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Germany’s Chinese investment problem

105 points by noir-york 10y ago

dovdov 10y ago
I wonder why... https://en.wikipedia.org/wiki/Yellow_Peril https://en.wikipedia.org/wiki/Yellow_Peril
simonh 10y ago
"Oh woe is us. Who will save us from downing in all this Chinese money." There were exactly the same concerns about Japanese investment back in the 80s. Now doing business with Japanese firms and companies like Sony owning major American firms is just natural. They're not weird alien creatures from space anymore, they're our business partners and investors. It's normal. The same will happen with China.
- devoply 10y ago
  I think China is going to be greatest civilization... or that's their aim. And with their population and level of growth they may very well get there.
  - tonyedgecombe 10y ago
    They will have to become more democratic and accountable to their population first. Up to now they have been able to buy off their middle classes with rising incomes, once that stops as it inevitably will those people will start calling for more representation.
    - tarpherder 10y ago
      A bit like how our own middle classes are not doing so great anymore compared to years prior and how our own population is calling for more representation. Which is why, as speculated by many, Trump got elected and Britain voted in favor of Brexit. We better make sure we are still relevant by the time the Chinese have some internal chaos.
    - DasIch 10y ago
      The CP clearly believes that as long as growth is maintained and people's lives improve, there won't be any political resistance. I'm inclined to agree. We have a lot of examples of people protesting and calling for more representation when they're not doing well economically but do we have any examples, any evidence, any indication at all of people doing that when things go well economically? The potential loss of quality of life associated with such resistance failing is massive and the probability of a failure is high. The people have too much to lose by calling for more representation and honestly not that much to gain.
      - tonyedgecombe 10y ago
        This is the point I'm trying to make, they have had a long period of economic growth, people will put up with a lot if they see their situation is getting better. The question is what happens when the growth flounders.
        devoply 10y ago
        People put up with a lot in America. That's mostly because of money. Take away the money and you will have problems.
        DasIch 10y ago
        The growth will of course slow down eventually as it has in Europe and the US. Slow growth might still be considered acceptable enough by most as to not be too much of a problem. I don't see this happening in the immediate future, except maybe temporarily due to global economic issues. I'd expect it to take at least a decade until this becomes a problem and as the article shows, China is certainly planning that far ahead and is able to execute these plans. Making and executing long term plans is definitely something China has a significant advantage in compared to the democracies in the west.
        simonh 10y ago
        You borrow massively to prop up employment and reflate asset markets. The Chinese government has plenty of scope to do this as they are well into the black, holding vast reserves of American treasuries. That gives them a massive war chest, and plenty of scope to assume equally large debts if needs be. They will buy economic stability in return for saddling future generations of Chinese with crippling debt. And it will work.
    - simonh 10y ago
      Possibly, but again Japan provides a case study of an alternate possible future for China. Japan also had a massive property bubble which burst spectacularly. It also had a single party with an effective monopoly on political power. Yet they avoided social upheaval and stayed in power, even in a democracy, by drowning the government in debt for decades. AT first the 90's were referred to as the 'lost decade', but even now they're still not out of the woods 26 years in. I think a similar scenario may play out in China. Today's excesses will be paid for by a generation of stagnation. Interestingly, Trump's economic plan will likely have the same effect in the end. High spending and low taxes will inevitable inflate government debt. In the short term that will create economic stimulus, the current generation of Americans might benefit, but America may well be looking at persistent stagnation for a generation or more after.
      - adrianN 10y ago
        Japan was hit by a recession around 2012 (or the aging workforce starts to play a bigger role), but before that the GDP per capita development wasn't actually that bad. http://www.economist.com/node/10852462 http://www.economist.com/node/10852462
    - baq 10y ago
      > They will have to become more democratic and accountable to their population first. I respectfully disagree. There is no need to do it as long as near total control over information is possible - and it is . Western, money-and-profit-oriented business don't see or don't care that any help they deliver in exchange for money will kill them later when internal-external asymmetry of Chinese economical and political system becomes too cumbersome to deal with. China is positioning itself as a global monopoly externally but cutthroat capitalism internally. External players are allowed in only if they bring more than they take out - again, they might not notice or not think it's a problem.
    - bjshepard 10y ago
      This is a plenty democratic place, I recommend coming and observing it with your eyes, asking people here questions, and assessing the history of the revolution yourself.
      - curun1r 10y ago
        With all due respect... I have been there. I went on a business trip to visit our offshore development office in Beijing. A few of the devs went sightseeing with me one weekend and we ended up going to see the forbidden city. The cab dropped us off at Tienamen Square and I asked if we could spend some time there before going across the street. There was general consternation as to why I was interested in such a boring place. I said I wanted to see where the iconic photo of the man standing in front of the tank was taken, just to pay my respects to such an act of bravery. Not one of the six Chinese devs had ever seen that photo or had any knowledge of what happened there. That history has been censored so completely that very few Chinese are aware of it. You can't be democratic with that level of censorship. A functioning democracy requires and informed electorate. For proof of this, look no further than the recent US presidential election.
        chenlianmt 10y ago
        I doubt if they really understood which event you were referring to or if they ever told the truth. My dad was an undergraduate in 1989 in China, and he constantly tells me what he had suffered during those days. So I'm pretty clear about what happened back then. I used to discuss this event with my friends and most of them had heard about it. Even if it's not in the history textbook and it's not allowed to be discussed in the public, most of the Chinese citizens who were alive in 1989 have heard of this event. I can't say children in next generations would remember it, but at least in 2016, Chinese people do remember it.
        paradite 10y ago
        I don't understand why every single discussion about China has to touch this issue and this is the first thing people do when they visit China. Do you talk to Germans by starting off discussing how Hitler killed millions of people? Do you talk to Japanese people about WW2 and how was the experience being bombed by nukes after saying hello? Do you expect non-US citizens to start talking to you about the massacres of indigenous peoples of the Americas during the first meeting? You don't go to a country just to re-visit their dark history. Regardless of how bad the censorship is, that is just rude behavior. Show some respect first, if you are really interested, make friends with them, then talk about it, they'd be happy to discuss it with a friend but not a stranger.
