China Is Buying America!

Pigs“China is buying America!” That is the rising nationalistic chant that has the potential of rising to a political fervor of objection about Chinese companies buying American corporations.

Should America copy the Philippine model and defend her business enterprises from being purchased by potentially malicious foreigners who may conduct business in some way that might hurt America?

The current case in point is Shuanghui International Holdings’ plan to buy Smithfield Foods Inc for $4.7 billion. The American company is the world’s largest pork producer and ships a lot of product to China today. The size of the purchase has raised political eyebrows, coinciding with a recent announcement that China has resumed cyber espionage into American government and private business computer systems. That espionage has resulted in theft of important military weapons technology.

Rather than writing an elaborate discussion on individual points, I’ll do a simple checklist of the pros and cons of the proposed purchase, and then put them together in an overall picture to draw off a conclusion.

Pros

  • If China buys the company, American pig ranchers and other food producers will have a great new market to sell into. A huge, hungry market. American pork producers will thrive.
  • Competitors will have an angle to compete against the biggest firm in the market. “Buy American!” Competitors will thrive.
  • China and the U.S. will be more closely entwined in commercial interests, making armed conflict less likely.
  • American food regulators will assure that the company continues to run in a first’class way, so Chinese consumers will be assured of avoiding the contaminants that have entered the food chain in Chinese pork products. It is good for China’s people.

Cons

Shanghai Pigs

2,000 Pigs in a Shanghai River

  • China may mismanage the company, cheat, and ignore American rules. For example, the company may put out contaminated products because they would lose money if they threw tainted products out. Chinese cheat, plain and simple. They have a different value system than Americans have, which is why tainted products are so common in China.
  • China should be punished for her cyber-crime offenses, not rewarded.
  • China will start to control American businesses and eventually, politics.
  • Bacon prices in the US will rise. Food will go to the Chinese instead of Americans.

Some Considerations

  • JoeAm’s grandfather grew prize-winning hogs, so he is impeccably qualified to opine on pigs.
  • JoeAm worked for the British during the European invasion of the US business markets in the 1970’s. The European economy went south and companies repatriated their American capital. JoeAm worked for the Japanese during the Japanese invasion of the US business markets in the 1980’s. The Japanese economy went south and companies repatriated their American capital. Now Joe’s former company is run by the French.  They retired him. Go figure. Life’s a cycle.
  • The Chinese company must abide by American laws and regulatory inspections. It will remain first class.
  • American food producers sometimes cheat, too, or treat animals cruelly.
  • Certain industries should be held apart from foreign investment. Defense contractors, for example. Telecom companies. Utilities. A Japanese company’s current proposal to buy the Sprint telecom giant warrants very close examination.  A food processor, however, is not in a sensitive industry.
  • Chinese cyber-spying is a separate issue; it should be looked at in concert with American cyber-spying and the normal hickory dickory bicker of international pushing and shoving.
  • If China and US tensions continue to rise, the US can threaten to mandate sale of Chinese assets held in America as a form of sanction to encourage a different set of Chinese behaviors.
  • More likely, however, is that, as China and the US grow more intertwined commercially, the Chinese business community will be able to lean against the irrational military leadership that is at the heart of China’s blustering, confrontational diplomacy today. In other words, cross ownership is the SOLUTION, not the problem.
  • What is done can always be undone.

Conclusions

The American capitalist system is a beautiful model for wealth creation. Chinese owners will invest to generate more product, and American farmers and businesses will benefit tremendously. So will Chinese consumers. Any downsides are totally within the control of the American government.

Fears are hobgoblins, and a proven economic model should not be run by hobgoblins.

The Philippine model is what you get when hobgoblins rule, blocking money from being spent in the Philippines, and stifling innovation and competition. I’m curious, do Filipinos believe their government is not capable of regulating and overseeing foreign enterprises?

But as it pertains to the subject of this blog, to China investing in America, do the deal! Do many more Chinese deals.

Sell, baby, sell.

Comments
27 Responses to “China Is Buying America!”
  1. The Mouse says:

    Forget pork bacon when there’s Turkey Bacon! Less cholesterol 😀

    I still hope, they only sell their hogs in China.

