China is becoming increasingly involved with global governance. As the
sovereign debt crisis in Europe continues, Premier Wen Jiabao said
last month that China will be a friend to Europe. The question is: how
will China help alleviate the sovereign debt crisis?
Zhang Xiaoqiang, vice minister of the National Development and Reform
Commission said: "For those countries experiencing a sovereign debt
crisis, we are willing to lend a helping hand to buy some of their
Buying European bonds is possible since China, the world's second
largest economy, has more than $3 trillion in foreign currency
But the West oscillates between two extreme positions regarding China.
The first is protectionism where acquisitions by Chinese companies are
being blocked. Many in the United States oppose such acquisitions
claiming they are a serious risk to national security and a number of
Chinese investment proposals have also been blocked in Europe.
The EU's industry commissioner, Antonio Tajani, recently said that
some European countries are worried that Chinese companies are looking
to buy European businesses to strip them of their technology.
According to Song Zhe, China's ambassador to the European Union,
background checks have been conducted on Chinese companies, which have
left many Chinese businesspeople with the impression that the European
investment environment is deteriorating, causing them to postpone or
even cancel their plans to invest there.
Chinese companies have been favoring Europe over the United States as
the Committee on Foreign Investment in the United States (CFIUS),
frequently stops Chinese firms from buying US companies on the pretext
of national security.
Recently, Alibaba Chief Executive, Jack Ma, reiterated that the
Chinese e-commerce company is interested in purchasing Yahoo, Inc. But
according to analysts, any potential deal is likely to be blocked by
CFIUS on the grounds it could harm national security. As was the case
in 2005, when China National Offshore Oil Company Ltd withdrew its
offer to buy UNOCAL, the ninth largest oil company in the US,
following what it described as "the unprecedented political opposition
that followed the announcement of our proposed transaction".
The second position is using China as a lender to bail out the West.
It is evident that China has an interest in a healthy European
economy, especially since Europe has expertise in sectors such as
aerospace, automotive, technology and luxury brands.
However, both positions do not reflect China's true standing in the
world. When Chinese firms take over foreign assets, they usually do
not remove the existing management and workforce. Instead, they
integrate the acquired firm in their existing operations. For
instance, when Geely, one of China's largest car companies, acquired
Volvo. Geely preserved Volvo's identity and succeeded in doing what
Ford, the former owner, failed to do.
As the sovereign debt crisis continues, Europe should accept help from
China. As Premier Wen Jiabao said, Europe needs to put its own houses
in order to stop the crisis from spreading and affecting other
countries. The West should look at China from a strategic point of
view and recognize China's market economy status, which is what China
has been anticipating since it began its economic reforms in 1978.
However, according to EU leaders, China has not yet met the necessary
conditions, since most of China's largest companies are State-owned
and their leaders appointed by the government. But the borderline
between private and State-owned is blurring and most State-owned firms
are being transformed into agile players, partly powered by foreign
And even though State-owned companies are still very powerful, private
firms are the driving force behind China's growth.
Based on the World Trade Organization rules, China will eventually get
market economy status by 2016. Achieving this will help China avoid
anti-dumping measures and boost bilateral trade, and will benefit both
The author is founder and chairman of Horasis, an independent
international organization committed to enacting visions for a
Horasis is a global visions community committed to enact visions for a sustainable future. (http://www.horasis.org)
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