    - fsloth 10y ago
      Has anything really changed in China in the past 3 millenia, from the point of view of political dynamics? https://en.wikipedia.org/wiki/History_of_China https://en.wikipedia.org/wiki/History_of_China China has had a central government for a long time. Before Roman civilization was more than a bunch of farmers. "people will start calling for more representation" No, people seldom have started calling for more representation. Rather, a portion of the intelligentsia has yearned for a system with more representation, based either on ideals originating in philosophy (europe) or out of spite of colonial masters (americas). Now, the question is - based on what philosophical framework would the intelligentsia base their request? I'm not saying you are wrong. I'm just pointing out that a european or american view of history will skew the political intuition around a framework that can lack a basis once one leaves these spheres of influence.
    - k__ 10y ago
      China is a big player now, but not even half of the people there have good lifes. Maybe Russia or USA will plant some seeds of doubt in the popuplation and China will be split up in the next 50 years.
      - ryuker16 10y ago
        Not gonna happen....I mean, the Chinese who don't like it move or leave.
    - gaius 10y ago
      You should read the story of Cheng Ho.
  - Chris2048 10y ago
    What exactly does "greatest civilization" mean? You mean the next super-power?
- yousry 10y ago
  Related News from last week: The government had cleared the deal on Sept. 8 but Aixtron said that the Economy Ministry had now canceled the clearance certificate for Fujian Grand Chip Investment Fund LP (FGC), a Chinese investment fund controlled by businessman Zhendong Liu, and planned to reopen a review of the takeover. The decision to rescind the approval was based on “previously unknown security-related information,” Germany’s Deputy Economy Minister Matthias Machnig told German daily newspaper Die Welt, without being more specific.
  - QuantumRoar 10y ago
    Aixtron hasn't been doing too well lately. So there is definitely a positive side to an acquisition. From Aixtron's website on November 17 [1]: >CFIUS [Committee on Foreign Investment in the United States] informed the parties that it plans to recommend to the U.S. President that the transaction be prohibited based on CFIUS’ conclusion that there would be no reasonable way to mitigate the U.S. national security risks perceived by CFIUS on the basis of the mitigation proposals submitted by the parties to date. > Both, GCI and AIXTRON have decided not to follow such recommendation as a result of which the matter has been referred to the U.S. President for decision in line with CFIUS statutes. If I understand that correctly, Aixtron SE has investments in the USA and the CFIUS is now moving to block the acquisition because they think if GCI owns these investments that the national security is threatened. Or am I misreading something? [1] http://www.aixtron.com/en/press/press-releases/detail/aixtron-se-uebernahmeangebot-der-grand-chip-investment-gmbh-abgabe-der-cfius-entscheidung-an-den-praesidenten-der-vereinigten-staaten/ http://www.aixtron.com/en/press/press-releases/detail/aixtro...
    - daemin 10y ago
      I recall there being an article here a month or so ago about this actual takeover. Basically Aixtron had this large customer in China, but at the last moment, un-expectantly, they cancelled the order. Therefore Aixtron shares plummeted and then this investment fund comes in to buy them out. The article also found that there was a hidden connection between the customer and the investment fund and that both used state money. So there is definitely something fishy going on, and China as a state is wielding its money to gain all of the technology for itself.
- stupidcar 10y ago
  This seems to ignore the main objection. It's not that Chinese companies are investing in European economies, it's that these companies are run by the Chinese state, and that China is not providing reciprocal access to its own market to Western companies. This is not natural free-market activity, it is a state-sponsored effort to take technology and expertise from European companies and feed it into state-owned Chinese ones. For all the fears raised recently about rising Western nationalism and protectionism, the Chinese regime is blatantly and unashamedly nationalist and protectionist as a matter of course. The state decides who wins and who loses, and they will simply not allow foreign companies to gain a dominant market position in any significant sector. All market activity, including foreign investment, is tolerated only so long as it is subservient to the nationalist goal of Chinese hegemony. For years, Western politicians and businesses have turned a blind eye to China's flagrant disregard for the basic rules of free global trade. Partly out of greed for Chinese money and market access, and partly due to an entirely wishful assumption that this is only a phase, and that China will eventually start playing by the rules and acting like a "normal" free market economy. This delusion demonstrates a fundamental misunderstanding of how autocratic regimes like China operate. Just as they cannot, and will not, tolerate any significant internal competition to their own authority, they will, in the long term, not tolerate any external competition either, either political, military or economic. The Chinese state will never be satisfied being one powerful economic actor amongst others, all playing by the rules of a global market. They will never accept being checked by laws of trade or other country's interests, any more than they will tolerate being checked by democratic accountability or rule of law.
  - Roritharr 10y ago
    > The Chinese state will never be satisfied being one powerful economic actor amongst others, all playing by the rules of a global market. They will never accept being checked by laws of trade or other country's interests, any more than they will tolerate being checked by democratic accountability or rule of law. The same could be said about the US i guess. It's the EU that looks like a naive child on the World Stage...
    - varjag 10y ago
- jacobush 10y ago
  I hope so. But China is going to be a much larger thing to chew and swallow. Also Japan depended (and does) on "the West" for military protection. And military might ultimately sets the bounds for what you can get away with in trade.
  - cinquemb 10y ago
    Considering that "the West" is reliant upon China for cheap labor for high tech goods, as much as China is reliant upon exporting to "the West", and with global military powers at a MAD stalemate, I don't think that is much concern for the near future outside of elites figuring out how to maintain their own local monopolies and playing it off the public to get an advantageous deal.
    - jacobush 10y ago
      That is the problem right there. The Chinese seem to plan for the long game, not the near future. Anyway, its an interesting time to be alive.
eb0la 10y ago
The truth is EU companies are being sold to US and Chinese companies. In the case of the US this is incentivized by the goverment (maybe indirectly) because US-based companies have to pay taxes for money they move to the US: in this case it is cheaper to use that money to buy invest overseas and get more market share. China might not have a plan, but they actually have cash in hand and they are pushed to invest somewhere else because they cannot have that money at rest. They need to recycle that benefits and buying in europe makes sense because is a big market that makes easy to keep money flowing in a global scale.
