The Shanghai Chinese Tower, in the center of the financial district in Lujiazui, stands 2000 feet above a city of 24 million people and counting. Fittingly, an American firm designed that tower, now the tallest building in China, and itself a symbol of the country's rise to greatness. As the drive to position Shanghai as one of the world's leading financial center continues, one wonders why both the U.S. government and American businesses are actively working towards helping China become a global powerhouse that could eclipse the U.S. and undermine Washington's own global influence.
Just look at China's fast and furious acquisition of American companies, an alarming development that has been met with deafening silence from the White House. While Chinese companies face little obstacles in snapping up prized American assets, our own companies are hampered (by overburdening regulations, among other obstacles) from securing a more active presence on China's turf.
The latest bidding war, involving Anbang and Marriott for the Starwood properties, has led to questions about why a Chinese insurance company with an "incredibly opaque" ownership structure wants to pay $14 billion for the hotel chain, considerably more than Starwood is worth. Anbang made three unsuccessful offers to buy Starwood last year, but never offered satisfactory answers about its financing or created much confidence in its corporate backstory. Even the Wall Street Journal keeps running into dead ends while trying to determine who's really behind the deal.
What's really important about why Anbang is willing to pay so much for Starwood is that the offer is consistent with China's aggressive stance on acquisitions, with $100 billion on the table so far this year. Those deals include the $44 billion ChemChina offer to purchase Syngenta, which has been met with real opposition from both Democrats and Republicans because of issues it raises for food security and national security. The Swiss-owned Syngenta has facilities in the U.S. that are dangerously close to key military bases, an element that has prompted the Committee on Foreign Investment in the United States (CFIUS), a regulatory body, to scuttle deals in the past. Iowa Republican Senator Chuck Grassley has repeatedly cautioned against the merger, asking CFIUS to assess the proposed acquisition's impact on domestic food security.
CFIUS has already shot down three Chinese investment deals this year for being egregiously dangerous to our national interest. Fairchild Semiconductor abandoned a merger with a Chinese company after the regulatory body expressed concern. However, barring a change in federal laws, CFIUS can't face off the Chinese dragon singlehandedly. Which is why passing a U.S. moratorium on Chinese acquisitions, at least until Beijing levels the playing field, is long overdue.
By the State Department's own admission, American companies face an overtly hostile and discriminatory environment in China. Investors need government approval for projects, foreigners are barred from staffing key managerial positions, and many sectors are prohibited by Beijing from benefitting from foreign investment. At the same time, the Central Committee effectively distorts competition by doling out "better tax incentives and financing opportunities" to Chinese companies.
Succeeding on the Chinese market is therefore tremendously difficult for U.S. companies. On the flipside, Chinese investors face almost no barriers on doing business on American soil, a fact that is currently helping Beijing prop up its ailing economy and advance its global influence. What should be obvious, even to the Obama administration and certainly to its successor, is that these plays are just another expression of China's unquenchable thirst for expansion. These strategies may seem new to targets in the West, but not to a Chinese government accustomed to deploying the same trade and financial weapons across the African continent and Asia.
Western analysts recognize China's compelling need for agricultural resources to feed its ever-growing population and natural resources to supply its voracious industries. What they miss, with a naïveté that leads to peril, is that China's longstanding commitment to expansion through trade, as the true endgame of a foreign policy that pays lip service to its "peaceful rise," really means Chinese hegemony – and that's a threat the U.S. must put to rest.
While the United States continues its mild-mannered overtures directed at appeasing conflicts in the South China Sea, or its iffy prospects for containing China's economic power through the Trans-Pacific Partnership and its ASEAN alignments, China doesn't pull any punches. American leaders operate within a diplomatic framework anchored in the polite fiction of a peaceful China moving toward responsible leadership in the global community. That's precisely the message the Chinese spent years creating, and a pretense they no longer bother to make themselves.
Meanwhile, America keeps building China's world-class future at its own expense. The pleas to put an end to unchallenged Chinese economic practices that disadvantage Americans – the outright theft of American innovation, the unfair currency manipulation, the alignment with unsavory world leaders abroad and the indifference to the daily $1 billion trade deficit at home – need to be acted on, and fast.
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