Shell are different” (…..)

  3. Russ: So, we borrowed billions from China, and thousands died, in an unnecessary war, that results in the US providing, and still protecting, a new energy supply for China, as their manufacturing displaces ours. And, we put Iran’s allies in power in Iraq, allowing the passage of arms and fighters to defend our adversary the Assad regime in Syria, expanding Iran’s influence, reducing Iran’s defense costs (with Saddam gone), and freeing up Iranian resources for their nuclear weapons development program. Sounds like Bush, Cheney, Rumsfeld, and Wolfowitz engineered a major strategic defeat for the United States. Loss of lives, military capability, billions of dollars, influence and safety. And they markedly strengthened our adversaries, economic and terrorist. All while trashing the US economy. Talk about multi-tasking! When will Bush, Cheney, Rumsfeld and Wolfowitz be nominated for the awards they deserve?

  4. MACV in DaNang: …. and now Corporate America & Canada want to sell China Oil by forcing the United States to process tar-sands-oil from Canada through the Keystone Pipeline for refinement (and spilling) in the Gulf Coast. Our Gasoline prices will not go down (supply & demand on a global scale) but go up once China & India start consuming in accordance with their national needs.

  5. Professor Uziel Nogueira says: This raises a fundamental point about modern US political system and society. George W. — probably the worst president in modern history – was elected twice. What is the lesson to be learned? First, the world became more complicated to deal with in the last twenty years. Past US economic and military superiority is no longer dominant in world affairs. Second, either the political system is failing to produce great leaders as in the past or the American electorate became dumber in choosing their leader. If the first assumption is correct, Obama will probably make mistakes as W. did in recent past.

  6. marian: Decisions made during the Bush years were 100% contrary to the interests of the USA. I can understand people make strategic mistakes- no one is perfect. But Bush was batting a thousand for everyone but the US. Manchurian candidate references come to mind….great movie made in the 60’s.

  7. (…..) SPIEGEL: The mixture of one-party rule and capitalism seems to work very well in China. Nevertheless, will the Western model, the combination of market economy and constitutional democracy, ever stand a chance in such countries? Merkel: Human rights are indivisible. Human dignity isn’t just important in Germany, but everywhere in the world. I’m convinced that the rule of law, democracy and freedom will be unstoppable everywhere in the long run. SPIEGEL: Does that mean that countries like China will come to resemble Europe more than the other way around? Merkel: Human rights are indivisible. Aside from that, it’s important for Germans and Europeans to recognize that China is going to great lengths to become prosperous, as well. If, in doing so, it behaves fairly in relation to global competitors, we have no right to stand in its way. Instead, we have to make sure that we keep up with this dynamic economic development and take advantage of our opportunities in connection with the country’s rise to prominence. At the same time, I’m under the impression that the Chinese leadership is certainly aware that the population expects greater respect for the rule of law, more efforts to fight corruption, more environmental protection and more freedom. SPIEGEL: Are Western democracies too slow to keep up with radical global changes? Merkel: Speed is important, but it isn’t everything. Democracy remains superior, partly because built-in checks and balances make it less prone to failure in the long term. But it is true that we need to speed up the pace of our decisions in a global financial crisis. I, for example, have turned my attention once again to the law that regulates the recognition of foreign professional qualifications. It took decades to get this sort of legislation up and running, and only this administration managed to succeed. Did it have to take so long? I don’t think so (…..)


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