- charlesdm 10y ago
  > In the case of the US this is incentivized by the goverment (maybe indirectly) because US-based companies have to pay taxes for money they move to the US: in this case it is cheaper to use that money to buy invest overseas and get more market share. Actually, that is not entirely correct. US companies are incentivised to invert and redomicile abroad (often in the EU), because that way they can avoid the global taxation penalty the US imposes. More often than not, an EU company acquiring a US competitor will be able to achieve more tax synergies than a US company acquiring a US competitor.
  - jacobush 10y ago
    s/achieve more tax synergies/evade more tax
    - charlesdm 10y ago
      Evasion means you do not declare certain income, and that gets you in jail. I think that's obvious. You want people declaring their taxes. Avoidance, however, is staying within the law to achieve a beneficial outcome. Given any company has freedom to structure transactions in any way they want, it's only normal to go for the most tax efficient way of generating profits. As if you would pay 35% corporate tax if there is a simple legal way to only, say, pay 20%? Let's say there are two ways to book a profit: royalty income is taxed at 15% and normal corporate income is taxed at 30%. You develop a software product. If the tax code allows you to book all of your (software) income as royalty income, why wouldn't you? Honestly, people frequently see evasion and avoidance in the same way, but they are not. If a tax law framework exists, and you stay within it, I don't see how you're doing anything wrong. Change the laws. Avoidance is only possible due to bad legislating. It's all too easy for politicians to shame companies while they are the ones doing a poor job. Some countries are proactive in closing avoidance techniques, others are not. This is entirely dependant on the politicians in charge and the policy set out.
paradite 10y ago
I am surprised to see Hacker News turning into China News recently.
- JBiserkov 10y ago
  Warning: Gross oversimplification and misrepresentation of facts ahead There is an apparent trend of Planet Earth turning into Planet China recently. Whether this trend is real, whether it will continue, whether you or I believe in it - who knows.
  - meira 10y ago
    > There is an apparent trend of Planet Earth turning into Planet China recently. Not planet earth, Planet US.
- TorKlingberg 10y ago
  Whenever something becomes topical you get a flurry of articles on the frontpage. At the moment it's China, but next week it will be something else.
kriro 10y ago
As a point of reference: Chinese investors bought 37 German companies in the first half of 2016 (39 in all of 2015)[0]. It's noteworthy that those investments tend to be with the idea of a long term engagement. Also interesting that some (most?) of the companies have been bought and restructured and resold at a profit by funds. Buy, restructure and sell to the Chinese seems to be a common strategy. I'm not a fan of the "we buy here, you can't buy in our country" mantra but by and large I see these investments less critically than most people I know. I think they are genuinely interested in keeping the companies profitable and importing/improving the technology (and not just strip mining for tech/ideas as many people claim). [0, in German] https://www.welt.de/finanzen/article157037250/Chinesen-kaufen-deutsche-Unternehmenslandschaft-leer.html https://www.welt.de/finanzen/article157037250/Chinesen-kaufe...
carapat_virulat 10y ago
After all, communists are the best managers of capitalism.
- otaviokz 10y ago
  Genius!
- clydethefrog 10y ago
  *State capitalists are the best managers of capitalism, the government does control the means of production, not the people themselves.
jakozaur 10y ago
After the second world war, Soviet Union was growing so fast that many smart people in western world that communism is superior to capitalism. However, Soviet Union economic growth peaked in 1959. It was primarily based on catch up growth: recovery from WW 2 and moving ppl from agriculture to industry. Is China similar story? http://blogs.ft.com/beyond-brics/2015/12/09/like-soviet-russia-in-1959-has-china-already-peaked/ http://blogs.ft.com/beyond-brics/2015/12/09/like-soviet-russ... A good read on that: https://www.amazon.com/Why-Nations-Fail-Origins-Prosperity/dp/0307719227 https://www.amazon.com/Why-Nations-Fail-Origins-Prosperity/d... I give 50/50 chance to China will avoid this fate, but not more.
- noir-york 10y ago
  Russia had a ceiling: Russian population was less than that of Europe or the US. Chinese population is larger than both combined. Russia was wedded to an ideology; the Chinese are pragmatist and practicing corporate capitalism. China will not only avoid the same fate, they will almost certainly come to dominate by sheer force of numbers. China is practicing the economics equivalance of embrace (buy Western technology), extend (their own 3G standards for instance), and eventually extinguish (locking the West out of their market)
  - varjag 10y ago
    Soviet Union had larger population than the USA in 1959. Russians comprised slightly over a half of the overall Soviet population. That's before you add any Warsaw Pact countries..
noir-york 10y ago
China is practicing the economic equivalent of embrace (buy Western technology), extend (their own 3G standards for instance), and eventually extinguish (locking the West out of their market). As private individuals, we don't mind being bought out by Chinese. As members of societies, I believe it is important to know that there is a concerted plan by China that is at best neutral, and at worst, hostile to Western economic interests. Individual gain at the long term loss of the society we form part is not really in anybody's interest. We should still trade with China, obviously, and even sell companies, but the terms of trade should not be one-sided: Western companies should get the same market access as Chinese companies do.
- tajen 10y ago
  Let's not forget the China has acquired this position by providing the world with goods for 30 years, for a price that meant misery for their workers. It's not entierly undeserved that they are now able to execute whatever grand evil plan they imagined. We're free to prevent them from accessing our markets, as long as we reimport manufacturing into free-market countries, which would mean paying a bit more than $7 for a toy, clothes and electronics, or accepting a minimum wage under $10/day for our Western workers. Serious question. is our independence worth the effort?
  - noir-york 10y ago
    > or a price that meant misery for their workers. Misery is relative. What is misery to us, was a god send to Chinese peasants who flocked in their millions to work in factories that promised at least some security as opposed to the utter misery of toiling in the fields. Those exports to the West helped lifted hundreds of millions of Chinese out of poverty.
  - LunaSea 10y ago
    I think you also forgot to add industrial espionage to this list as a compensation for low innovation levels.
  - ryuker16 10y ago
    Chinese factories aren't that bad....whence I started talking about the labor standards in nearby Indian factories he was shocked.
forgottenacc57 10y ago
China is buying the world.
makomk 10y ago
"help them secure access to the growing Chinese market" is a very euphemistic way of referring to China's refusal to let non-Chinese-owned businesses operate there. China, you see, does not actually believe in free trade and is really rather keen on protectionism when they're the ones doing it..
