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Entries in China (495)

11:57AM

Where China and the US are clearly collaborating

Nifty WSJ full-page report in mid-June entitled, "Beneath a war of words, money paints a different China-U.S. picture."  The subject?  Chinese investments in US renewable energy efforts.

Just like in the case of hydraulic fracking, we see the Chinese eager to collaborate.

Naturally, as the less advanced technology economy, the Chinese are eager to go beyond collaboration into . . . ahem . . . aggressive collaboration, let's say.  But let's be honest: that's the incentive for the less-technologically gifted party in any technological investment. For the more advanced party, the goal is an expanded pool of opportunity over time:

Read the headlines and you find a war of words between the U.S. and China over clean energy, with the two countries trading barbs over whether Chinese solar-panel makers are dumping their wares onto the U.S. market at prices so low they're illegal. Follow the money more broadly, however, and you see something different: clean-energy investors and executives from the two countries starting to do deals.

Chinese businesses, typically with Beijing's support, are beginning to buy stakes in U.S. clean-energy companies and projects, often with Washington cheering. The deals span technologies from cleaner ways to burn coal to cheaper ways to use renewable power.

Each side has reasons to expand this capital flow. The Americans get the Chinese money and, with it, access to China's vast market, which is far hungrier for clean-energy innovation than the U.S. The Chinese get U.S. technology to help sate their soaring energy demand, and a place to invest that looks positively low-risk compared with their home turf.

As for the fears? Money talks - no matter the language.

One reason is economic. Federal stimulus money for the energy industry is tapering off, and other federal clean-energy subsidies, many of which failed to deliver enough bang for the buck, are likely to get pared back, too. More than ever, U.S. clean-energy companies could use the help of China's investors and consumers.

Another reason is environmental. Many clean-energy technologies are getting cheaper but are still too expensive to compete against conventional fossil fuels. The only way they stand much chance of gaining real scale is if the world develops and deploys them in the most economically efficient way: across national borders. Moreover, if American clean-energy technologies aren't deployed in China, where air pollution is thick and greenhouse-gas emissions are rising, then whatever cleanup those technologies accomplish on U.S. soil won't much matter.

Thank God for the logic of businesspeople.  Imagine if the Pentagon could aspire to such thinking.

11:45AM

The generational shift emerging in Chinese society

Nifty FT piece on the emerging post-Tiananmen generation - or anyone too young to remember that. Here they're talking only up to 24 years old, but in truth, you could easily go as high as 30-32, because people don't come of age on political matters til around 13 at the earliest.

As it is (rough eye-balling here), you think the under-25 crowd in China is close to 1/3rd of the population.

Piece argues that recent enviro demonstration "exposed a new vein of activism" among this crowd.

You know the old bit (repeated by me) where Chinese activists said, "Before Tiananmen, we thought freedom was 90% political and 10% economic.  After Tiananmen, we decided that freedom was 90% economic and 10% political."

When I first heard that bit, I loved it immediately as a basic expression of the lesson that virtually all revolutionary generations learn throughout history:  it's easier to revolutionize the environment through technology and commerce than through politics (which, in Marxian fashion, reflect those deep underlying realities).  So what I'm saying here is that most revolutionary generations learn that it's smarter to inexorably reshape the base than attempt to smash - one afternoon - the superstructure.

Why environmentalism is such a signpost of change: it's the political issue that translates so clearly to economic progress, because it defines the point where people look up from their economic successes and start asking the tradeoff questions. Yes, labor wages tend to precede as an issue, but that's such an intra-business issue (especially in a place like China where you're talking foreign owners). Environmentalism, in contrast, is undeniably local - even intimate (your bodies and what you put in them).

Overall, a great piece worth reading.  The "post-90" generation is starting to graduate from college and displaying a keen interest in politics.  With a tougher economy awaiting them, the instinct to seek better answers will be strong - along with the communication capacity for self-organization (see the unsurprising youth skew on "netizens").

No, I don't see some fast wave a'coming.  I see about a two-decade struggle where the government and Party consistently yield ground because it's the best choice for continued growth accompanied by political stability.

