Is the US Love Affair With China Ending?

This next article is posted here with permission from Confidential Reporter. As my knowledge of China is not one of my major areas of interest, I very appreciate CR allowing this entire article to posted here.

That China is a now one of the top powers in the world is very hard to refute. China has experienced quite a steep, upward ride in economic, social and military gains. Perhaps more than anything else, it is the social unrest that may bring about the next upheaval inside China.

" Unrest is of course a catch-all term that includes strikes and other forms of labor unrest, protests and uprisings by pauperized farmers and rural villagers--the left-behind, oppressed and exploited rural poor--and violent crimes against wealthy Chinese and visiting foreigners. More and more foreign business executives are returning to their home countries with tales of harrowing encounters with and narrow escapes from desperate--even suicidal--thieves and robbers.

The crime wave shows no signs of abating. Among members of China's elite, there is suddenly a Latin America-like fear of kidnapping and murder. Chinese entrepreneurs and executives no longer flaunt their wealth. On the contrary; owners of expensive foreign cars who used to delight in driving their vehicles to impress onlookers now hire decoy drivers to motor empty automobiles from one location to the next."

From Foreign Confidential

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Is the US Love Affair With China Ending?

By Confidential Reporter

 

Litigation, Fraud Allegations and Speculation About Coming Collapse Changing US Perceptions of China

The worlds of media and finance finally seem to be paying attention to the darker side of China's meteoric ascent--namely, to the possibility that China, after achieving all that it can in its current stage of development, may have already peaked and begun its descent, and, more shockingly, that China may actually be the verge of a complete crackup, or collapse. According to some China watchers, the world's most populous nation is poised to plunge into a period of prolonged social and economic chaos that could well lead to a neo-Maoist resurgence and/or outright military rule and the scrapping of the current Communist Party-run system.

Click here to read "America's Love Affair With China," an essay by Sol Sanders in the Washington Times, and on the video segments below for interviews with journalist and lawyer Gordon Chang. He describes China as a socially "disintegrating" country with an increasingly powerful and menacing military--and a foreign policy that aims to radically alter China's power relationships with its neighbors and the United States.

International politics aside, social unrest in China is rising, as this VOA report makes clear. Unrest is of course a catch-all term that includes strikes and other forms of labor unrest, protests and uprisings by pauperized farmers and rural villagers--the left-behind, oppressed and exploited rural poor--and violent crimes against wealthy Chinese and visiting foreigners. More and more foreign business executives are returning to their home countries with tales of harrowing encounters with and narrow escapes from desperate--even suicidal--thieves and robbers.

The crime wave shows no signs of abating. Among members of China's elite, there is suddenly a Latin America-like fear of kidnapping and murder. Chinese entrepreneurs and executives no longer flaunt their wealth. On the contrary; owners of expensive foreign cars who used to delight in driving their vehicles to impress onlookers now hire decoy drivers to motor empty automobiles from one location to the next.

Lawsuits and Negative Publicity

Lawsuits involving Chinese companies could further shape perceptions of China. U.S. homeowners have sued sellers and other third-parties whom the aggrieved homeowners hold responsible for defective Chinese drywall; the U.S. wind turbine designer American Superconductor has filed a lawsuit in Beijing against the company's biggest customer, Sinovel,which is China's leading wind turbine manufacturer, accusing it of corporate espionage; and at least one U.S. investment banking firm has sued a Chinese client over alleged non-payment of fees. Click here and here to read about the dispute between the U.S. firm and a Hong Kong-based Chinese coal blending company (Westminster Securities v. Petrocom Energy).

Tides, once turned, are hard to reverse. In the wake of a surge of law suits against Chinese companies that went public in the U.S.--triggered by a tsunami of accounting scandals involving U.S.-listed Chinese companies--U.S. (and European) investor interest in China has declined dramatically. (The formidable challenge of collecting from Chinese companies is reported over here.) As a result of the securities-related litigation and accompanying negative publicity, many U.S. investment bankers who not too many years ago were able to almost effortlessly finance their China deals by laying them off on private equity firms and hedge funds, now find far fewer institutional doors open to them with regard to China business. Offers to receive PowerPoint presentations and prospectuses promoting and explaining new projects are politely declined, or simply ignored.

As if to prove that negativity can be a two-way street, Chinese companies seem much less interested nowadays in investing and going public in the U.S. Some listed Chinese companies, alleging defamation by short sellers seeking to drive down share prices, have filed lawsuits in the U.S. against anonymous Internet critics. Click here for that story, and here to read about one case (Deer Consumer Products v. Arthur Little John Doe #1-#10 and Seeking Alpha, Ltd.).

Money Pouring Out of China

In contrast with waning interest on the part of Chinese companies, many individual Chinese investors appear to be intensely interested in putting their money to use in the U.S. Money is pouring out of China--the country is now exporting capital as well as consumer products--as legions of wealthy, well-connected Chinese citizens seek to invest overseas. The U.S. is a prime destination for these high-net-worth investors because, while it may not be able to hold out the promise of astronomical returns on capital the way China once did for foreign investors, the U.S. has what China can't possibly provide: stability and the comfort of investing in a country in which laws and regulations really matter. Despite all the criticism that has been leveled against U.S. regulators in recent years with respect to the government-assisted U.S. housing bubble, the banking and financial services industry meltdown that nearly wrecked the global economy, and the giant scams that for a while made Wall Street synonymous with fraud, most U.S. officials responsible for protecting the public approach their work with the utmost seriousness.

Chinese interest in the U.S. transcends investments. Members of the flight-capital crowd are known to also be intensely interested in acquiring citizenship or permanent residency status in foreign countries, with the U.S. topping the list of desired domiciles.

In other words, Americans are not the only ones who have fallen of love with rising China. A growing number of Chinese, those who can afford to flee in style, are also looking for love and money--and safety and security--in other lands.

Copyright © 2012 Foreign Confidential™

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