- witty_username 10y ago
  Same could be said to a lesser extent about the US.
coldplay 10y ago
China just made probably one of its biggest mistakes http://bit.ly/2dmfR9K http://bit.ly/2dmfR9K
- mtmail 10y ago
  The linked page talks about the currency policy, not foreign investment. That website reads like fear mongering conspiracy theories. "free market "jihadists" in China", "the Western banking cartel", "the IMF mafia" Please don't use URL shorteners (full URL is http://failedevolution.blogspot.de/2016/10/china-just-made-probably-one-of-its.html http://failedevolution.blogspot.de/2016/10/china-just-made-p...)
TXV 10y ago
[rant] I have first hand experience with this. In China there is a law which states that in certain sectors and above a certain level of "security" (guess who defines security) the supplier company must be Chinese and its legal representative must be a Chinese national. Of course this law is loosely enforced. It's not that they prevent you from doing business there. Simply it's like a gun pointed to your head. When they decide it's time to pull the trigger, you're out. You might think to buy a Chinese company or set up a commercial partnership or found a JV and then sell your products through them. One successful example of this is Blizzard. However this works up to a point- the "security" level. When you're above the line, even the product must be Chinese, and that's when you transfer your sources to the local counterpart or give up and leave. Concretely, this means that you can forget doing business with the Chinese gov. Or prepare to be canned up any time. Now couple this with the wild investments China is conducting on a cash-hungry Europe. And of course it is state-driven, because outbound capital flows are heavily restricted in China otherwise. However it looks like Chinese acquisitions in EU not only play toward China's long-term goals to rebrand their production (and eventually make money off of our own market). You can also see it as a modern cold-war with the USA, where the stake is industrial predominance and the means is influence over Europe. Just like the old USA vs USSR times. The USA try to make deals with us, while the Chinese outright buy us. Europe has mainly two choices, take a side or become the third pole. I think bot are politically valid choices, however what is really astonishing and enraging, and the article conveys it very well, is that EU has the political energy to do neither. It's not that our political agenda gets crushed by either side. Is that we have none. And this to me means that the European Union at the end of the story will be the only one true big loser, and we as Europeans will follow along. [/rant]
- zhte415 10y ago
  For those interested in more about the legal representative /'fa ren' (literally, legal person) there's a good overview here: http://www.china-briefing.com/news/2011/08/11/roles-and-responsibilities-of-the-china-legal-representative.html http://www.china-briefing.com/news/2011/08/11/roles-and-resp... TXV: Not a law about the role of legal representative in general, right, but that industries that are defined as 'protected' are not open to foreign owned companies? The role of the legal representative is to represent the company in civil law. The legal representative also has a supervisor or board of supervisors, so their actions can be kept in check. This in indeed one of the main roles of the supervisor/board of supervisors: to make sure the legal representative does not run away with the company's cash.
legulere 10y ago
Maybe China is just showing us that the ideology of free market with no protectionism at all might in fact not be the best thing after all.
shanwang 10y ago
I doubt the EU has any plan of anything. With rise of nationalism and protectionism, the EU is fighting for its own existence. China was never a equal trade partner to the west. In fact, I don't think any of the developing countries can be equal trade partners to the developed countries. When you are weak, open your market completely to western multinational companies with huge capital and technology advantage is economical suicide, and it will benefit no one but the rich and powerful at the very top on both sides.
Annatar 10y ago
Europeans won't buy Chinese goods because the quality is horrible, and they understand that by buying them, they would be making themselves poorer and jeopardize their own jobs and economy, even if they are the cheapest. So the only way for the Chinese to make inroads was to start buying European companies, and then infiltrate their goods into Europe that way. At least they will try, and in the long term, nothing short of major political interventions will stop them from eventually moving those jobs to China, where the labor is cheaper... cheaper for now. I for one don't want to support oligarchs in People's Republic of China exploiting people who have to work 16 hour days for six days per week for low pay. We had that in Europe in the 19th century, and we learned that it leads to really low standard of living. It's exploitation.
timthelion 10y ago
When the Czech republic and other ex-soviet states dropped communism and started "moving west", the west greeted these countries with open arms and a chorus of "opening your countries up to foreign investments will spur growth and make your economies flower!" The Czech Republic responded, by allowing foreign investments essentially without reservations. This lead to a highly corrupt fire sale, called the "privatization process" in which state assets were sold off for far bellow market price to foriegn investors. Czech people, just comming out of communism, of course, could not afford to invest in their own country. Now, most of the valulable assets have been sold off, and the Czechs, to a large extent, live in a country which they do not own. Now, when the Chineese do the same thing, but in much fairer circumstances (Germany is hardly recovering from a repressive communist regeim), we're crying foul? I do not like foreign investment, but a part of me is satisfied, that the West is finally getting a taste of it's own medicine. Not that it will reverse the damage done, and not that two wrongs make a right.
- Create 10y ago
  This is one of the reasons why Europe is falling apart. The hidden cynical double standard always trumped good will. Brexit voters were unusually open (in a secret ballot) about east-west relationships.
  - Create 10y ago
    Dear downvoter: The production and exports of cars, run by foreign owners, is a key driver of economic growth in the eastern European Union member where wages for skilled workers are well below Western European levels. Daimler workers in Germany, where wages are much higher, took part in strikes earlier this year, which led to a deal in May to lift wages by 4.8 percent in the metal and electrical engineering sectors in Germany. http://www.euronews.com/2016/11/24/hungarian-mercedes-workers-hold-brief-wage-strike http://www.euronews.com/2016/11/24/hungarian-mercedes-worker...
    - timthelion 10y ago
      You mean "Daimler workers in Hungary" right?
bogomipz 10y ago
>"“To have a major Chinese shareholder is a huge benefit in opening doors,” Gordon Riske, CEO of Germany-based Kion, parts of which were acquired by Chinese state-owned Weichai Power in 2012, said during this week’s Hamburg Summit, a conference on EU-China economic relations." My concern is that those doors might only open in one direction though from China into another country. Will any of these acquisitions result in Germany having an easier time doing business in mainland China?
- dilemma 10y ago
  > Will any of these acquisitions result in Germany having an easier time doing business in mainland China? That's obviously what your citation says.

