Politi­ciz­ing eco­nomic af­fairs gen­er­ates no fruit

China Daily (Hong Kong) - - COMMENT -

Ear­lier this year, the for­mer chief econ­o­mist of Bank of China, Cao Yuanzheng, warned the Chi­nese busi­ness com­mu­nity that a change in their global op­er­at­ing en­vi­ron­ment was pos­si­bly on the way — a change from peace­ful de­vel­op­ment of all busi­nesses to fe­ro­cious com­pe­ti­tion. We have al­ready seen some high-level ap­pointees in the US ad­min­is­tra­tion of Don­ald Trump blam­ing the eco­nomic woes of the world’s sole su­per­power on its trade part­ners from the de­vel­op­ing world.

Now, as if to pro­vide yet an­other foot­note to omi­nous pre­dic­tions about the fu­ture, there is news of a pe­ti­tion from au­thor­i­ties in Ger­many, France and Italy to the Euro­pean Union for a veto right over Chi­nese high-tech takeovers.

This at­tempt has been in­ter­preted by some Euro­pean me­dia as spear­head­ing lo­cal politi­cians’ grow­ing de­sire to block any Chi­nese in­vest­ments, ei­ther be­cause they rely on “State funds” or be­cause they serve a strat­egy to “buy up” Euro­pean tech­nolo­gies.

In fact, in 2016, al­ready as much as $75 bil­lion worth of Chi­nese would-be over­seas ac­qui­si­tions were can­celed, seven times more than the pre­vi­ous year, due in part to the dis­ap­proval of gov­ern­ments in Western Europe and North Amer­ica.

It is noth­ing new, ad­mit­tedly, that all gov­ern­ments serve na­tional in­ter­ests. But if peo­ple are talk­ing with com­mon sense about busi­ness, they should know that if a com­pany, backed by its pro­pri­etors or board of di­rec­tors, has no in­ten­tion what­so­ever of sell­ing its as­sets, no merger or ac­qui­si­tion will be on the cards and thus be a case for reg­u­la­tory re­view.

Chi­nese peo­ple know full well that the time has long gone when a gov­ern­ment could pur­sue eco­nomic expansion with such force­ful means as gun­boats and un­equal treaties.

Euro­pean politi­cians and of­fi­cials should con­cen­trate on the re­form of their own economies in­stead of shadow-box­ing with China.

Or, they could ask some third-party ex­perts to do some re­search for them, just to check the vol­ume of merg­ers and ac­qui­si­tions in China, an econ­omy of 1.3 bil­lion peo­ple (com­pared with the some 500 mil­lion in the EU).

The data of a Chi­nese pri­vate eq­uity com­pany show that in the first half of 2016, China com­pleted more than 1,518 do­mes­tic M&A deals, in con­trast with 107 over­seas deals.

And, be­cause of the tight­en­ing reg­u­la­tions on cross-bor­der cap­i­tal flows, Chi­nese over­seas merg­ers and ac­qui­si­tions are ex­pected to de­cline this year.

Sus­pect­ing a vol­un­tary busi­ness deal of serv­ing a vaguely de­fined na­tional strat­egy re­flects a stub­born anachro­nism rather than rea­son.

And block­ing in­vest­ment with no hard ev­i­dence of po­lit­i­cal at­tach­ment or mo­tive is a de facto at­tack on busi­ness.

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