By Andrew Snyder, Volume Spike Alert
It seems as though controversial subjects never really go away. Sure, nobody talks about them or they don’t make headlines for a while, but a good controversy is never over.
Just a few months ago, the nation was up in arms over the idea Dubai Ports was interested in purchasing the Port of Baltimore, one of the nation’s busiest seaports. With enough debate and finger shaking, the foreign investors gave up on the notion and went to find other ways to spend their money.
Even though the acquisition bid was unsuccessful, it stirred a debate that has been ongoing. Who should invest in our country? Should we let nation’s that are friendly with our enemies invest in American businesses? Should we invest in foreign businesses even though there is tension between the nation’s governments?
These are all questions a strong democratic country should be asking itself. It is even a question a communist country should ask itself. That is exactly what China is doing.
Recently, China announced new guidelines on how it will treat and react to large foreign investors. When the country was struggling to grow, it accepted money from nearly everybody. But now that it is reaching economic maturity and becoming quite the global powerhouse, it has to be much more choosy. It needs to ensure its booming economy is making its citizens wealthy and not greedy foreign capitalists.
China’s new foreign investment blueprint is too aggressive. It claims the country is now seeking “quality” investments versus “quantity.” For a country known for its cheap labor and lax environmental and workplace statues, quality will be tough, if not impossible, to define -- let alone attract.
The country is looking to shed the stereotype that its workforce is only good for menial processing and assembly tasks. It wants to become a leader in high-tech design, research, and modern manufacturing techniques, sort of like India.
Frankly, this plan won’t work. Sure, the Chinese government would love to have a country filled with high-paying jobs, but that is not what investors go to China for. It is viewed as the land of cheap labor, lax regulations, and a seemingly unending labor pool. If China sticks to this blueprint, foreign investors will go somewhere else for the cheap labor they are craving.
Even worse, if China begins to deny foreign investments that it does not view as a strategic fit, the country’s economy is going to stop growing at its current breakneck pace. The days of double-digit growth would be over.
For American investors, this move is a troubling sign. It proves the wild ride in China is coming to an end. The days of quick gains from investing in the country’s infrastructure are over.
The country’s economy has matured and now the government is meddling with it trying to squeeze everything it can out of it. That’s trouble. If you have a sizeable sum investing in China, now would be a great time to put that money elsewhere.