Geely deal shows overseas investment backs economy

By Chen Gong Source:Global Times Published: 2018/3/13 22:18:41

Illustration: Luo Xuan/GT


When Li Shufu, chairman of Chinese carmaker Geely, bought nearly 10 percent of Daimler, the parent company of Mercedes-Benz, becoming the largest single shareholder, there was much talk at home and abroad. Pressure and excitement came together with jealousy and fear.

The real controversy is actually about funding. The situation is: If Li uses domestic funds, he will encounter trouble; if he uses overseas funds, it will be better, because it would be none of China's business.

Such opinions are dangerous, and the policies that result from them are even more dangerous. Policy, not money, is the real problem.

The world situation is undergoing drastic and radical changes. In the past, China participated in the global market mainly through trade. Therefore, the problem of international trade deficits always plagued China's economic and trade relations with other countries.

The deficits have always been a bargaining chip for countries, especially the US and Europe, which has become a big headache for China's policymakers. To balance this relationship, China has even purchased the government bonds of other countries for a long time, resulting in the amount of US Treasury bond holdings by China experiencing a rapid expansion.

China must be aware of three coming changes.

First, achieving a balance in international trade is getting more and more difficult. We must find new approaches. Buying a few high-technology products and holding the bonds of various countries is no longer useful.

Second, the real economy is going out into the world, so we must find ways that can be widely accepted to achieve participation in the world market. The real economy of China has risen. However, simple methods of "selling products" can't be used. It is necessary to find a proper path in terms of better participation in the world market.

Third, we must consider the actual use of capital in the real economy. The real economy enables industrial capital's power to exert its value and effectiveness in the international market.

Policy is the key. Drastic changes in the world situation must be taken into account so that innovation can be used to develop a new grand strategy in world markets. Vigorously developing the real economy cannot be empty talk. There must be methods, innovation, support and industrial development. From products to technology, from technology to capital and then to the market, this is the path that must be followed for sound development. It is absolutely necessary to participate in international industrial capital cooperation to upgrade China's real economy and create more scope for development.

Many people are worried about the past, when foreign investment went into buying banks, hotels and real estate.

What happens next depends on China's foreign exchange balance. Moderate adjustment is necessary, but the general direction is unquestionable. China's foreign exchange balance is indeed very important, as is the stability of the yuan's exchange rate. However, these factors can't be viewed from a microscopic angle.

Li's investment in Daimler, even if it is not funded by overseas money, should also be supported. The actual State policy also supports this. Investments blocked by policy have always been capital investments, not investments in the real economy. But improper interpretations in the media have triggered distress and pressure.

Geely's acquisition of Daimler's shares is expected to provide access to Daimler's electric vehicle battery technology, and it is even possible they will establish an electric vehicle joint venture domestically.

Therefore, whether in terms of technology or the market, Li's approach is reasonable. In the future, such overseas investment in the real economy is expected to become a new intermediary for international investment, and it will also become an attractive source of industrial capital cooperation.

Li's investment should be supported, and China's real economy will increasingly become a new intermediary channel for overseas investment.

The author is the chief research fellow with Beijing-based private strategic think tank Anbound.


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