10:14AM

India: a nice signpost of the - necessarily - coming progressive era

Nice WSJ weekend piece that chronicles the recent media rise of a sort of muckraking Phil Donahue (the original US avatar of the wave of "truth" exposing shows that blossomed in his wake - Sally Jesse, Oprah, and so on) in India:

The format of "Truth Alone Prevails" is simple. (The show airs on the Star network, which, like The Wall Street Journal, is owned by News Corp.) Mr. Khan introduces the issue of the day to a live studio audience; a short video is shown, featuring a real-world case of hardship or injustice; and then, with only a modest amount of television wizardry, the lights come up and the person from the video is on stage, seated opposite Mr. Khan. And they begin to talk. Mr. Khan does not dazzle the audience with his star power; for the most part, he just listens. It is his guests, often heartbreakingly ordinary, who do the talking.

What emerges from their stories is a creeping horror, a vision of modern India that is stark and deeply unsettling: the family whose mother's life is snatched away, they say, in a botched and unauthorized organ transplant; the 12-year-old girl who accuses a 55-year-old family friend of sexual abuse; the call-center worker who tells of the forced abortion of her female fetuses—six times in eight years—at the hands of her husband's family. Mr. Khan's style is wry and laid back, but occasionally the stories are too much for him, and his eyes well with tears.

Though all manner of cruelty and casual violence are on display, the show is essentially uplifting.

India has not always been comfortable looking this hard at itself. Mr. Khan's show indicates a new candor and boldness, and the response has been staggering. As he told me, "We used to sit back, my team and I, and discuss how people would react, what they would feel. And the kind of response we dreamed of, and hoped for, that is exactly what we're getting." He admits to being emotionally drained by the show at times: "There's a lot of trauma, a lot of distress, a lot of injustice" out there, he said, and he has yet to commit to a second season. But he also says that he encountered an "equal number of examples of courage, high levels of integrity and deeply honed values."

Critics have accused Mr. Khan of being far less reliable on scientific issues than he is on social ones. Some also say that the show is preachy, even messianic, and that its research is not always up to scratch. 

This, and the rise of "bureacratic lit" (obliquely critical books on Chinese officialdom), are signposts - in my mind - of the inevitable progressive wave (lasting decades in length) that both India and China are doomed to "suffer." It's just what comes next . . . after such tumultuous rises where so much of society is exposed to opportunity in which many succeed, some take cruel advantage (nothing succeeds like excess), and plenty feel screwed over (the populist anger impulse).

The end of the WSJ says it all:

What gives "Truth Alone Prevails" its optimism is the voice of India's new middle class, which is increasingly politically and socially aware, though still unsure of itself and its newfound wealth and security. If the old India of my childhood [writer is an Indian part-time expat] - which was a far bleaker place - is to be superseded, it will depend on this new class' ability to understand and defend the freedoms that have enriched it.

Beautifully written and very perceptive piece, and a genuine signpost for analysts who track strategic trends.

11:03AM

Hopeful sign of a sustained Africa take-off?

WSJ story on how Africans are starting to invest in Africa in a big way.  We're talking FDI, or foreign direct invesment that crosses borders and, in contrast to stock markets, represents "sticky money" in that it involves investment "directly" into assets.

Historically, when a region takes off, it's local money followed by extra-regional money in terms of sequencing. Same holds with panics: local money freaks first, triggering same with extra-regional.

Afric is different, because so much of its wealth, once captured by its elites, has gone abroad (I've seen estimates as high as 40%).  Word has been that a good portion of that money is now coming back to take advantage of things.

But this story is about big commercial entities across Africa getting more into cross-border investments, which is incredibly positive. I have run into a certain amount of this in my own dealings on the continent, with tiny Mauritius playing the Singapore role.

What the charts show:  Although the financial panic of late 2008 didn't make a dent, because Africa's financial connectivity (hence exposure) is limited, the slow down does eventually impact extra-Africa FDI: big Western markets slow and that slows Asian exports and that slows FDI into Africa generally because the continent is first and foremost a raw materials supplier.

But the good news of the piece: Africans themselves have picked up a decent portion of the slack, which is quite encouraging.

Total self-sustainable liftoff?  Hardly.  Africa's great hope of the past few years is that rising Asia (and other developing risers) might provide a sustained demand for materials that the West, in its more isolated boom-and-bust cycles of the Cold War, ever could.

Some concern there as we all now watch China slow down - inevitably - as it moves from extensive (at least along the coast) to intensive growth.  The hidden hope there?  China goes intensive along the coast and keeps taking advantage of extensive growth in the interior.

10:46AM

Excellent NYT op-ed on China in Africa

 

By Damisa Moyo, whom I like a lot.

