Is blocking China “Sinophobia”

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From the FT:

Moves by Brussels and Berlin to thwart high-profile Chinese takeovers on Monday are the latest sign of stiffening resistance in the West to investment from Beijing that has contributed to the scuppering of nearly $US40 billion ($52 billion) in planned Chinese acquisitions since mid-2015.

Most have fallen foul of competition and security concerns, such as a take­over target’s proximity to a military base, and have prompted some Western governments to consider new regulatory procedures to investigate Chinese deals.

The $US40 billion total, compiled by boutique investment bank Grisons Peak, does not include proposed takeovers of Swiss agribusiness Syngenta and German semiconductor company Aixtron for $US44 billon and €670 million, respectively. Both faced problems on Monday following reviews by the EU and Germany.

Is it any wonder? China is overplaying it hand. From Bloomie:

When a Chinese home-appliance company announced a plan in May to become the largest shareholder in one of Germany’s most advanced robot manufacturers, the backlash was immediate.

German politicians and European officials denounced Midea Group Co.’s offer for Frankfurt-listed Kuka AG, whose robotic arms assemble Airbus jets and Audi sedans. In a rare public appeal for alternative acquirers, Germany’s economy minister argued that Kuka’s automation technology needed to stay out of Chinese hands.

And yet in two months, Midea pulled it off. Thanks to a combination of political courtship, guarantees on jobs and security, and support from influential customers like Daimler AG Chief Executive Officer Dieter Zetsche, Midea overcame knee-jerk opposition to the deal. By July the appliance maker had secured an 86 percent stake, valuing Kuka at 4.6 billion euros ($5 billion).

The experience showed how some Chinese firms are learning to soothe misgivings about the country’s record $207 billion overseas buying spree. While Sinophobia isn’t yet a thing of the past and practices among Chinese buyers vary widely, merger-and-acquisition professionals say a new generation of savvy dealmakers is starting to emerge from the world’s second-largest economy.

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The clear danger is that an autocratic state is using free market principles to take undue control of the very nations that support them.

I would not describe addressing that possibility as “Sinophobia”. I would describe it as risk management.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.