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OpEdNews Op Eds    H3'ed 7/15/09

Diva China's Turn

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Message Michael Fox

Here she is, boys!
Here she is, world!
Here's CHINA!

Time is reporting that China is holding record cash reserves and going on a bargain-hunting global shopping spree. With nearly two trillion dollars to spend, they've snapped up $1.2 billion worth of Morgan Stanley, countless pieces of residential property, and have been shopping aggressively for major international brands. Auto manufacturers present a particular allure: just last month, Sichuan Tengzhong picked up Hummer, and Chinese companies have bid for Opel, Chrysler, and Saab. Next up: Volvo.

Ya either got it, or ya ain't.
And, boys, I got it!
Ya like it?
Well, I got it!

Iconic Swedish carmaker Volvo, presently held by Ford, is being shopped to Chinese auto manufacturer Geely (incidentally, pronounced just like the notorious Ben Affleck movie flop). Presumably, if the Chinese buy Volvo, the manufacturing and design of the Volvo you buy in Europe or the US will remain in Gothenburg, but parts and electronics will be coming, ever increasingly, from China. It is not unreasonable that there will be other "Volvos" made in whole by Geely in China for the Chinese market, just as, today, you can buy a Buick Park Avenue (a model name no longer marketed in the US or Europe) in China. It is made entirely in China, on a GM Holden platform. There is nothing American about that Buick, beyond its name (and even the Chinese press acknowledge it).

Some people got it and make it pay.
Some people can't even give it away.
This people's got it
And this people's spreadin' it around!
You either have it
Or you've had it!

China is holding enormous cash reserves, but their trade and manufacturing have dwindled as the rest of the world has stopped shopping. Consequently, they are driving harder bargains in business, and the latest method of Chinese negotiation may end up being utterly self-defeating, and make all the free-market globalists shake in their Ferragamos:

The case of Mr. Stern Hu, an executive of Australia's Rio Tinto mining company, who has been arrested by the Chinese government in a game of ruthless hardball amidst tough negotiations between the company and the government-run steelmaking authorities should be on the mind of anyone doing business with China. Mr.Hu has been charged with espionage in any other country of the civil (corporate crime) variety, rather than the national security variety, which is how China sees it, as the state is the negotiating entity. Mr. Hu is only being allowed but one visit a month with his Australian Consul in Shanghai.

The Hu arrest may well make every Western corporation re-think their Chinese operations, as no one wants their employees under arrest for doing business. It's not worth the risk, and fewer individuals will choose to opt for a position in China with the knowledge of what has happened to Mr. Hu in mind.

Everything's coming up roses,
This time for me!
For me! For me! For me! For me! For me!
For me...

China's overplaying of their hand in the case of the Australian Mr. Hu unless settled promptly - may, in fact, be the most significant single act since Archduke Franz Ferdinand and Princess Sophie got shot. This is not hyperbole, as I previously pinpointed the trigger of the new Depression was the point at which China stopped loaning the US money in November of 2007, thus bursting the bubble (a year later, of course, officials retroactively concurred on that date). So it is worth considering how China is now responding to the financial meltdown. Buying up established brand names and realty is one thing, imprisoning business rivals is quite another. What might be next for a regime that plays by such rules (or without any)? And has the US lost some position in criticizing such rule-breaking courtesy of our previous administration?

(paraphrased lyrics by Steven Sondheim)

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Michael Fox is a writer and economist based in Los Angeles. He has been a corporate controller, professor, and small business entrepreneur. After a life-altering accident, he spent five years learning more about medicine and the healthcare (more...)
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