[Side comment: Why is it that all male African political commentators seem to be fat ugly toads and their female counterparts all look like runway models?  Not complaining - just asking.  As the adoptive father of two of the most beautiful - and clever - female creatures on this planet (both Ethiopian), I'm imagining very bright futures in dad's chosen field.]  

Sounds like she's shilling her new book, “Winner Take All: China’s Race for Resources and What It Means for the World.”  I will be sorely tempted to buy next time I'm in an airport.

I dissect at length:

IN June 2011, Secretary of State Hillary Rodham Clinton gave a speech in Zambia warning of a “new colonialism” threatening the African continent. “We saw that during colonial times, it is easy to come in, take out natural resources, pay off leaders and leave,” she said, in a thinly veiled swipe at China.

Tart start!

In 2009, China became Africa’s single largest trading partner, surpassing the United States. And China’s foreign direct investment in Africa has skyrocketed from under $100 million in 2003 to more than $12 billion in 2011.

This is why Wikistrat ran its recent sim on "China as Africa's de facto World Bank."

Since China began seriously investing in Africa in 2005, it has been routinely cast as a stealthy imperialist with a voracious appetite for commodities and no qualms about exploiting Africans to get them. It is no wonder that the American government is lashing out at its new competitor — while China has made huge investments in Africa, the United States has stood on the sidelines and watched its influence on the continent fade.

Fair enough.

Despite all the scaremongering, China’s motives for investing in Africa are actually quite pure. To satisfy China’s population and prevent a crisis of legitimacy for their rule, leaders in Beijing need to keep economic growth rates high and continue to bring hundreds of millions of people out of poverty. And to do so, China needs arable land, oil and minerals. Pursuing imperial or colonial ambitions with masses of impoverished people at home would be wholly irrational and out of sync with China’s current strategic thinking.

"Quite pure" is a sales job, given what she stated next.  In truth, China will press for advantages in Africa for precisely the reason Moyo cites here: they will do whatever it takes to keep the development train on track back home - and the Party in power.

Moreover, the evidence does not support a claim that Africans themselves feel exploited. To the contrary, China’s role is broadly welcomed across the continent. A 2007 Pew Research Center survey of 10 sub-Saharan African countries found that Africans overwhelmingly viewed Chinese economic growth as beneficial . . .

As we've heard many times on this site from Maduka, that does compute.

Now, on to a stickier charge . . .

And the charge that Chinese companies prefer to ship Chinese employees (and even prisoners) to work in Africa rather than hire local African workers flies in the face of employment data. In countries like my own, Zambia, the ratio of African to Chinese workers has exceeded 13:1 recently, and there is no evidence of Chinese prisoners working there.

Next comes suitably boilerplate statements about China needing to respect human and labor rights in Africa. Moyo asserts her case and then ends with . . .

But to finger-point and paint China’s approach in Africa as uniformly hostile to workers is largely unsubstantiated.

And then starts laying into African governments themselves - also fair enough.

My take: the more China gets into Africa, the more it enmeshes its interests with the locals, who, in turn, become more demanding of better deals - just like Chinese labor back home.  

Will it be a nice process?  Hardly ever is, judging by history.

But an unsurmountable process?  Not if China is as highly incentivized regarding back-home stability as Moyo argues here (and I agree).

After ripping African leaders a new one, Moyo ends powerfully with this:

With approximately 60 percent of Africa’s population under age 24, foreign investment and job creation are the only forces that can reduce poverty and stave off the sort of political upheaval that has swept the Arab world. And China’s rush for resources has spawned much-needed trade and investment and created a large market for African exports — a huge benefit for a continent seeking rapid economic growth.

No argument from me on that.  China is creating connectivity and opportunity - more so than the West right now.  The West is still a far bigger player in Africa, but China is the most dynamic agent right now.

In the end, this is a very good thing, and it certainly beats the alternative of weak South-South connectivity.

As I've stated before: Asia in general and China in particular has been the center of global savings for a while now.  That means we all need Chinese investment to work globally and for Chinese companies to improve in their behaviors as a result of all this connectivity-begetting-better-rules.  Needs to happen in Africa.  Needs to happen everywhere.

So all we need to do in the West is realize that this is a good "problem" or "challenge" - the best we've faced in Africa  . . . ever, actually. 

And then we need to ditch the hyperbolic finger-pointing, which serves no purpose.

