How will China react to lost investments?

[Steve the Planner]

JMA:

Austin Powers. Dr. Evil. Deadly shark tank (but couldn't get a permit for sharks). Sea bass with lasers.

OK, Broader allusion: Fear the Turtle! University of Maryland Terrapins---the folks with the modern football fashion styles.

[JMA]

JMA:

Austin Powers. Dr. Evil. Deadly shark tank (but couldn't get a permit for sharks). Sea bass with lasers.

OK, Broader allusion: Fear the Turtle! University of Maryland Terrapins---the folks with the modern football fashion styles.

Austin Powers?

I think we have a generation gap here Steve.

[Bill Moore]

I think a lot of China's success is smoke and mirrors and over time a large number of hollow companies will be exposed as being hollow. They are not transparent, so buying any Chinese stock is high risk.

The fact that China continues to invest in the U.S. indicates something, and it isn't just to keep us a float economically, if they were as strong as some of our folks make them out to be they wouldn't have to depend a stable U.S.. The Chinese bubble will bust soon enough, and that will probably be a greater threat to us than its continued growth.

[davidbfpo]

My understanding is that China decided a few years ago that returning it's income from exports to China would set off inflation, alongside distorting its planned investment strategy and it sought non-Chinese investments as a potential source of income. Many of those initial investments were not in natural resources; the only one I can recall was a mobile phone provider and this led to serious concerns over national security.

[Fuchs]

Why does China invest abroad?

The macroeconomic answer is that trade balance surplus = capital export.

So basically they invest abroad because that's the only alternative to importing goods once you've got cash from net export sales.

[Ray]

Well from that incident the Gemstone and Allied Workers Union of Zambia will not be organising any protest marches at the Collum Coal Mine anytime soon now that they know the Chinese bosses are armed and prepared to use them.

That would be an interesting issue.

And it would be real callous of the Zambian Govt to not act if their citizens are killed.

I saw a BBC programme which shows that Zambians are not too comfortable with the Chinese.

But then, I may have missed something.

[Dayuhan]

Some yearsd ago I met an Angolan businessman who was in Dubai buying heavy equipment. He made a comment something like "we thought the whites were bad, but we didn't know what racism was until we dealt with the Chinese".

A lot of people are uncomfortable with the Chinese. Of course a few people - the ones getting the money - are very comfortanle with them, and willing to extend all manner of comfort to them. That's an inherently volatile situation, though, especially when it involves Chinese companies buying huge parcels of farmland and shipping in Chinese workers to farm them. Agricultural land is political in a way that oil and minerals may not be, especially when existing residents are displaced.

My guess is that as long as capital flow in exceeds capital flow out, resentment will be manageable. When that flow reverses - as surely the Chinese intend it to, otherwise there would be no point - things may get much more difficult to manage. The question is what the Chinese will do if the governments that protect these enterprises, and thus the enterprises themselves, are threatened.

Some discussion of farmland investment here:

http://www.economist.com/node/13692889

Countries in the Middle East are also buying, as is Korea, but I suspect that they are more inclined to use local labor. The use of Chinese labor, obviously displacing local employment, is likely to accelerate local resentment and also places a large number of Chinese nationals in a potentially risky place. The racism issue can easily provide trigger points, especially given the street-level visibility of the Chinese presence... Chinese-owned shops and businesses, etc. What would it take, as resentment grows, to touch off anti-Chinese riots? Not much, I suspect, once conditions are right.

[davidbfpo]

Many of the comments have been helpful to answer my question. I do feel that Zambia will be an interesting, possible test case as it is landlocked and no PRC "gunboats" can loiter offshore. Secondly, although nearly all Western-owned investment in the Copper Belt has gone, replaced by private PRC companies, will the price of copper - understood to be going up - mean Western investment may return?

