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By Serge Truffaut
Le Devoir
Thursday 07 July 2005
When Sony acquired Columbia during the 1980s, several American voices were raised to demand that a protectionist policy be adopted. Today, we hear analogous proposals ever since China made known its intense interest in a California oil company. History repeating itself? Certainly not.
Not long ago, the management of the Chevron company presented an offer to purchase Unocal. Two weeks went by before CNOCC, two thirds of the shares of which belong to the Chinese state, imitated Chevron and added 2 billion dollars to the offer. Up until then, almost no one had criticized or attempted to counter China's financial acts and gestures on American soil. But then, when the stakes were this petroleum considered a resource relevant to the security of the State, the echo of protectionism reverberated once again within the walls of the Congress.
Before giving satisfaction to these partisans of economic nationalism, the authorities in charge will have to think about it twice. It is certain that they will weigh the pros and cons at some length. In fact, the Chinese autocrats have many means at their disposal to put a stick in the spokes of the United States' economic wheels, particularly its financial wheels.
In fact, the deficits that the Bush administration accumulates with a constancy that borders on irresponsibility have allowed China to haul itself up to the second rank of the United States' main creditors, behind Japan. Beijing holds 230 billion dollars of American Treasury bills. Selling only a tenth of these would be enough to send the dollar into a serious dive. In the case that concerns us today, an essential fact must be retained: Beijing's desire to get a hold of Unocal is that much firmer because its economy's thirst for primary materials is inextinguishable.
If ever the Chinese dictators should be thwarted, we shall witness a revision of a policy the sources of which go back to the middle 1990s. Following the policy of two systems decreed by Deng Xiaoping - a capitalist economy and a one party state - China experienced such rapid growth that it forced Beijing to revamp its strategy entirely. That exercise has opened out into the elaboration of a policy described as a quiet orderly progression. For the mechanism necessary to realizing the plan, the authorities opted for a Gulliver strategy. I shall explain.
To imprint an influence equal to its power on Asia, Chinese diplomacy went door-to-door from the middle of the 1990s to the beginning of the 2000s. It multiplied meetings with big as well as little nations, with the objective of signing a maximum number of bilateral and multilateral agreements. Adding up all these agreements, China reached its goals: to produce as many constraints or restrictions as there are treaties. That's what the experts call the Gulliver Strategy, which - among other advantages - allows them to ensnare everyone.
The clear result: all the Asiatic countries as well as Australia are now involved in high-volume trading with Beijing. The statistics speak for themselves. In 1990, Japan exported 2% of its production to China, versus 14% today. What has been observed with Japan is also true for India, the Philippines, Indonesia, Malaysia, South Korea, and Thailand. In short, they've gone from little more than nothing to a thousand times more.
With the United States, the data are still more striking. The products that China manufactures for Wal-Mart alone make this company the sixth export market behind ... all of Germany! Last year, the Americans bought 11 billion dollars worth of clothing made in China and more than 180 billion dollars worth of different goods, notably portable electronic goods.
Following the dispute provoked by the Unocal affair, the American authorities are confronted with a dilemma. If they should ever oppose the transaction, China could create a multi-pronged counter-offensive.
Apart from the possible weapons already mentioned (we think of the debts), we must emphasize this one: the commercial partners with which Beijing has woven links that are vital for all of them will certainly step up to the plate to reverse the American efforts. Including Australia, which has signed an agreement with the Chinese CNOCC for the exploitation of natural gas.
When he opened the spigots to capitalism, Deng whispered this: "What difference does it make whether the cat is black or white, as long as it catches the mouse." And that, without any cheese.
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