1:06PM

Time's Battleland: CHINA | The Perfectly Ironic Chinese Foreign Direct Investment

Tuesday’s Wall Street Journal story of how Chinese state bank (China Development Bank) is pumping $1.7 billion into two long-stalled redevelopment projects in the San Francisco Bay area – namely, Hunter’s Point (a Navy base until 1974) and Treasure Island (same until 1996) — is worth noting.

Read the entire post at Time's Battleland blog.


11:42AM

Time's Battleland: (CYBER) Cyber Warfare Treaty: DOA, Thanks to President and Pentagon

Misha Glenny making a smart case in the New York Times for a cyber arms control treaty, but it won’t happen.

Why?

For the same reason why the U.S. has refused – for many years now – to engage other great powers on a treaty banning space weaponry: our Pentagon wants to dominate that imagine conflict space like any other. This fantasy lives on despite the great private-sector forays into space transport and travel.

Read the entire post at Time's Battleland blog.

11:37AM

Asians become America's top incoming immigrant cohort

From WSJ story noting that fastest-growing pop groups "supplies US with skilled workers."

And before you start griping about too many Asian immigrants:

Half of Asians have a college degree, compared with 30% for all Americans, and their median annual household income is $66,000, versus $49,000 for Americans as a whole.

Asians are more likely than the overall U.S. population to be married, or to live in a multigenerational household, and their children are more likely to be raised in a two-parent home, the report says.

"Asians exceed Americans on educational credentials and socioeconomic markers of success despite being predominantly first-generation immigrants," Mr. Taylor said. He added this sets Asians, three quarters of whom are foreign-born, apart from previous waves of immigrants.

So plenty to like.

The key reason why China ages 3x faster than America over the next four decades (PRC's median age rises from 36 to the late 40s by 2050 while America goes from 36 to just under 40) is that America takes in immigrants - Asians and Latinos.

Our immigrant nation status remains our greatest long-term strength.  China will belong to the old-crew powers come 2050.  America will be sitting with the young-crew great powers (India, Brazil, Turkey, South Africa, Indonesia, etc.).

10:40AM

Time's Battleland: NATIONAL SECURITY - What the Wisconsin Recall Says About the Future of the U.S. Military

Governor Scott Walker survives his nasty recall vote earlier this month, a dynamic triggered by his brutal reshaping of Wisconsin’s public sector unions.  Pundits are interpreting all this in terms of November and what it means for President Obama’s chances in that crucial swing state, but I see a bellwether for the future of U.S. national security.

Read the entire post at Time's Battleland blog.

11:28AM

An accurate if overwrought description of the Chinese economy

Wang v. Bo - preview of coming clashes!Got it via a friend who read Krugman's post on this post. Here's the Krugman's site, and here's the original post.

Hempton's description is correct, by everything I know.  He's just a bit much on the name calling ("China is a kleptocracy of a scale never seen before in human history.")  Krugman reads the post and sees, per his usual pessimism, a system bound to implode.

What Hempton describes is a form of capital expropriation of the Asian variety.  It is different in style than what happened in the West (super-low wages) because it focuses on abusing the average Chinese citizens' savings to prop up state-run enterprises while allowing the elite to siphon off extraordinary profits. But understand that Japan and South Korea did much the same, so yeah, the scale is magnificent but the dynamic is familar.

The system is right for China in terms of preventing instability and allowing for an overall rise in GDP per capita that generates a massive middle class (in sheer numbers, less so as a percentage of total population).  It'll be right until the people can't stand it anymore (populist anger) or the global economy can't stand it anymore (the export-driven growth and general mercantilism) or the national economy can't stand it anymore (the heavy reliance on public investment).

Now, Hempton's take is all righteousness to point of sounding like a Marxist, which is correct enough and ironic enough, but, you know, Marx was right on a lot of things.  He just couldn't imagine a political system smart enough and flexible enough to bend at the point of near-breaking.  In the West, he didn't believe democracies could pull it off - except they did.

Now, we Westerners can't image single-party states in the East managing the same.  Except Japan did actually move off the model - to a certain extent.  South Korea has done it much better.  China approaches the historical moment when it must happen; when it must turn into a system ruled by the middle.  

Will it become a recognizable democracy?  So many experts will tell you that cannot happen due to Asian civilization.  I personally find that bullshit and always have.  It won't resemble Western democracy but it will define - just like Japan and South Korea have - Eastern democracy (and yes, that concept makes some experts' heads burst into flames once they scream, "INCONCEIVABLE!").  

