Finland?! Granted, Finnish is likely easier than Chinese... Anyway, it ain't too late for you to learn the basics of your future bosses' lingo:
chinese.bendigo.latrobe.edu.au
Commentary: A powerful yuan for American icons
By William Pesek Jr. Bloomberg News
Tuesday, October 26, 2004
As George W. Bush's administration pushes for a stronger Chinese currency, it should keep two U.S. properties in mind: Pebble Beach in California and Universal Studios.
It was the purchase of those American icons by Japanese entities in the 1980s that had folks across the United States fretting over their economic future. One member of Congress warned that the United States was "rapidly becoming a colony of Japan."
Back then, it wasn't so much Japan's huge trade surplus that irked people from Seattle to Miami. Rather, it was the perception that Japanese were buying up the United States on the cheap. Are Chinese about to become a similar target of U.S. fear and loathing? Yes, in all likelihood, and a Chinese currency revaluation may accelerate things.
Chinese acquisitions of household-name U.S. companies and properties will be more affordable if the yuan rises the 10 percent, 20 percent or even 40 percent that analysts expect. Stronger Chinese purchasing power could make China the target of U.S. scorn that Japan was 15 or 20 years ago.
All this may sound a bit far-fetched. After all, China's per-capita income is about 10 percent that of the average U.S. consumer. For all the excitement about its outlook, China has a dearth of internationally known companies that operate on a global scale and market their products abroad.
Yet things are changing rapidly. "The story of today and tomorrow is not about how much foreign capital is flowing to China," says Joseph Quinlan, chief market strategist at Banc of America Capital Management. "Rather, it is about the mounting tide of foreign investment flowing out of China as an increasing number of Chinese firms spread their global operations."
It's an important point, and one that's gotten lost in the debate over China's pegged currency. "As the U.S. demands for China to revalue its currency against the dollar, some in Washington should be careful what they wish for," Quinlan adds.
Economists exploring the side effects of Beijing ending its peg to the dollar, which is at roughly 8.3 yuan, tend to focus on U.S. Treasuries. As China buys U.S. debt to keep its currency stable, it helps the U.S. finance a current account deficit that's approaching 6 percent of gross domestic product. Fewer Chinese debt purchases mean higher U.S. bond yields and slower economic growth.
The chances of a stronger yuan helping China Inc. go global and confronting U.S. corporations with a new challenge also are rising.
Just wait until it helps Chinese textile manufacturers buy up what's left of the U.S. textile industry. Or aids Chinese electronic firms in acquiring key U.S. component makers. Or empowers Chinese energy companies to buy U.S. ones. Or when a stronger yuan empowers Chinese real estate tycoons to snap up trophy U.S. properties.
Such scenarios may seem less far-fetched to Canadians watching events at Noranda, the mining company. China Minmetals, a state-owned company, is offering about 7 billion Canadian dollars, or $5.6 billion, for Noranda. Some Canadian members of Parliament are trying to block a bid that could merely be the first of many for North American companies.
Japan's history may be instructive here. In the 1970s, the idea of the Japanese, whose economy was all but destroyed by World War II, scooping up high-profile names like Columbia Pictures, Pebble Beach, Rockefeller Center or Universal Studios seemed preposterous. Yet by the 1980s, you may have been traveling to Tokyo or Osaka if you wanted to see your favorite Picasso or Van Gogh painting.
Today, corporate China's situation bears some similarities with Japan's roughly 30 years ago - a cheap currency, a protected home market and a government pursuing an export-your-way-to-prosperity economic model.
Yet as the United States stepped up demands for more market access and a yen revaluation, Japan went on the defensive. It promoted policies to encourage investment outside Japan and currency restrictions were reduced. Loan programs and other incentives helped boost Japan's presence as an economic power by the 1980s.
Might China follow the same route? It's quite possible given that today it faces many of the same challenges Japan confronted.
"Our hunch is that the more the U.S. hammers China about its growing trade imbalance, the more inclined Chinese firms will be to jump potential trade barriers by undertaking direct foreign investment in the U.S.," Quinlan says.
During the 1980s, foreign direct investment outflows from China averaged $450 million annually. That grew to $2.4 billion in the 1990s and so far in this decade it has averaged $3 billion. That's a negligible sum, but the Japanese began with a similarly quiet tickle.
None of this eclipses the serious challenges facing a Chinese economy on the verge of overheating. China's learning curve is steep, too. Multinational companies won't roll over in the face of new competition, complicating things for Chinese corporations with little experience globally.
Yet it's likely many will follow in the footsteps of Haier Group. One of China's best-known companies, it now builds refrigerators in Camden, South Carolina. The plant saves Haier, which had $8.5 billion in sales in 2003, transportation costs and time.
China is encouraging the process, urging executives to look abroad and offering incentives to companies going global.
"Get ready America," Quinlan says. "Corporate China is coming."
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