105 points by noir-york 10y ago

I wonder why... https://en.wikipedia.org/wiki/Yellow_Peril https://en.wikipedia.org/wiki/Yellow_Peril

"Oh woe is us. Who will save us from downing in all this Chinese money." There were exactly the same concerns about Japanese investment back in the 80s. Now doing business with Japanese firms and companies like Sony owning major American firms is just natural. They're not weird alien creatures from space anymore, they're our business partners and investors. It's normal. The same will happen with China.

devoply 10y ago
I think China is going to be greatest civilization... or that's their aim. And with their population and level of growth they may very well get there.
- tonyedgecombe 10y ago
  They will have to become more democratic and accountable to their population first. Up to now they have been able to buy off their middle classes with rising incomes, once that stops as it inevitably will those people will start calling for more representation.
  - tarpherder 10y ago
    A bit like how our own middle classes are not doing so great anymore compared to years prior and how our own population is calling for more representation. Which is why, as speculated by many, Trump got elected and Britain voted in favor of Brexit. We better make sure we are still relevant by the time the Chinese have some internal chaos.
  - DasIch 10y ago
    The CP clearly believes that as long as growth is maintained and people's lives improve, there won't be any political resistance. I'm inclined to agree. We have a lot of examples of people protesting and calling for more representation when they're not doing well economically but do we have any examples, any evidence, any indication at all of people doing that when things go well economically? The potential loss of quality of life associated with such resistance failing is massive and the probability of a failure is high. The people have too much to lose by calling for more representation and honestly not that much to gain.
    - tonyedgecombe 10y ago
      This is the point I'm trying to make, they have had a long period of economic growth, people will put up with a lot if they see their situation is getting better. The question is what happens when the growth flounders.
      - devoply 10y ago
        People put up with a lot in America. That's mostly because of money. Take away the money and you will have problems.
      - DasIch 10y ago
        The growth will of course slow down eventually as it has in Europe and the US. Slow growth might still be considered acceptable enough by most as to not be too much of a problem. I don't see this happening in the immediate future, except maybe temporarily due to global economic issues. I'd expect it to take at least a decade until this becomes a problem and as the article shows, China is certainly planning that far ahead and is able to execute these plans. Making and executing long term plans is definitely something China has a significant advantage in compared to the democracies in the west.
      - simonh 10y ago
        You borrow massively to prop up employment and reflate asset markets. The Chinese government has plenty of scope to do this as they are well into the black, holding vast reserves of American treasuries. That gives them a massive war chest, and plenty of scope to assume equally large debts if needs be. They will buy economic stability in return for saddling future generations of Chinese with crippling debt. And it will work.
  - simonh 10y ago
    Possibly, but again Japan provides a case study of an alternate possible future for China. Japan also had a massive property bubble which burst spectacularly. It also had a single party with an effective monopoly on political power. Yet they avoided social upheaval and stayed in power, even in a democracy, by drowning the government in debt for decades. AT first the 90's were referred to as the 'lost decade', but even now they're still not out of the woods 26 years in. I think a similar scenario may play out in China. Today's excesses will be paid for by a generation of stagnation. Interestingly, Trump's economic plan will likely have the same effect in the end. High spending and low taxes will inevitable inflate government debt. In the short term that will create economic stimulus, the current generation of Americans might benefit, but America may well be looking at persistent stagnation for a generation or more after.
    - adrianN 10y ago
      Japan was hit by a recession around 2012 (or the aging workforce starts to play a bigger role), but before that the GDP per capita development wasn't actually that bad. http://www.economist.com/node/10852462 http://www.economist.com/node/10852462
  - baq 10y ago
    > They will have to become more democratic and accountable to their population first. I respectfully disagree. There is no need to do it as long as near total control over information is possible - and it is . Western, money-and-profit-oriented business don't see or don't care that any help they deliver in exchange for money will kill them later when internal-external asymmetry of Chinese economical and political system becomes too cumbersome to deal with. China is positioning itself as a global monopoly externally but cutthroat capitalism internally. External players are allowed in only if they bring more than they take out - again, they might not notice or not think it's a problem.
  - bjshepard 10y ago
    This is a plenty democratic place, I recommend coming and observing it with your eyes, asking people here questions, and assessing the history of the revolution yourself.
    - curun1r 10y ago
      With all due respect... I have been there. I went on a business trip to visit our offshore development office in Beijing. A few of the devs went sightseeing with me one weekend and we ended up going to see the forbidden city. The cab dropped us off at Tienamen Square and I asked if we could spend some time there before going across the street. There was general consternation as to why I was interested in such a boring place. I said I wanted to see where the iconic photo of the man standing in front of the tank was taken, just to pay my respects to such an act of bravery. Not one of the six Chinese devs had ever seen that photo or had any knowledge of what happened there. That history has been censored so completely that very few Chinese are aware of it. You can't be democratic with that level of censorship. A functioning democracy requires and informed electorate. For proof of this, look no further than the recent US presidential election.
      - chenlianmt 10y ago
        I doubt if they really understood which event you were referring to or if they ever told the truth. My dad was an undergraduate in 1989 in China, and he constantly tells me what he had suffered during those days. So I'm pretty clear about what happened back then. I used to discuss this event with my friends and most of them had heard about it. Even if it's not in the history textbook and it's not allowed to be discussed in the public, most of the Chinese citizens who were alive in 1989 have heard of this event. I can't say children in next generations would remember it, but at least in 2016, Chinese people do remember it.
      - paradite 10y ago