Here again, I think Marx is right in saying that capitalism is so revolutionary that it remakes societies.  It just does at the pace of generational change - duh!

China's system works in expanding capitalism throughout China and creating tremendous (and real) growth and in networking China with the global economy.  It works just like America's system of global governance through the absorption of export-driven growth and debt-financing-as-a-reserve-currency and providing (with all that cheap money) military Leviathan services worked for expanding globalization for about 25 years in the long expansion from the early 1980s through the late 2000s.  It works until it works itself into an imbalance that requires correction and new rules and new policies, etc.  It works until it succeeds too much and thus stops working - simple as that.

What always happens when a system like either of those reaches its apogee of success and no more success can be had is that the critics come out in droves and go ape-shit in their condemnations.  Suddenly, not only is the created imbalance bad, but the entire system is evil and all that came through it is viewed as a complete fraud.

This is way over-the-top analysis and Hempton's piece is chock full of it.  But it's this kind of Cassandra crying that signals you're reaching the endpoint and system-failure-triggering-revolutionary-solutions is nearing.

So yeah, an accurate description, and yeah, way over-the-top in its gloom-and-doomism.  

Why have the Chinese people allowed this system to unfold and expand and reach such imbalance?  Because it's delivered the country and a great deal of them a far improved life - simple as that.  

Why will the Chinese people progressively rebel against the system now and in the future?  Because it's reached the point where it stops working as well as it did in the past - in large part because China hits the same shift point between extensive and intensive growth that all risers hit - again, simple as that.

Yes, we can call it all sorts of names and point fingers, and pull our hair, and predict all manner of doom.

But you know what?  China ain't going anywhere.  The system will adapt.  

No, it won't be pretty, but the Asian version of capitalism adapts just like the Western version did.  Eventually the rich find they have enough and want to protect their wealth through enhanced social stability - even more equality - if that's what it takes.  Eventually, the rank-and-file see that they've eaten enough bitterness on behalf of China so that they deserve a better cut.

If China hits the same roughly-five-decades-mark on single-party rule and then spasms toward democracy, like so many other Asian nations have in their individual "rises," then that democratizing point probably arrives in the 2020s (but between now and then, expect tons of apres moi, le deluge handwringing that will mentally prep the Chinese people for the coming change).  I am convinced China cannot make it past that point in history and wealth creation (by 2030, a per capita GDP of about $20,000) without going full democratic (always with some Asian/Chinese twists, mais oui).

But, as we know, China is doing everything so fast in comparison to Japan and South Korea and other predecessors.  But it's also far larger (which is why EVERYTHING in China is the "biggest in human history" - puhleaze!), meaning we can't forget the extensive growth still to come in the interior provinces, where well over a half-billion poor people live.

China's rich coast must integrate its still-impoverished/poorly developed interior just like the rich-and-rising American East integrated its Wild West from 1865 to about 1900. Those were wild and crazy years, full of booms and busts and robber barons galore.  But that mounting angry populism eventually segued into a progressive era of tremendous progress, one that cemented the middle class as the republic's political center.

To me, the most fascinating question out there (besides the Fracking Revolution in energy) is, How fast does China's democratization process arrive?  China still has to make that interior growth happen, but, because it lacks true democracy, it's got this restive coast.  Already, you see this dichotomy reflected in the Party between the coastal, cosmo "princelings" and the far-more-red interior hard-core types more rooted in the Party's past.  You also saw it in the dramatic showdown between Chongqing's Bo Xilai (with his Maoist revival) and Guangdong's Wang Yang. This is classic red state-v-blue state stuff!

So yeah, the big political fights (and accompanying democratization) are coming.  They'll just unfold within the Confucian mindset of the system, which will actually help a great deal in keeping this thing from exploding.

So yeah, China is deep into that journey of transformation that we've seen so many predecessing systems experience as "punishment" for their successful rises within capitalism.  That's why, in my mind, there's no question that between now and 2030, all the changes desired by the West and many Chinese will come to pass - albeit in a manner that is particularly Chinese.  So no, I do see the power of culture and civilization in the "how" part; I just don't think it prevents or obviates the "what" part.

So read Hempton's piece.  Read Krugman's blog.  Just understand that none of this is all that unprecedented.  It's just the latest chapter in capitalism's expansion. Yes, it's a crucial one alright.  You add China to the mix and you go from a "global economy" to globalization - pure and simple.  But China won't be the last story in this epic cycle.

