Chinese state investment at odds with western nations' concepts

PUBLISHED : Monday, 30 July, 2007, 12:00am
UPDATED : Monday, 30 July, 2007, 12:00am

The title of your editorial raises more vexing questions than it answers ('If other governments invest, why not Beijing?' July 24).

The core issue is not about China's integration with the rest of the world. Rather, it is that China conducts its external investment primarily through state-controlled entities, whereas western countries rely on private enterprises.

Much of the capitalist west is suspicious of any government involvement in business, especially foreign governments. The public and the media worry about 'meddling' by illiberal foreign nations. There may even be security issues involved.

You say that 'an American or European government participating in such ventures (like Barclays' bid for ABN-Amro) would not have raised an eyebrow.' Not true. There would be uproar in Europe at a US government company using public funds and sequestered exchange reserves for this purpose and vice versa.

Now imagine that hypothetical Washington-controlled company wished to buy into a Chinese institution - it's inconceivable. The reason China has allowed major foreign investment at all is because firms like the Royal Bank of Scotland and Bank of America are independent private enterprises. China has stated that foreign involvement in its 'strategic' sectors (and famous brands) will be highly constrained.

There is a popular narrative in the Chinese mind, neatly captured in your last paragraph, that the world seeks to 'block China's rise'. After investing almost one trillion dollars of foreign direct investments in the mainland (for profit, to be sure, not charity), promoting China's World Trade Organisation accession and accommodating China's export-driven growth agenda, the prevalence of this myth reflects a PR failure by the west. One area where more dialogue clearly is needed is in resolving this awkward difference between Chinese state and western private investment.

I would hope channels like the South China Morning Post could help move the understanding to a higher level.

Julian Snelder, Tai Tam