Second, two Chinese investors, Jianhua Huang and Adrian Cheng, are buying a 15% combined stake in the NBA's Cleveland Cavaliers. (Incidentally, this is my hometown team.) The move by Cleveland may have a lot more to do with globalizing the team's brand than budget problems. Cleveland hopes to entice the team's phenom, LeBron James, who could be fancying a new city after the Cavs were beat -- yet again -- in the late stages of the playoffs.
Lastly, a Chinese industrial company, Tengzhong, is expected to close a deal later this year on total ownership of Hummer. General Motors, Hummer's current owner, chose to sell off Hummer as part of its restructuring deal with the federal government.
These three bids are important for a few reasons:
1) They represent the larger economic trends underway in the US and China. During this deep and long recession, the US contracted by 6% in the first quarter of 2009 while China grew by the same amount. China has taken a hit in its export sector, but its large government stimulus and considerable investment has left many Chinese companies in strong positions. Meanwhile, the US market has made penny stocks out of heretofore dependable behemoths -- such as GM -- and these firms are cutting jobs or going belly-up. In some cases, then, Chinese companies are well-suited to buy up these quintessential American brands while the market price is dirt cheap and the US companies are desperate for cash. In short: China and its businesses are gaining from the economic destruction taking place in America.
2) Relatedly, such investment is ultimately good for the US economy. America's deflation is worsened by the lay-offs produced by businesses shutting down. Every Chinese firm that saves a US firm from liquidation helps to counter deflationary pressure. For example, Tengzhong's buy-out of Hummer will keep employed 3,000 factory workers as well as employees at 100 Hummer dealers.
3) These investments are signs of deepening globalization. As Chinese entities take more ownership in US entities selling in the American market, China's fate will necessarily be more connected to the fate of America. Even though the pattern, until recently, has been interconnection via cheap Chinese exports and incredible American consumption, this new direction should be expected to become more common. Furthermore, heightened interdependence will make official Sino-US relations more complicated. But at the same time, it may also assure that the relationship remains peaceful.
Of course, you may have a problem with the loss -- partial or total -- of big American brands to foreign entities. (A "quasi-American" Hummer just doesn't have the same patriotic appeal.) I would offer a couple responses. First, if it is any comfort, most components for your favorite American products have been coming from abroad for many years. Second, find a positive coping mechanism. Globalization is quite unlikely to go away, particularly during the most globalized recession in human history.
I'm for globalization to a point...as it is here and alive and well...However, I'm not for a enslaved Nation...and also to think its okay to outsource to cheap labor when it is illegal here....So in reality I'm not really for selling off America, but its too late...We are too in debt to others...to ever go back...However, I wonder how far we are going to go before we are all enslaved to Bankers and Corporate America...across our borders which I believe puts us at Risk...in many ways....I believe we are seeing the risky business........
ReplyDeleteLike the previous commenter, it's not so much globalization or debt/investment from foreign nations that concerns me. What does make me uneasy is that our ever increasing debt and financial dependence is with a country under communist political control. This relationship empowers China's government to go unchanged.
ReplyDeleteTo the most recent commenter: we need to clarify something that is not only inaccurate but also a pet peeve of mine.
ReplyDeleteChina is not communist.
In everything but name, the country is not communist. Communism is a highly controlled economy in which property is shared by the public -- everyone -- equally or near-equally. This accurately described China, perhaps, in the 1950s and 60s. But since the reforms of 1978 and especially in the past two decades, China has become increasingly capitalist, which is precisely the opposite of communist.
And don't take my words for it; look at China's inequality. The Mainland is now one of the most inequitable nations in Asia, and inequality is a sign of capitalism, not communism.
Sure, China is some level of socialist in their rhetorical values, but they are certainly not communist.
Now, that aside, I think what you mean to say is, "authoritarian", where political power is concentrated in the hands of a select political elite. *This* would be an accurate description of China's government. (Even if the number of elite who control big federal decisions in China is growing -- so China is becoming slightly less authoritarian.)
Assuming that you, "Anonymous", meant "authoritarian political control", you may or may not be justified in your concerns. On the one hand, as you say, the increasing global position of China could empower the CCP to remain in control of the country. But on the other hand, financial and commercial integration could bring higher demands on China's government to liberalize its economic and laws in order to satisfy consumers and companies.