        I don't understand why every single discussion about China has to touch this issue and this is the first thing people do when they visit China. Do you talk to Germans by starting off discussing how Hitler killed millions of people? Do you talk to Japanese people about WW2 and how was the experience being bombed by nukes after saying hello? Do you expect non-US citizens to start talking to you about the massacres of indigenous peoples of the Americas during the first meeting? You don't go to a country just to re-visit their dark history. Regardless of how bad the censorship is, that is just rude behavior. Show some respect first, if you are really interested, make friends with them, then talk about it, they'd be happy to discuss it with a friend but not a stranger.
  - fsloth 10y ago
    Has anything really changed in China in the past 3 millenia, from the point of view of political dynamics? https://en.wikipedia.org/wiki/History_of_China https://en.wikipedia.org/wiki/History_of_China China has had a central government for a long time. Before Roman civilization was more than a bunch of farmers. "people will start calling for more representation" No, people seldom have started calling for more representation. Rather, a portion of the intelligentsia has yearned for a system with more representation, based either on ideals originating in philosophy (europe) or out of spite of colonial masters (americas). Now, the question is - based on what philosophical framework would the intelligentsia base their request? I'm not saying you are wrong. I'm just pointing out that a european or american view of history will skew the political intuition around a framework that can lack a basis once one leaves these spheres of influence.
  - k__ 10y ago
    China is a big player now, but not even half of the people there have good lifes. Maybe Russia or USA will plant some seeds of doubt in the popuplation and China will be split up in the next 50 years.
    - ryuker16 10y ago
      Not gonna happen....I mean, the Chinese who don't like it move or leave.
  - gaius 10y ago
    You should read the story of Cheng Ho.
- Chris2048 10y ago
  What exactly does "greatest civilization" mean? You mean the next super-power?
yousry 10y ago
Related News from last week: The government had cleared the deal on Sept. 8 but Aixtron said that the Economy Ministry had now canceled the clearance certificate for Fujian Grand Chip Investment Fund LP (FGC), a Chinese investment fund controlled by businessman Zhendong Liu, and planned to reopen a review of the takeover. The decision to rescind the approval was based on “previously unknown security-related information,” Germany’s Deputy Economy Minister Matthias Machnig told German daily newspaper Die Welt, without being more specific.
- QuantumRoar 10y ago
  Aixtron hasn't been doing too well lately. So there is definitely a positive side to an acquisition. From Aixtron's website on November 17 [1]: >CFIUS [Committee on Foreign Investment in the United States] informed the parties that it plans to recommend to the U.S. President that the transaction be prohibited based on CFIUS’ conclusion that there would be no reasonable way to mitigate the U.S. national security risks perceived by CFIUS on the basis of the mitigation proposals submitted by the parties to date. > Both, GCI and AIXTRON have decided not to follow such recommendation as a result of which the matter has been referred to the U.S. President for decision in line with CFIUS statutes. If I understand that correctly, Aixtron SE has investments in the USA and the CFIUS is now moving to block the acquisition because they think if GCI owns these investments that the national security is threatened. Or am I misreading something? [1] http://www.aixtron.com/en/press/press-releases/detail/aixtron-se-uebernahmeangebot-der-grand-chip-investment-gmbh-abgabe-der-cfius-entscheidung-an-den-praesidenten-der-vereinigten-staaten/ http://www.aixtron.com/en/press/press-releases/detail/aixtro...
  - daemin 10y ago
    I recall there being an article here a month or so ago about this actual takeover. Basically Aixtron had this large customer in China, but at the last moment, un-expectantly, they cancelled the order. Therefore Aixtron shares plummeted and then this investment fund comes in to buy them out. The article also found that there was a hidden connection between the customer and the investment fund and that both used state money. So there is definitely something fishy going on, and China as a state is wielding its money to gain all of the technology for itself.
stupidcar 10y ago
This seems to ignore the main objection. It's not that Chinese companies are investing in European economies, it's that these companies are run by the Chinese state, and that China is not providing reciprocal access to its own market to Western companies. This is not natural free-market activity, it is a state-sponsored effort to take technology and expertise from European companies and feed it into state-owned Chinese ones. For all the fears raised recently about rising Western nationalism and protectionism, the Chinese regime is blatantly and unashamedly nationalist and protectionist as a matter of course. The state decides who wins and who loses, and they will simply not allow foreign companies to gain a dominant market position in any significant sector. All market activity, including foreign investment, is tolerated only so long as it is subservient to the nationalist goal of Chinese hegemony. For years, Western politicians and businesses have turned a blind eye to China's flagrant disregard for the basic rules of free global trade. Partly out of greed for Chinese money and market access, and partly due to an entirely wishful assumption that this is only a phase, and that China will eventually start playing by the rules and acting like a "normal" free market economy. This delusion demonstrates a fundamental misunderstanding of how autocratic regimes like China operate. Just as they cannot, and will not, tolerate any significant internal competition to their own authority, they will, in the long term, not tolerate any external competition either, either political, military or economic. The Chinese state will never be satisfied being one powerful economic actor amongst others, all playing by the rules of a global market. They will never accept being checked by laws of trade or other country's interests, any more than they will tolerate being checked by democratic accountability or rule of law.
- Roritharr 10y ago
  > The Chinese state will never be satisfied being one powerful economic actor amongst others, all playing by the rules of a global market. They will never accept being checked by laws of trade or other country's interests, any more than they will tolerate being checked by democratic accountability or rule of law. The same could be said about the US i guess. It's the EU that looks like a naive child on the World Stage...
  - varjag 10y ago
jacobush 10y ago
I hope so. But China is going to be a much larger thing to chew and swallow. Also Japan depended (and does) on "the West" for military protection. And military might ultimately sets the bounds for what you can get away with in trade.
- cinquemb 10y ago
  Considering that "the West" is reliant upon China for cheap labor for high tech goods, as much as China is reliant upon exporting to "the West", and with global military powers at a MAD stalemate, I don't think that is much concern for the near future outside of elites figuring out how to maintain their own local monopolies and playing it off the public to get an advantageous deal.
  - jacobush 10y ago
    That is the problem right there. The Chinese seem to plan for the long game, not the near future. Anyway, its an interesting time to be alive.