    • Mariano Renato Pacifico says:

      Thank gootness I gave up on Pork. Pork is dirty. Mohammed and Jesus ordered their flocks not to eat Pork. I only eat goat, turkey, lamb, chicken, beef … definitely not pork. I do not go to Filipino parties because they force me to eat their artery-clogging coronary cuisines.

  2. Mariano Renato Pacifico says:

    Smithfield will be employing child labor. OSHA will be paid-off. Chinese owners will be excused for Equal Employment Opportunities. Employees will be paid minimum wage. We will never know if my pork sausage consist of horse, rats and cats. We will never know.

    Has anyone noticed there are not cats and dogs blocks around Chinese restaurants? Go figure.

    What is in China that they get away with government-sponsored cyberspying of Americans?

  3. edgar lores says:

    1. I don’t get it. JoeAm worked for the British… and the European economy went south. JoeAm worked for the Japanese… and the Japanese economy went south. Now JoeAm has transplanted himself on a Philippine island… and the Philippine economy goes north. How?

    2. “If China and US tensions continue to rise, the US can threaten to mandate sales of Chinese assets…”

    2.1. China has immense holdings of US government debt. Because of this people say that China ‘owns’ the US. But what would happen if China were to get rid of these ‘assets’ in a misguided attempt to threaten the US?

    2.2 Surprisingly, the answer seems to be that China cannot. It is caught in a dollar trap. It cannot repatriate the funds, move it to euro-zone debt, switch it to corporate debt, purchase foreign corporations or invest in mining resources – it cannot do any of these without encountering insurmountable obstacles or high risks. Refer to the following link:

    http://thediplomat.com/pacific-money/2012/09/28/the-dollar-trap-chinas-misunderstood-foreign-exchange-reserves/

    3. Another problematic aspect of China’s rising affluence is Chinese tourism. The Chinese have overtaken Americans and Germans as the world’s big spenders. But there are problems — apart from, ah, bodily functions, spitting, littering, loudness, queue-jumping — with Chinese tourists’ behavior and expectations. (Note: Filipino tourists night be equally reprehensible. My wife caught a Filipino ‘watering’ the Australian bush.)

    3.1. Recently, a Chinese teen earned international ire was for defacing an Egyptian temple wall with the immortal line “Ding Jinhao was here”.

    3.2. Here in Australia, Chinese tourists are herded into an exclusive duty-free shop that is in the middle of nowhere and is only open for the brief duration of their visit.

    4. So poor China seems to be beset on all sides: dollar trap, tourist traps and diplomacy traps from without and official corruption and rising people’s expectations from within. Bluster it might, but has the dragon, the paper dragon, looked ever so forlorn?

    • Joe America says:

      I think what is going on in China is that there is a simplistic, provincial militarization of the central committee. They are still counting with beads rather than computers and uttering jingoism as truth and posturing as if the rest of the world weren’t connected to videos and facts and knowledge. Hopefully, China is still at the fork in the road, and the weight of the business community can start to zip the lips of the brash, arrogant generals. China’s future in a peaceful world is up. Her future in a world of military contest and friction and insult delivered daily to her important markets and suppliers is bound to be rich . . . with angst and suffering.

  4. manuel buencamino says:

    Joe,

    “Chinese cheat, plain and simple.” So do Americans. We can start with the Indian Treaties all the way to the collapse of the housing market and the financial system.

    “They have a different value system than Americans have, which is why tainted products are so common in China.”

    The American value system is superior to China’s? Are you referring to Confucian versus Protestant values or communist versus capitalist values?

    You seem to be comparing the worst in China with the best in America. That’s not fair. I think if you compare best to best and worst to worst you will find that Chinese and American value systems come out even, Furthermore, if we go beyond values ostensibly held to their actual application, you will also see the same best to best and worst to worst parity.

    Stereotyping China has no place in a sober, objective analysis of the issue regarding China’s offer to buy a US company.