So don't wear yourselves out on fear and hyperbole - as "SHOCKING!" and entertaining as these "discoveries" are.

10:26AM

Chart(s) of the day: The Chinese economic "miracle" of past decade

From the Economist.

In a nutshell, it ain't their growing domestic consumption and it isn't their current account surplus (exporting prowess - see below), it's the amount of public investment.  And as the lower right (above) chart shows, China is revving that particular supply-side motor a lot higher than either Japan or South Korea did.  

All of this is to say: nothing miraculous here.  And no endless linear rocket upward either.

12:54PM

Signs of the coming agricultural interdependency

FT story on Marubeni, the Japanese trading house, buying US grain trader Gavilon - a major corn trader.

Why buy it?  China's recent forays into the US corn market suggest the rise of a similar long-term relationship as did early Chinese forays on soybeans years ago.  China now regularly imports massive amounts of US soybeans. A similar long-term transactional relationship now seems in the works regarding corn.  Marubeni already has an agreement with Sinograin, a state-owned Chinese company that manages the country's strategic food reserves.

Military strategists of varying levels of economic awareness imagine the US, Japan and China fighting naval battles over the South China Sea.  Meanwhile, truly deep economic/resources dependencies - such as these in food - are cropping up all over the place. 

Guess which relationships prevail?

And no, comparing this to globalization-cum-1914 is too ludicrous a notion to process.  It isn't comparing apples to oranges; it's comparing apples to mammals.

BTW, growing up on the edge of the US corn belt (SW Wisconsin), this issue is near and dear to my heart.

11:34AM

Time's Battleland: MILITARY SPENDING On Cyber Warfare, the American Public Is Constantly Being Played by the Pentagon

From a Washington Post piece describing “Plan X,” the Pentagon’s new push to develop cutting-edge offensive cyber weapons:

It makes sense “to take this on right now,” said Richard M. George, a former National Security Agency cyberdefense official. “Other countries are preparing for a cyberwar. If we’re not pushing the envelope in cyber, somebody else will.”

Read the entire post at Time's Battleland blog.

9:45AM

Time's Battleland: SYRIA When Military Intervention Makes Sense

Gideon Rachman at the Financial Times says that “diplomacy is still better than bombs” and that “moral outrage is just the starting point for a decision to intervene.”  He then goes through all the major powers in his piece Tuesday and cites reasons why each one is either holding back or holding things up. It’s one of those great ass-covering op-eds that’s supposed to make you look smart when the intervention does comes and it — gasp! — leads to more death and destruction.

Let me tell you why great powers intervene:  they don’t care about moral outrage and they don’t care about stopping the killing.  Moral outrage is a headline and nothing more, while the killing is either made faster or slower but never really “prevented.”

Great powers intervene when they can.  It’s as simple as that.  Good and bad don’t play into it.

Read the entire post at Time's Battleland blog.

11:34AM

Time's Battleland: NATIONAL SECURITY Death to “Resource Wars”!

Nice Washington Post piece on Saturday about how the “center of gravity” in global oil exploration and production is shifting to the Western hemisphere.  No, the bulk of global conventional oil reserves still sits in the Persian Gulf, but the larger point is worth exploring: we no longer project global futures where East and West logically fight over Middle East energy reserves.  Those expected long-term dynamics are collapsing right now before our eyes.

Read the entire post at Time's Battleland blog.

8:58AM

Here comes Chinese FDI in a very public way

This NYT story today really jumped out at me, and the Chinese just bought, in a signature Foreign Direct Investment move, the second-biggest movie chain in the US:  

The Wanda Group, a Chinese conglomerate with extensive interests in the entertainment business, has agreed to acquire AMC Entertainment, North America’s second-largest movie theater owner, in a deal that is valued at $2.6 billion, including roughly $2 billion in assumed debt, the companies said Sunday.

David Gray/Reuters

Gerardo I. Lopez, AMC’s chief executive, left, exchanged documents with Zhang Lin, vice president of the Wanda Group, during a ceremony in Beijing on Monday.

The acquisition creates the world’s largest theater group, the companies said. It also represents a significant expansion of Chinese influence in the American film industry. The industry has been looking to China for a vast new reservoir of ticket buyers for Hollywood movies, while joining Chinese investors to produce films like the planned “Iron Man 3” and teaming up to build studio facilities and a new Disney theme park in China.

