China is all over the news these days, but the debate about their role in the world has been given an extra boost by their participation in a "strategic economic dialogue" in Washington this week.
One theme that keeps re-appearing is that of Chinese expansion abroad. For instance, Marc Chandler at BBH argues that China's use of its enormous foreign reserves to lock up strategic resources abroad is a 21st century version of colonialism. Moreover, the country's level of outbound foreign investment, currently tagged at $41 billion, is set to increase after August when Chinese firms will be permitted to purchase currencies to fund foreign acquisitions.
Marc worries that such activities will stagnate development in the countries that China invests in because "It prevents the economic diversification away from low value-added commodity extraction... and often doesn’t lead to employment opportunities as China often exports workers to operate projects." That may be true in some circumstances, but Adrian Wood counters that this is a one-off phenomenon. As China grows and moves up the value-added chain, it will open up a huge gap in labour-intensive manufacturing that workers in other developing countries can fill. (Of course, that's assuming they can keep growing at pace, which I'm not so sure about).
Nor are China's foreign investments simply to acquire strategic resources to fuel their rapid growth - according to an op-ed by Moldova's OECD ambassador, China has moved into Russia's sphere of influence by acting as Moldova's lender-of-last resort (and replacing the IMF to boot). Moldova isn't what you might call a reliable debtor, so there must be other considerations at play here.
Two other areas where Chinese foreign acquisitions suggest that they're not only interested in "hard power" assets or geopolitical maneuverings, but also "soft power:"
- The Chinese government has taken a stake in distilling giant Diageo, further confirming the trend in booze sales I reported on in a tongue-in-cheek editorial back in February.
- A Chinese firm has acquired America's finest news source, but the content looks more-or-less the same.
But fear not - should our blog also be acquired by a foreign fish-stick manufacturer, readers should expect that our quality standards for content, wittiness and snark will remain unchanged.