eb0la 10y ago

The truth is EU companies are being sold to US and Chinese companies. In the case of the US this is incentivized by the goverment (maybe indirectly) because US-based companies have to pay taxes for money they move to the US: in this case it is cheaper to use that money to buy invest overseas and get more market share. China might not have a plan, but they actually have cash in hand and they are pushed to invest somewhere else because they cannot have that money at rest. They need to recycle that benefits and buying in europe makes sense because is a big market that makes easy to keep money flowing in a global scale.

charlesdm 10y ago
> In the case of the US this is incentivized by the goverment (maybe indirectly) because US-based companies have to pay taxes for money they move to the US: in this case it is cheaper to use that money to buy invest overseas and get more market share. Actually, that is not entirely correct. US companies are incentivised to invert and redomicile abroad (often in the EU), because that way they can avoid the global taxation penalty the US imposes. More often than not, an EU company acquiring a US competitor will be able to achieve more tax synergies than a US company acquiring a US competitor.
- jacobush 10y ago
  s/achieve more tax synergies/evade more tax
  - charlesdm 10y ago
    Evasion means you do not declare certain income, and that gets you in jail. I think that's obvious. You want people declaring their taxes. Avoidance, however, is staying within the law to achieve a beneficial outcome. Given any company has freedom to structure transactions in any way they want, it's only normal to go for the most tax efficient way of generating profits. As if you would pay 35% corporate tax if there is a simple legal way to only, say, pay 20%? Let's say there are two ways to book a profit: royalty income is taxed at 15% and normal corporate income is taxed at 30%. You develop a software product. If the tax code allows you to book all of your (software) income as royalty income, why wouldn't you? Honestly, people frequently see evasion and avoidance in the same way, but they are not. If a tax law framework exists, and you stay within it, I don't see how you're doing anything wrong. Change the laws. Avoidance is only possible due to bad legislating. It's all too easy for politicians to shame companies while they are the ones doing a poor job. Some countries are proactive in closing avoidance techniques, others are not. This is entirely dependant on the politicians in charge and the policy set out.

paradite 10y ago

I am surprised to see Hacker News turning into China News recently.

JBiserkov 10y ago
Warning: Gross oversimplification and misrepresentation of facts ahead There is an apparent trend of Planet Earth turning into Planet China recently. Whether this trend is real, whether it will continue, whether you or I believe in it - who knows.
- meira 10y ago
  > There is an apparent trend of Planet Earth turning into Planet China recently. Not planet earth, Planet US.
TorKlingberg 10y ago
Whenever something becomes topical you get a flurry of articles on the frontpage. At the moment it's China, but next week it will be something else.

kriro 10y ago

As a point of reference: Chinese investors bought 37 German companies in the first half of 2016 (39 in all of 2015)[0]. It's noteworthy that those investments tend to be with the idea of a long term engagement. Also interesting that some (most?) of the companies have been bought and restructured and resold at a profit by funds. Buy, restructure and sell to the Chinese seems to be a common strategy. I'm not a fan of the "we buy here, you can't buy in our country" mantra but by and large I see these investments less critically than most people I know. I think they are genuinely interested in keeping the companies profitable and importing/improving the technology (and not just strip mining for tech/ideas as many people claim). [0, in German] https://www.welt.de/finanzen/article157037250/Chinesen-kaufen-deutsche-Unternehmenslandschaft-leer.html https://www.welt.de/finanzen/article157037250/Chinesen-kaufe...

carapat_virulat 10y ago

After all, communists are the best managers of capitalism.

otaviokz 10y ago
Genius!
clydethefrog 10y ago
*State capitalists are the best managers of capitalism, the government does control the means of production, not the people themselves.

jakozaur 10y ago

After the second world war, Soviet Union was growing so fast that many smart people in western world that communism is superior to capitalism. However, Soviet Union economic growth peaked in 1959. It was primarily based on catch up growth: recovery from WW 2 and moving ppl from agriculture to industry. Is China similar story? http://blogs.ft.com/beyond-brics/2015/12/09/like-soviet-russia-in-1959-has-china-already-peaked/ http://blogs.ft.com/beyond-brics/2015/12/09/like-soviet-russ... A good read on that: https://www.amazon.com/Why-Nations-Fail-Origins-Prosperity/dp/0307719227 https://www.amazon.com/Why-Nations-Fail-Origins-Prosperity/d... I give 50/50 chance to China will avoid this fate, but not more.

noir-york 10y ago
Russia had a ceiling: Russian population was less than that of Europe or the US. Chinese population is larger than both combined. Russia was wedded to an ideology; the Chinese are pragmatist and practicing corporate capitalism. China will not only avoid the same fate, they will almost certainly come to dominate by sheer force of numbers. China is practicing the economics equivalance of embrace (buy Western technology), extend (their own 3G standards for instance), and eventually extinguish (locking the West out of their market)
- varjag 10y ago
  Soviet Union had larger population than the USA in 1959. Russians comprised slightly over a half of the overall Soviet population. That's before you add any Warsaw Pact countries..

noir-york 10y ago

China is practicing the economic equivalent of embrace (buy Western technology), extend (their own 3G standards for instance), and eventually extinguish (locking the West out of their market). As private individuals, we don't mind being bought out by Chinese. As members of societies, I believe it is important to know that there is a concerted plan by China that is at best neutral, and at worst, hostile to Western economic interests. Individual gain at the long term loss of the society we form part is not really in anybody's interest. We should still trade with China, obviously, and even sell companies, but the terms of trade should not be one-sided: Western companies should get the same market access as Chinese companies do.

tajen 10y ago
Let's not forget the China has acquired this position by providing the world with goods for 30 years, for a price that meant misery for their workers. It's not entierly undeserved that they are now able to execute whatever grand evil plan they imagined. We're free to prevent them from accessing our markets, as long as we reimport manufacturing into free-market countries, which would mean paying a bit more than $7 for a toy, clothes and electronics, or accepting a minimum wage under $10/day for our Western workers. Serious question. is our independence worth the effort?
- noir-york 10y ago
  > or a price that meant misery for their workers. Misery is relative. What is misery to us, was a god send to Chinese peasants who flocked in their millions to work in factories that promised at least some security as opposed to the utter misery of toiling in the fields. Those exports to the West helped lifted hundreds of millions of Chinese out of poverty.
- LunaSea 10y ago
  I think you also forgot to add industrial espionage to this list as a compensation for low innovation levels.
- ryuker16 10y ago
  Chinese factories aren't that bad....whence I started talking about the labor standards in nearby Indian factories he was shocked.

forgottenacc57 10y ago

China is buying the world.

makomk 10y ago

"help them secure access to the growing Chinese market" is a very euphemistic way of referring to China's refusal to let non-Chinese-owned businesses operate there. China, you see, does not actually believe in free trade and is really rather keen on protectionism when they're the ones doing it..

witty_username 10y ago
Same could be said to a lesser extent about the US.

coldplay 10y ago

China just made probably one of its biggest mistakes http://bit.ly/2dmfR9K http://bit.ly/2dmfR9K

mtmail 10y ago
The linked page talks about the currency policy, not foreign investment. That website reads like fear mongering conspiracy theories. "free market "jihadists" in China", "the Western banking cartel", "the IMF mafia" Please don't use URL shorteners (full URL is http://failedevolution.blogspot.de/2016/10/china-just-made-probably-one-of-its.html http://failedevolution.blogspot.de/2016/10/china-just-made-p...)