The usual motives apply:  Chinese firm looking for know-how in an industry that's booming across China but isn't being as monetized as it could be - by Western standards.  For the US company, a crucial sub-plot emerges a few paras down the story:

In addition to the $2.6 billion value assigned to AMC’s debt and equity in the deal, Wanda is expected to invest $500 million for what the companies called “strategic and operating initiatives.” Mr. Wang said that the money would generally be used for renovation and other needs, but that specifics were up to Mr. Lopez and his team. Mr. Lopez said there was no plan in place for the money. But, he said, it might be used to retire debt, acquire new theaters or fix up old ones.

To me, this is a very positive development, and it's one we're going to read about countless times over the next decade. And yes, it will look and feel like Japanese money "buying up everything!" across America in the late 1980s/early 1990s.

But, of course, America has "suffered" these invading waves of FDI throughout our long history as a multinational economic union.  Chinese money will be just as good and useful as those of the other countries that preceeded it, and the further intertwinning of our economies will mitigate the craziness out of the Beltway crowd as they pine for a "near peer" competitor to justify the dropping floor of the defense budget.

You know, the Chinese were going to be the featured villain in the remake of "Red Dawn," but then Hollywood realized they'd be shutting themselves out of the Chinese box office, so they subbed in the North Koreans, which - of course - makes the film a complete and utter fantasy.  But it just goes to show you what all this financial connectivity leads too - cooler heads prevailing everywhere save among those fiercely dedicated fear-mongers in DC.

12:04AM

Red Dawn! Chinese state banks to enter US market

You just want to summon your inner Yakov Smirnov:

In America, banks loan you money.

In China, you loan banks money!

WSj front-page lead on "Chinese banks get nod in U.S."  The Fed Reserve okayed 3 state-run banks to enter and apparently didn't stop the first ever acquisition of a U.S. retail bank by one of them.

The goal of Chinese banks?  Initially, to service Chinese companies operating overseas and those foreign investors looking for "exposure" to the renminbi.

Exposure is the key word here - in both directions.  But, in general, I heartily approve.

China is the biggest saver in the system these past couple decades.  So yeah, access is crucial for an economy with shakey finances.

Of course, China's financial system has its own dangers, but - again - in general I greatly approve of even more financial interdependence.  

It'll help keep the China crazies inside the Pentagon on a leash.

10:04AM

Chart of the day: Why GM and SAIC naturally decided to pair up

Pretty obvious, actually. 

Far short of merger, but the same logic holds:  you are weak where I am strong and vice versa.  Why not ally and crush all opposition on global basis.

This would-be globally integrated enterprise as a preview of globalization's coming attractions.

From an Economist story on Chinese carmakers.

9:32AM

To what extent China can copycat the fracking revolution in US

Big FT piece.

China, we are told, has enough shale gas to cover its needs for 200 years.  It currently has no commercial production but wants to reach 60B cubic meters by 2020. A number of big Chinese and foreign energy firms are currently exploring China, with Sinopec running the big Tarim basin that is routinely described as the biggest in the world.

Dozens of exploratory wells have, so far, yielded mixed results.  The geology is just not the same as the US - more complex, so serious additional innovation will be required.  China's reserves are deeply buried and feature more clay, which is far harder to break up to release the gas.

China also lacks the US's existing pipeline network and trained personnel.

To overcome the stiffness of its three primary national energy companies, China has allowed foreign companies in and plans to liberalize prices on oil so its own companies will invest more.

Then there's the Chinese investment in US firms over here, a development that's been met with far less resistance than when CNOOC tried to buy Unocal seven years ago.  CNOOC plopped a solid $2b into Chesapeake Energy to access some of this technology.

This will be one follow-on to the US fracking revolution worth watching closely.

10:54AM

Planning for less Chinese growth

Citing FT here (pic from NYT), but there's been a slew of stories recently in WSJ and FT on same subject:  Western companies planning for less exports to China and looking more to home markets as a result.

As one exec put it: "The problem in emerging markets for us is really isolated to China."

Here also: "... the speed of the slowdown in Chinese demand has taken companies by surprise."

This is the higher labor costs kicking in prior to the domestic consumption driver kicking in enough to compensate for it - the essence of the middle-income trap.  

Doesn't mean companies don't expect growth in China or aren't planning on it.  Just means all this hype about the Chinese economy ruling all is rapidly dissipating.

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