    • Joe America says:

      My method in this article was to express what both sides would say, not what I would say. The anti-China rhetoric in the US is becoming more pronounced. That is a sober, objective statement, and why would I try to sweep it under the table? Some U.S. Congressmen are objecting to the deal, do I hide that, too? Indeed, in the article, I recognized that American food companies cheat, too, and abuse animals. And I put the cyber-spying on the same footing, irrelevant because both sides likely are up to their eyeballs doing it. And in the end, I conclude that the complaining Congressman ought to let this deal through. As I point out, harmony through entwined business interests is the solution, not the problem.

      My point in making the statement that rubbed you the wrong way was to recognize it is a view that is being expressed.

      I’m not sure how you conclude I believe the American value system is better than China’s when I argued this deal should be done. I think the Chinese are fundamentally good people, enjoying the fruits of capitalism. And I love noodles, and dim sum, and peanuts with prawns. I have the deft of dexterity to grab a slippery peanut with a pair of long, ivory chopsticks and place it gently on the tongue to enjoy the multiplicity of layers of flavor and msg. I’ve got nothing against the Chinese.

      Other than that they are in Philippine waters intent upon stealing the wealth that can help make the Philippines less poor.

      • manuel buencamino says:

        Sorry, I thought you were expressing your views rather than reporting the views of others.

        But to answer your question. The sentence below is why I concluded that you believed the American value system is superior.

        “They have a different value system than Americans have, which is why tainted products are so common in China.”

        The sentence is loaded. First, your sentence says China’s different value system is why tainted products are so common in China. It showed a causality between Chinese values and tainted products and in the same breath it pointed out that their values are different than Americans’. That insertion tells me two more things: 1) that tainted products are not so common in America. 2) And it’s because of the American value system.

        I have become extra critical of your views on China because I sense that they are drifting towards the Philippines seeing China as an enemy and America as a friend. I am aware that if China’s latest horse and pony show succeeds in convincing weak SEA countries that they can and will colonize the disputed territories, the Phiippines and the rest of the claimants will suffer. However, what I don’t want to see is the Philippines, in dealing with China’s threat, does not run blindly to America for protection, for the simple historical reason that America’s record with respect to the Philippines is not exactly deserving of unconditional and unguarded trust.

        The conflict over the disputed territories should be seen as one among the claimants, the solution to be arrived at by the claimants among themselves, and for the contending parties not to allow themselves to be used as pawns by two superpowers in a contest for regional hegemony. What we want for ourselves is peace and cooperation and not a hegemon, benevolent or otherwise. I am not taking sides between two superpowers advancing their national interests. I am looking out for the interest of my country. That’s where I’m coming from.

        • Joe America says:

          Hey, I write fiction half the time, so don’t get too worked up. It is an idea, a perspective, that’s all.

          I do think China has progressed so fast economically that she has not been able to keep pace with certain “modern” values (pollution control, consumer product quality, labor management, human rights). I also think the US has, of self interest, not subscribed to certain internationally recognized “modern” values (drone killings, torture, pollution,and maybe some others that my biased mind is not able to grasp right now).

          I do see China as behaving like an enemy of the Philippines and America a friend. I also agree that, in the past, America has not been kind. But that is then and now is now and what is in the best interest of the Philippines today? I suspect your wariness can be viewed as weakness, from Chinese eyes. They want to drive wedges between the Philippines and any other nation. Especially the U.S. Isolate and weaken.

          China could convince me of their good intentions by putting a proposal on the table as to how to deal with the Spratleys in a reasonable way that recognizes the UN has assigned economic ownership of the nearby seas to the Philippines.

          • manuel buencamino says:

            Yes, wariness could be viewed by China as weakness instead of maturity based on experience. What is in the best interest of the Philippines today is to benefit from the development of the resources in those disputed areas.

            Speaking of values, here’s the latest on a quintessential American corporation http://ens-newswire.com/2013/05/28/guilty-of-pesticide-crimes-wal-mart-fined-81-million/

          • Joe America says:

            I agree with your statement that the best for the Philippines is how to benefit from the resources there.