[Bill Moore]

China's foreign policy is immature and while many nations desire increased Chinese investment, they are also tiring of China pursuing its naked economic interests at all costs. China, just like the powerful countries in the West, will have to learn to adapt its foreign engagement policy if it wants to remain a significant player in the global arena.

http://democracyforburma.wordpress.c...r-yale-global/

CHIANG MAI: At a time when Asian countries are increasingly worried about China’s growing assertiveness, Burma’s rejection of a huge Chinese hydroelectric dam project has raised new questions: Is this a rare victory for civil society in a repressive country? Or does it indicate an internal dispute over the country’s dependence on China? Regardless of the answers to these questions, the public difference over a close ally’s project marks a new stage in the Burma-China relationship.

On September 30, Burma’s new president, Thein Sein, sent a statement to the country’s parliament announcing that a joint venture with China to build a mega-dam in the far north of the country had been suspended because “it was contrary to the will of the people.” The US$3.6 billion The Myitsone Dam would have been world’s 15th tallest and submerged 766 square kilometers of forestland, an area bigger than Singapore.

[Dayuhan]

although nearly all Western-owned investment in the Copper Belt has gone, replaced by private PRC companies, will the price of copper - understood to be going up - mean Western investment may return?

Copper prices have been tumbling since June, though of course nobody knows how long that will last. Given the political and security risks involved in African mining, I doubt that there will be much interest from US companies at least. Neither is there any great strategic imperative: Chile, Peru, and US are by far the world's leading producers. If the Chinese want to take the risks in Africa, let 'em. Not like there's a shortage of the stuff.

[Ray]

Maybe this will help

http://carlosqc.blogspot.com/2009/09...-european.html

[Dayuhan]

Maybe this will help

Maybe it will, or maybe not. Take a closer look...

All very emotional, and understandably so: the Congo has had a rough road and has been screwed by a lot of people (notably its own leaders) and a lot of nations. The US had a hand in that back in the cold war, but if you're looking for responsibility to day... well, let's look at some of what's said here.

The U.S. has not only sent AFRICOM troops to Congo, but it also built a huge military base in Rwanda only three years after the Rwandan genocide, and it’s used as an intelligence base built.

Sounds very sinister, except that... well, there isn't any huge US military base in Rwanda. Never was. You'd have thought the guy would have checked on that, it's not difficult.

Ever since the US introduced AFRICOM, a certain wing of the left - you couild call it the Chomsky faction - has been up in arms, declaring it all a naked grab for power and resources. They almost make it sound credible, until you look at the actual force structure of AFRICOM. It's 1200 people in Stuttgart, Germany. That's fewer than 30 for every nation in Africa, and they aren't even in Africa. The only US facility in Africa is in Djibouti, and that's mainly about operations in Yemen.

In fact the structure of AFRICOM and the force assigned to it show clearly that Africa has a very, very low priority for the US. There's a lot of talk here about AFRICOM soldiers doing this and that - no specifics, of course - but in reality US deployments in sub-Saharan Africa are very minimal. The minimal resources assigned to AFRICOM are mainly aimed at places where AQ has or might be able to develop a presence; sub-Saharan Africa gets very, very little attention.

He mentioned a bigger international pressure -its proved it can help- in order to stop the U.S. military aid to Rwanda and Uganda, which in 2007 amounted over $7 million dollars worth in military equipment.

$7 million? In military purchases from the US? What do you figure that buys, a container of spare parts? Not exactly evidence of commitment.

If you believe in R2P etc, you can easily accuse the US of having not done enough in Africa. Accusations that the US is projecting force to serve its interests in Africa don't stand up very well to scrutiny, because when you actually look, there's virtually no force being projected.

The Chinese bring their expertise and locals are trained, their infrastructure is badly built but it can improve and “they are not coming with weapons, proxy rebel groups” they reinvest profits in the land they go, showing willingness to talks with African leaders when there is a problem

Yes, the Chinese are always willing to talk to African leaders. More to the point, they are willing to pay African leaders, without any conditions or demands over Western constructs like human rights, environmental protection, corruption, etc. That of course makes the Chinese popular with the people who get paid. How long those people will stay bribed, or what happens when a new set of guys takes over... well, that's a problem for the Chinese. We'll see where it goes. It may even be refreshing to see someone else mucking around in the swamp, instead of us.