TXV 10y ago

[rant] I have first hand experience with this. In China there is a law which states that in certain sectors and above a certain level of "security" (guess who defines security) the supplier company must be Chinese and its legal representative must be a Chinese national. Of course this law is loosely enforced. It's not that they prevent you from doing business there. Simply it's like a gun pointed to your head. When they decide it's time to pull the trigger, you're out. You might think to buy a Chinese company or set up a commercial partnership or found a JV and then sell your products through them. One successful example of this is Blizzard. However this works up to a point- the "security" level. When you're above the line, even the product must be Chinese, and that's when you transfer your sources to the local counterpart or give up and leave. Concretely, this means that you can forget doing business with the Chinese gov. Or prepare to be canned up any time. Now couple this with the wild investments China is conducting on a cash-hungry Europe. And of course it is state-driven, because outbound capital flows are heavily restricted in China otherwise. However it looks like Chinese acquisitions in EU not only play toward China's long-term goals to rebrand their production (and eventually make money off of our own market). You can also see it as a modern cold-war with the USA, where the stake is industrial predominance and the means is influence over Europe. Just like the old USA vs USSR times. The USA try to make deals with us, while the Chinese outright buy us. Europe has mainly two choices, take a side or become the third pole. I think bot are politically valid choices, however what is really astonishing and enraging, and the article conveys it very well, is that EU has the political energy to do neither. It's not that our political agenda gets crushed by either side. Is that we have none. And this to me means that the European Union at the end of the story will be the only one true big loser, and we as Europeans will follow along. [/rant]

zhte415 10y ago
For those interested in more about the legal representative /'fa ren' (literally, legal person) there's a good overview here: http://www.china-briefing.com/news/2011/08/11/roles-and-responsibilities-of-the-china-legal-representative.html http://www.china-briefing.com/news/2011/08/11/roles-and-resp... TXV: Not a law about the role of legal representative in general, right, but that industries that are defined as 'protected' are not open to foreign owned companies? The role of the legal representative is to represent the company in civil law. The legal representative also has a supervisor or board of supervisors, so their actions can be kept in check. This in indeed one of the main roles of the supervisor/board of supervisors: to make sure the legal representative does not run away with the company's cash.

legulere 10y ago

Maybe China is just showing us that the ideology of free market with no protectionism at all might in fact not be the best thing after all.

shanwang 10y ago

I doubt the EU has any plan of anything. With rise of nationalism and protectionism, the EU is fighting for its own existence. China was never a equal trade partner to the west. In fact, I don't think any of the developing countries can be equal trade partners to the developed countries. When you are weak, open your market completely to western multinational companies with huge capital and technology advantage is economical suicide, and it will benefit no one but the rich and powerful at the very top on both sides.

Annatar 10y ago

Europeans won't buy Chinese goods because the quality is horrible, and they understand that by buying them, they would be making themselves poorer and jeopardize their own jobs and economy, even if they are the cheapest. So the only way for the Chinese to make inroads was to start buying European companies, and then infiltrate their goods into Europe that way. At least they will try, and in the long term, nothing short of major political interventions will stop them from eventually moving those jobs to China, where the labor is cheaper... cheaper for now. I for one don't want to support oligarchs in People's Republic of China exploiting people who have to work 16 hour days for six days per week for low pay. We had that in Europe in the 19th century, and we learned that it leads to really low standard of living. It's exploitation.

timthelion 10y ago

When the Czech republic and other ex-soviet states dropped communism and started "moving west", the west greeted these countries with open arms and a chorus of "opening your countries up to foreign investments will spur growth and make your economies flower!" The Czech Republic responded, by allowing foreign investments essentially without reservations. This lead to a highly corrupt fire sale, called the "privatization process" in which state assets were sold off for far bellow market price to foriegn investors. Czech people, just comming out of communism, of course, could not afford to invest in their own country. Now, most of the valulable assets have been sold off, and the Czechs, to a large extent, live in a country which they do not own. Now, when the Chineese do the same thing, but in much fairer circumstances (Germany is hardly recovering from a repressive communist regeim), we're crying foul? I do not like foreign investment, but a part of me is satisfied, that the West is finally getting a taste of it's own medicine. Not that it will reverse the damage done, and not that two wrongs make a right.

Create 10y ago
This is one of the reasons why Europe is falling apart. The hidden cynical double standard always trumped good will. Brexit voters were unusually open (in a secret ballot) about east-west relationships.
- Create 10y ago
  Dear downvoter: The production and exports of cars, run by foreign owners, is a key driver of economic growth in the eastern European Union member where wages for skilled workers are well below Western European levels. Daimler workers in Germany, where wages are much higher, took part in strikes earlier this year, which led to a deal in May to lift wages by 4.8 percent in the metal and electrical engineering sectors in Germany. http://www.euronews.com/2016/11/24/hungarian-mercedes-workers-hold-brief-wage-strike http://www.euronews.com/2016/11/24/hungarian-mercedes-worker...
  - timthelion 10y ago
    You mean "Daimler workers in Hungary" right?

bogomipz 10y ago

>"“To have a major Chinese shareholder is a huge benefit in opening doors,” Gordon Riske, CEO of Germany-based Kion, parts of which were acquired by Chinese state-owned Weichai Power in 2012, said during this week’s Hamburg Summit, a conference on EU-China economic relations." My concern is that those doors might only open in one direction though from China into another country. Will any of these acquisitions result in Germany having an easier time doing business in mainland China?

dilemma 10y ago
> Will any of these acquisitions result in Germany having an easier time doing business in mainland China? That's obviously what your citation says.