Is China buying up the world?

While the world cup started and is currently captivating the media, it appeared to me that another event seems to have passed quite unnoticed. Following the disaster of the Greek economic situation, China came in the form of a white knight. It might be a good deal for debt-ridden Greece but I wonder how this situation will turn out. China has already been strongly developing its ties in Africa and in the Middle East. It seems like China is trying to get a foothold in Europe so it could better protect its own interest. This deal would mostly concern maritim arrangements in the Piraeus port and some touristic contracts. Somehow, it reminds me of the way the EU soft power operates: investing heavily in developing countries and then forcing them to adopt positions more favourable to EU standards, most of the time they concern human rights and other subjects linked to freedom and lifestyle or simply business wise, it could be related to a sort of bullying. Same goes for China, unfortunately for Greece; the Chinese government does not have the same credentials as the EU governments of nowadays. In a parallel story, India is suspicious of Chinese exportations and its government is taking measures to ensure that Chinese equipments do not contain spywares, so Greece could provide the perfect foothold on Old Europe for the Chinese to install more spywares. Interestingly, I could not find a lot of articles in the western press on this event but I found a 2009 article, in French on this Chinese website, talking about a China-Greek deal in the Piraeus port but recently nothing bar an article concerning the rehearsal of a Greek tragedy at the Experimental Theatre of Beijing......


While browsing this website I found an article describing how China was slamming US pressure on RMB exchange rate and another one, including a poll, trying to find some argument to explain this situation, as if this situation was only affecting the US. The low exchange rate of the Chinese currency is a major component in China’s economic growth as it favours its exportations. At the same time, China and its government want to have the respect of the world for their achievement and keep their currency at the level of a developing nation, in a word they want to have their cake and eat it. What stroke me was the rhetoric employed which is bare of any critical spirit: everything seems to between China and the US when it comes to troubles and otherwise China is a peaceful nation. It is not surprising, yet it is the first time I have ventured on these kind of “news” sites and it was a shock.

However the million dollar question is what would happen when China’s soft power on developed nations will not be enough; indeed, it is plausible to believe that developed nations should be more reluctant to be told what to do as they have more choices and power than developing nations, and what would then happen to China’s "harmonious world"?

-C

To protect or not

The competition between Boeing and EADS/Northrop concerning the USAF tanker offer went to an end last week when Northrop decided to pull out. The whole story started back in 2004 after charges against Boeing were filed and some of its top executives fired as a result. The senator McCain wanted a fair competition on this contract. It was for EADS and Airbus a good opportunity to enter the US market and to diversify its production and source of income.  The contract is estimated at 35 billion dollars and is only the first part of 3 phases.

If EADS is a European company, the incorporation of Northrop, a Californian defence firm, was supposed to help with this negative image and it also planned to build a factory in the USA to manufacture the tankers based on a version of the civilian A330. On the other hand, Boeing would build its tanker, based on the smaller 767, in USA too; however it is arguable that the Boeing tanker would have an all American plane as most of its components are outsourced abroad.

This end of the competition is mainly due as what is seen as some form of protectionism by the USA in favouring Boeing. Indeed the first leg, in February 2008, of the competition was won by EADS/Northrop but Boeing protested that the plane of its rival was not conform, even though it was deemed better, to the contract. As a result the offer was remade and this time Northrop felt it had to pull out. Its CEO observed that this contract clearly favoured Boeing.

The EU commission threatened to bring the whole case in front of the WTO and the leaders of France and the United Kingdom Mr Sarkozy and Mr Brown, amongst others, showed their disapproval of such a behaviour especially since protectionism is “a policy that the USA usually warns other countries against.”

So what was the whole point of opening the competition to foreign companies? I could understand that the USA would keep their defence market closed, although they do not like to be put away on this basis abroad, but this opening of the competition showed that it was not the general feeling at the moment to do it this way. The EADS/Northrop joint venture would also create some jobs in the USA in a non-unioned company (Northrop) whereas Boeing is and thus is susceptible to strikes. Did the American leaders think that Boeing was so good at its business that no-one could do better than them and this competition was just a show for fair competition? It seems unlikely that the US leaders would be that naive. Is it favouritism from Obama as he was the former senator of Illinois and that Boeing has some of its offices in Chicago? That would be quite naive too.

However the facts remain that it is another feud between the EU and the USA in the trade sector.  This contract might have an influence on how the F35 JSF will happen. Indeed, it is overdue and its price still rising. If the USA does not act smoothly with its European allies, why should they expect them to continue to act in a polite manner? Even the United Kingdom, the best ally of the USA, is unhappy. Competition is rising everywhere in the world; I would not advocate starting a mini trade war between strong allies.

-C