Saturday :: Jul 9, 2005

Feng Shui Capitalism

by Marie

What did Americans expect China to do with all those dollars they have been amassing? Overpriced golf courses, hotel and movie studios like the Japanese? Fat Chance.

In my opinion, there are few similarities between the cultures, traditions and people of China and Japan. Japan seems to be a naturally socialistic society masquerading as a capitalistic success story. China is a more naturally capitalistic society. Possibly so much so that without a long period of communism to tame the purely capitalistic spirit, their economy could never move beyond a weak 19th Century form of capitalism. While both have been protectionist in their trading relationships, itís not at all clear to me that the reasons for this are strictly economic. Cultural purity has always factored into how Japan interacts with other countries. China is more about only buying what they like such as Kentucky Fried Chicken (the largest western fast food operation in China) that they canĎt make more cheaply themselves. Chinese bankers are unlikely to subsidize small businesses that arenít viable through annual loans that can never be repaid and the government is unlikely to subsidize heavy equipment contractors through contracts to build roads and bridges to nowhere as the Japanese have done. Better to let the money pile up until a good investment comes up for sale.

Maytag, IBM PC and Unocal. Why buy the milk when the cow is for sale? Unlike Japan, China arrived in the world markets just at that moment in time when America decided to stop making things and begin squandering capital. We buy things made in China on credit. We buy our government operations on credit. Through taxing policies and other legislation, we are speeding up the process of moving capital and jobs abroad. As we lose our industrial and technological advantage, we decide that itís time to starve our schools and teach religion instead of science. Time to try to make up our deficits through military imperialism (at least we still make military hardware). China is lurching its way to the late 20th Century as the US is running back to the future of the 19th Century.

Chinaís Unocal offer is a gutsy move. Unlikely to succeed. Even if it means that oil companies extract more concessions from US taxpayers to prevent it. The offer is more like a shot across the bow of the USS Enterprise, Inc. China needs more energy to keep its industrial engines running and we need more energy to keep all our modern conveniences humming. However, Unocal is more symbolic than practical to either the US or China. Unocalís major assets donít contribute to our energy needs and canít contribute to those of China. Itís more about foreign control in SE Asia. I donít know enough to speculate on the national security implications of this. China may be even less welcome than the US in that region. About all I know is that Muslim fundamentalists are active in SE Asia, and have no reason to believe that Chinese investment would change that. Although, maybe it could take some of their focus off the US as their enemy and become an unintended consequence for China.

Ultimately, I think this isnít much more than a business deal. China is signaling that they intend to begin spending some of their dollars. Perhaps they are also signaling that they donít want to buy more US T-bills. Nobody else wants them either, even GWB. However, going forward, at least for the next few years, their options are limited, and Americans refuse even to recognize the mess we have created for ourselves. The lowest risk option for both China and the US is to let them buy US corporate assets.

Donít worry; be happy. The heirs of American multi-millionaires will not be left behind in the great American sell off.

Marie :: 4:36 PM :: Comments (18) :: TrackBack (1) :: Digg It!