China in the Boardroom

June 22, 2005

China in the Boardroom
Posted by Suzanne Nossel

China's influence on the U.S. economy and the corporate sector is becoming more powerful by the day. I was thinking about this trend this morning, and just happened on more evidence that its here to stay:

A Chinese state-controlled energy corporation just made an unsolicited $18.5 billion bid for Unocal, which was slated to be acquired by Chevron for $1.7 billion less. The deal is driven by China's unquenchable thirst for the energy resources needed to continue to fuel its economy. Regulatory concerns may well hobble the deal, but the fact that they're in the game in a transaction this big is unprecedented.

This comes on the heels of the acquisition of IBM's PC business (think ThinkPad) by another Chinese company, Lenovo (now the world's 3d largest PC-maker after Dell and HP) and a bid this week by yet another Chinese conglomerate to buy washing-machine giant Maytag.

Meanwhile trade tensions between the U.S. and China are continuing to escalate. Our trade deficit with China is $161 billion, up 30% since 2003.

It's all more than a bit remeniscent of the Japanese takeover of Rockefeller Center and doomsday predictions of NYC-turned-Tokyo that melted into an endless Japanese recession. But still, a few thoughts:

- It will be fascinating to learn what its like for American employees of Chinese conglomerates - as anyone whose worked for a foreign-owned company culture plays a big role;

- For a long time people have said that China would remain relatively "inward-looking" for the foreseeable future as their economy grew steadily from a relatively miniscule base. My sense is that the outward turn is happening faster than expected and will only continue;

- As has been true since they entered office, the Bush Administration doesn't seem to have a clear handle on how to deal with the Chinese - they waver between claiming partnership over North Korea and making empty threats based on China's unwillingness to devalue their currency;

- If these trends continue, then globalization Chinese style will be something we see more and more of.

June 22, 2005 at 09:24 PM in Potpourri | Permalink

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---It's all more than a bit remeniscent of the Chinese takeover of Rockefeller Center and doomsday predictions of NYC-turned-Tokyo that melted into an endless Japanese recession.---

I hear a lot of people taking comfort in this comparison, but according to the CIA factbook, Japan has a per capita income of $29,400. If the Chinese are even 1/3 as successful as Japan has been, China's economy will be larger than ours.

Posted by: Cal | June 23, 2005 at 04:13 AM

the link to the NYTs on UNOCAL is off; should read:
http://http//www.nytimes.com/2005/06/22/business/worldbusiness/22WIRE-CNOOC.html?hp&ex=1119499200&en=23bd8ddf523d1a8e&ei=5094&partner=homepage

Posted by: doc | June 23, 2005 at 06:55 AM

for cyin' out loud, now i'm doing it: try this -
http://www.nytimes.com/2005/06/22/business/worldbusiness/22WIRE-CNOOC.html?hp&ex=1119499200&en=23bd8ddf523d1a8e&ei=5094&partner=homepage

Posted by: doc | June 23, 2005 at 06:56 AM

China’s budding reemergence onto the world stage is a complex though not necessarily dangerous event: much depends on how the current and following administrations respond to China’s inevitable growth. and, while the allusions to the rapid economic growth of Japan in the 80s are somewhat apt, differences abound: for one, after WWII Japan was never a serious threat to supplant the US on the world stage – China has the potential and ability to do just that.

forget for the moment that China holds umpteen billion dollars of our notes, the current
social/political/military realities in China demand that the US not only pay attention to her, but actively engage her leaders with the reagonesque “trust but verify” attitude on the issues that matter most to us. we also need to realize China is still working out which political philosophy will rule within – if carefully and truthfully done, the US can help shape that debate.

but ham-handed US policies will only close China to us, so the current and future administrations need to understand that ethnocentric or ‘america first’ international policies are losing propositions, regardless of the catcalls and feigned outrage back home. instead of unilaterally invading countries (go home with your ‘willing coalition’) and generally behaving as if we, and only we, had the answers to all the world’s ills, the US should be a positive force for uniting countries to work out the most worrisome international issues. that it does not is what worries China and the world.

Posted by: doc | June 23, 2005 at 09:30 AM

It does seem like China is moving about more vibrantly in the international arena than before, whether in corporate investments or (finally) global peacekeeping. There's one issue that isn't being talked about as often as I hope, and so I wonder if others can shed some light on it: How is China managing growth within its borders?

Chinese economic expansion is impressive, yet most of what I hear of it seems to be about Chinese money and products floating around the globe. The Economist stated in March that China would have to create around 12 million jobs per year (I'm not clear whether this is gross or net growth) and that supply of manufactured goods is shooting way far in front of demand (even with the cheap yuan). Would the distribution of these jobs, if created, have an impact on China's stability? Namely, if the current trend in developing the coastlines (and some efforts in Yunnan) continues, would there be a center-periphery conflict so often experienced by less well-off countries the world over? NPR reports that Internet access is growing in leaps and bounds in the cities but lags in the countryside. Is this a cultural, financial, or infrastructural issue (or all three)?

The urban-rural and ethnic cleavages for now seem relatively tame (sans a few village riots), and China has been an adept manager of internal divisions in the past few decades (even Xinjiang is no Aceh or Ituri). Still, the People's Republic doesn't exactly have a glorious history when it comes to conflict management within its borders, and I feel whatever development that occurs inland may not be in the best interests of the people living there. In that case, would the usual combination of assimilation, accomadation, and coercion be sufficient to dampen future rural unrest? As the countryside sees the divergent lifestyles of the urban Chinese, will some rural elites attempt to exploit ethnic or class identities, old and new, to gain more goods from Beijing? I just wonder if the Party leadership is fully aware of the possible impact of its economic policies on the vast inland area of China, which for now appears relatively untouched by the PRC's foreign exploits (with the exception of dams). Of course, it could just be that the foreign media on which I rely paints a slanted picture of how development is unfolding in the inland provinces.

Mea culpa, I'm actually a (inter)national security student so I apologize for turning an economic discussion into, well, a security one!

Posted by: Sho Morimoto | June 23, 2005 at 12:56 PM

"Mea culpa, I'm actually a (inter)national security student so I apologize for turning an economic discussion into, well, a security one!"

...nothing to apologise for - the issue is both a security and economic one.

Posted by: doc | June 23, 2005 at 01:09 PM

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June 22, 2005