I came across some recent articles in the European trade press that got me wondering about the Chinese investment trend and the impact foreign financing could have on the tech sector.
European Union industry commissioner Antonio Tajani reportedly supports the establishment of a new authority that would examine foreign investments in strategic European businesses. Theoretically, the agency, which would be modeled after the US Committee on Foreign Investment, would also have the right to block foreign takeovers and acquisitions if they were perceived as a danger to European knowledge or technology.
To nobody's surprise, the underlying concern appears to be rooted in increased overseas investments from Chinese entities. (You’ll find the original report in the German paper, Handelsblatt , here along with a couple of other sites -- EUobserver.com and PCWorld -- that picked up the story in English.)
Really? This is the best we can come up with? Stopping foreign takeovers of strategic businesses in the quest to protect our “indispensable” technology and knowledge? I’m not buying it.
Here’s how I see it. Western companies have been pouring billions of euros and dollars into China so they could save heaps of money on labor and overhead expenses. They have overcome all sorts of political, logistical, and cultural obstacles to elbow their way into a fledging market and secure their places in that part of the world. Now, when the new Chinese bourgeois or entrepreneurial capitalists -- made wealthy by the ripple effect caused by years of Western investment -- want to do what their predecessors have done (i.e., invest in developing hot spot markets or gain a competitive edge on the global scene), many Western businesses and politicians cry foul.
Businesses and politicians can’t just stop the globalization machine when it is not serving their near-term financial or bureaucratic interests. "What goes around comes around" is the adage that keeps coming to mind. Japanese, American, and European companies have had their day watching profits soar because they off-shored production, created partnerships in desirable geographies, or flat-out acquired weaker global competitors. Companies from all of these regions have shaped and forever influenced the world’s auto, banking, industrial machinery, retail, technology, and telecom sectors, to name a few.
Were we collectively naïve enough to think that one day Chinese companies wouldn’t pursue -- or would never be strong enough to pursue -- the same kinds of ventures they were subjected to a decade or two ago? Just maybe it’s time for the Chinese to lead the next phase of worldwide business direction. They have money in the bank to back up their big-game talk, and they have developed the Western world’s appetite for profitability and growth.
In a world where money talks and strong balance sheets impress Wall Street, why is the Western world so afraid to let Chinese companies make overseas investments in IP and technology development?
I’m not saying Chinese investors should have carte blanche to do whatever they feel like; in the same vein, I never believed Western corporations should have had carte blanche in developing nations either. There have to be reasonable limits and a more effective way to safeguard intellectual property and know-how, although I’m short on ideas on how to feasibly do that in the interdependent world we now live in.
Of course, governments feel obliged to wave the "it’s-in-our-national-interest" flag when the threat of potential evildoers mounts and weakens the home team’s advantage. And, obviously, narrowing the European-Chinese trade deficit should be addressed on some level, if only to create a relatively balanced import-export landscape.
But, I don’t think adopting protectionist strategies actually does much for the business world or consumers. Proposed measures like these sidestep possible solutions that endorse fair competition worldwide, and furthermore, they dilute the "only the strong survive" conjecture that drives business success in bull or bear markets.
What do you think? Do we need another government organization to write the rules of international business? Or, is this something corporations should hammer out by themselves?
Also, have you had any experience with the Committee on Foreign Investment in the United States (CFIUS)? I’d like to hear how it works, and if it’s a model worth replicating in Europe.