Shuanghui International

Will China's pigs deal fly?

The offer of US$4.7b by Shuanghui for the American pork processor Smithfield Foods has brought cries of anger from US politicians

PUBLISHED : Wednesday, 05 June, 2013, 12:00am
UPDATED : Wednesday, 05 June, 2013, 4:38am

Is pork really a matter of national security? To China it might be, given that the meat is a staple foodstuff of a rapidly growing economy. But in the United States? How many security concerns can one country have?

News that China's Shuanghui International had agreed to buy Smithfield Foods, the world's largest pork producer, for US$4.7 billion, or US$7.1 billion including debt, set alarm bells ringing throughout the US.

Some members of congress were incandescent with anger at prime brands such as Armour passing into Chinese hands.

Security experts expressed worries about a Chinese choke point over American food supplies. Lobbyists pointed out that US food imports have grown to 16 per cent in 2011, almost doubling in a decade, and that China is the leading supplier of staple products such as apples, potatoes and peas.

Environmentalists had a field day, scared that China might try to poison the US with unhealthy agricultural practices. William Triplett, a former counsel on the senate committee on foreign relations, said: "Inserting the words 'China food safety' into the internet leads to over 155 million hits - none of them laudatory as far as a brief examination can tell."

The fact that the deal and the outcry came just days before the most important summit meeting of the year, between China's new leader, Xi Jinping, and the US President, Barack Obama, in California, ought to have both countries worried about the dodgy state of their economic and political relationships.

It is doubtful whether Smithfield will figure in the two days of talks between the two leaders unless someone tries to make a tasteless joke about "bringing home the bacon". Xi and Obama have more important things to discuss, including the US "pivot" to Asia, China's aspirations to global leadership and fears that Washington is determined to block it, the dangerous situation on the Korean peninsula, tensions in the seas around China, cyber-spying, the value of the yuan, alleged Chinese dumping of products, Beijing's failure to protect intellectual property rights, Washington's irresponsible fiscal policies, and indeed the failure of both countries to show economic leadership befitting their roles as global power.

Yet the impending purchase of Smithfield shows how bad practical business relations are between the two political and economic giants. This is worrying, not only for the two countries, but for the rest of the world, which has suffered the consequences of the dangerous dance of the two monsters.

As a high-powered report from the China-United States Exchange Foundation (chaired by former chief executive Tung Chee-hwa and businessman Victor Fung Kwok-king) said last month: "The bilateral economic relationship between the US and China has developed over the past few decades from virtually non-existent to the most important in the world.

"The US and China are the largest and second largest trading nations in the world. They are also each other's second largest trading partners. A vast volume of trade in goods, integrated supply chains, a growing volume of trade in services, substantial direct American investment in China and even larger Chinese investment in US Treasury securities, speak to the importance of the relationship."

Contrast this with an angry outburst from the Hidden Harmonies China blog, which purported to offer a summary of the media and internet comments from the US after the Smithfield deal was announced.

"After getting their communist hands caught in the cookie jar with cyber espionage and covert theft of our technology and IP, the sneaky Communist Chinese are shifting tactics and resorting to overt acquisition of our safe pig husbandry and processing technologies to save their crumbling pork industry rife with disease, contamination, poison, censorship, lack of freedom.

"They have to be stopped. Write to your congressman, boycott Communist China-made products and turncoats who sell out to the communists. Burn all your possessions contaminated with Communist China-made parts, like you and your neighbour's cars (especially if they are ChiComs) … Communist China is evil, we are great, USA, USA, USA … Signed, Freedom-loving, patriotic but not nationalistic, America."

Shuanghui's takeover of Smithfield would be the biggest Chinese investment in the US, though dwarfed by the US$18 billion that CNOOC offered for the purchase of Unocal, a bid that CNOOC withdrew under political pressure, a continuing sore point with Beijing.

Shuanghui has promised that there will be no closures or relocations of Smithfield's operations and that the current management will keep their jobs. What more can Americans want?