            Walmart is a love/hate company for me. They sell products cheap, sell guns (I think they still do), and totally re-invented inventory management for the retail business. They are madhouses of poor service and shoddy product. There is no question that the capitalistic drive for profits comes across as greed in some settings. The US system for prosecuting illegal acts is pretty good, though, I think. State and U.S. attorneys general and the courts are for the most part well respected.

          • The Mouse says:

            What we’re forgetting here is that the Philippines wasn’t always in good faith either…in terms of its relations with the US especially on the political side.

            You hear our Senatongs and Tongressmen crying that the US is not holding the MDT (WTF, shots have not been fired yet!) yet calling for the abolition of the VFA, right? Say that the Americans do help us in defending our claims..and then what? Our politicians will abolish the VFA because of “nationalism”? What a waste of US taxpayers money (And I am speaking from the US taxpayers POV).

            The Philippines is acting like a fair-weathered “friend” here, if that’s the case

          • The Mouse says:

            And in the MDT, it is stated there that both parties will enhance their military…guess who didn’t follow that 😀

          • Joe America says:

            Yes, Senator Santiago’s view of the VFA is “the humiliation! The humiliation!” because of the differing imprisonment clauses. She ought to be humiliated by her own countrymate’s decisions, not by the willingness of Americans to come and die for the Philippines.

        • Lil says:

          ‘However, what I don’t want to see is the Philippines, in dealing with China’s threat, does not run blindly to America for protection..”
          There is a conundrum. The leaders bemoan the “colonial mentality” when they themselves are cultivating it. To save a million bucks, no doubt. As a matter of fact, they are rignt now back to almost begging the US for outright support and protection. All of a sudden, the bases’ renewal was “strategic error”. Hmm. That’s the problem with Filipinos. Puro salita -emotinalism, walang gawa. The modernisation plans should have started years ago then the PH won’t be in so bad of a bind. It won’t match China’s, it never will because the point is to at least you have some show of deterrence capability.

          • Joe America says:

            There was a formal Defense Modernization Act passed way back a decade or more ago, but it simply was not fulfilled. Something like 10% of needed funds were supplied.

            I agree with the sentiment not to run blindly to America. But I’d say keep that defense agreement in place by moving the Philippines further and further up the scale of defense self-sufficiency. That said, I think it ought not be open-ended. Someone ought to draw up what we need for reasonable self-sufficiency in say 10 years. Do we need a submarine? An aircraft carrier? I don’t think so. A nuclear bomb? Gives me the heebie jeebies. Maybe 10 drones and 150 missiles and 20 boats. I dunno.

            The alternative is the Switzerland model. We are neutral and peaceful and don’t need a strong military. Now kindly respect that and get out of our territory.

          • The Mouse says:

            I think the Switzerland model is only possible if CCP and KMT are plucked out of the region…LOL
            It seems to me that these two nations see neutrality as a weakness and to be taken advantage of. Maybe, not. Asia is running high with “nationalism”. Kinda like pre-WWII Europe

          • Joe America says:

            “Asia is running high with “nationalism”. ” Yes, that does seem true. What happened in Europe? Everyone saw what hyper-nationalism leads to, the excesses of Hitler, and said “enough”. The Middle East is another hotbed of nationalism runamuck. So now I think “neutral” is a sane approach. Let’s build economic strength and let the other cock-roosters strut their stuff.

            After we get them out of our seas, of course.

  5. Mariano Renato Pacifico says:

    World’s most visited City. Not London. Not NYC. Not Paris. 8 most visited are in South East Asia. I know what country is in your mind. Not that. Gave up?

    Here it is: http://gma.yahoo.com/worlds-most-visited-city-not-london-paris-nyc-175320938–abc-news-travel.html

    Here is another: Most visited places in the Philippines. Ta da !!! http://traveltips.usatoday.com/ten-popular-places-philippines-61751.html

  6. Attila says:

    Senator Santiago is not bright. She would not have a chance to become a US senator is she was an American. She is just too dumb and spineless.

    • Joe America says:

      Too much emotion, not enough diplomacy. She will hit the principle right some days and miss it entirely on others. Either way she will be both loud and deaf to other views. I think her health is poor. I’m rather doubtful she will ever sit on the international court to which she has been appointed.

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