As the new year begins, one of the most hotly debated issues among foreign investors is whether Beijing is resorting to nationalism to block foreign takeovers of domestic companies.
On December 18, the State Assets Supervision and Administration Commission, the government agency responsible for overseeing more than 100 large state-owned enterprises (SOEs), explicitly named industries of utmost importance to national and economic security. They were: armaments, power generation and distribution, oil and petrochemicals, telecommunications, coal, aviation and shipping. For these, the state must exercise 'absolute control' and help them grow into 'leading global businesses', said commission chairman Li Rongrong .
This has raised a number of questions: Is this the latest signal that Beijing is determined to block foreign takeovers it does not like? Or is it simply an eye-for-an-eye reaction to some high-profile failures to acquire foreign assets? And how does the government feel about the industries that were not included in the list of 'strategically important sectors'?
Before answering these questions, one must pose another: Has the government ever said these sectors were not firmly under state control? The answer is obviously 'no'. Accordingly, the spotlight should fall on the timing of Mr Li's pronouncement, which is suspiciously self-serving.
As China becomes a medium-income country with per capita gross domestic product exceeding US$2,000, the growth strategy based on massive investment and exports appears increasingly unsustainable. Apart from the extensive environmental destruction and increasing resentment among trade partners this engenders, the country's insatiable demand for energy and raw materials has made it vulnerable to price gouging by foreign companies. So, from certain policymakers' perspective, China has the right to respond by resorting to non-market means.
They may argue that their economic strategy could incorporate more government control over industry and even government-led overseas expansion.