So, in today’s article we will find out, Why Chinese people invest in other countries and Start-ups? Also know, who invests it, the Chinese Companies or the Government of China? It’s not that only Chinese invest in other countries or companies many countries do. But, what matters is their agenda or idea behind it, is it the money or power or both?
There are mainly three kinds of investing followed by the Chinese; First, they invest in growing companies and make money out of it; Second, they provide a loan (debt) to the companies and countries so that they are in their (Chinese) debt for forever; Third, they hostile takeover (take total control) a company. We have seen all these types done by China in the recent past and let me take you through it one by one.
Before starting the above mentioned, let me share with you an interesting information about the Chinese. When the Chinese investors invest in a large company or a start-up you never know who is investing, whether an investor or the Government of China, weird right, yes because the investors, CEO’s and the founders of a company hold a key position in the ruling political party in China like Ren Zhengfei (Founder and CEO of Huawei), Ma Huateng (Chairman and the CEO of Tencent Holdings Ltd), Robin Li (Chairman and CEO of Baidu Inc), Lei Jun (CEO of Xiaomi Corp).
It is also believed that Jack Ma (Founder of Alibaba) had to step down from CEO due to the political pressure of the Government because Ma had become too powerful and influential and posed a challenge to China’s top leadership. It is also believed that through his retirement, Ma has avoided being caught up in the Chinese government’s political and business dealmakers and we all know that China is a Communist country, and the CEO, Founders are under the direct influence of the President of the Government of China. So, you never know whose decision was it to invest in a company and the Government may have all the data collected by the companies.
Now, let’s start the Chinese investment types:
The debt: China follows something called Debt-trap diplomacy; through which China intentionally extends excessive credit (loan) to another debtor country with the alleged intention of extracting economic or political concessions from the debtor country when the country is unable to pay the debt to China. Here’s an instance of debt-trap diplomacy, the People’s Republic of China sanctioned a loan to construct the Hambantota Port in Sri Lanka on a condition; if Sri Lanka fails to pay the debt then a 99-year lease given to China in place of payment. Due to Sri Lanka’s inability to pay the debt, it was leased to the Chinese state-owned China Merchants Port Holdings Company Limited on a 99-year lease in 2017. This caused concern in the U.S., Japan, and India that the port might be used as a Chinese naval base. This is just an example but China has done this to several countries like Africa, Kenya, Indonesia, Malaysia, and many more.
Even Pakistan is under the same trap; Pakistan has heavy debt under China, and the enemy’s (India-China) enemy (India-Pakistan) is always an ally (China-Pakistan). So, there’s something called China-Pakistan Economic Corridor (CPEC) is a collection of infrastructure projects that are currently under construction throughout Pakistan like Roadways, Railways, Ports, Energy Sectors, Agriculture, Science and Technology, Finance, Security and many more (China almost owns Pakistan). Pakistan owes China around $62 Billion. This (debt) has transformed China into the largest official creditor, easily surpassing the IMF or the World Bank.
The Hostile Takeover: Here the Chinese invest money in a company to become a shareholder in it, and by continuously increasing their stakes they become one of the major shareholders of the company and later take over the total control of the company. For instance, Kuka (world’s 4th largest robot manufacturer), a German-based company known for its innovative robot manufacturer was acquired by Midea Group (a Chinese company), for around $4.5 billion, then nearly two years later Kuka was the subject of a hostile takeover by China’s Midea, which now holds almost 95 percent of the German firm’s shares also kicked out the CEO of Kuka. The acquisition of one of the most technologically-advanced makers of industrial robots by a Chinese firm caused much controversy, due to national security concerns, and lawmakers across Germany and other countries have been actively debating about the kind of influence Chinese companies make these kinds of investments. This was just one of the examples of a hostile takeover by China.
The Investing: You might have already heard about these kinds of investments like China’s Central Bank has raised its stake in HDFC Bank during the outbreak which lead the Indian Government to make some changes in the investment policy of neighboring countries. Chinese investors such as Alibaba, Tencent, and Ant Financial have invested 18 of the 23 Indian unicorns, including Byju’s, Gaana, Flipkart, Paytm, Snapdeal, OYO Rooms, Ola, Swiggy, Zomato, BigBasket, PolicyBazaar, Dream11; and the Chinese have invested in around 90 start-ups other than mentioned above. China has invested to create a lot of wealth in the future and this helps China both in Money and Power.
All of this is just the tip of the iceberg. There are Projects like Belt and Road Initiative and Maritime Silk Road by China (which is a lot to take in and a whole other topic).
Thank you for reading and hope to see you in the next one.