China has deep tentacles in the American economy
Back in the 1980s, the big fear was that Japan was buying up America. At the start of the third decade of the 21st century, the fear is that China is buying up America, a threat much more potent than Japan ever was. Unlike Japan, which expanded by building a better mousetrap, China's reach is predicated upon Marxist expansionism, military and private-sector espionage, corrupt business practices, slave labor, and a large military.
Investing.com assembled a list of 76 American brands that China owns in whole or in part. (There are also companies that Hong Kong owns, but China's aggressive inroads in Hong Kong make that something of a distinction without a difference.) Here are some of the more surprising entries in that list:
AMC Theaters, which is the largest movie chain in the world, started life in Kansas City, Missouri, in 1920, as American Multi-Cinema. From 2012 to 2018, though, China's Dalian Wanda Group, which operates out of Beijing, was the majority stakeholder.
In 2018, Silver Lake Partners, a private equity company in Menlo Park, California, invested $600 million in AMC, which gave it 32% of Dalian's class B common stock. However, the way the deal was structured, despite owning slightly less than 50% of the common stock, Dalian still has majority control over the board of directors. In other words, Dalian controls what movies people around the world can see.
The wrench in the works is the Wuhan virus. In October 2020, AMC reported that it was running out of money and could have no cash left by the end of 2020 or the beginning of 2021. It will be interesting to see whether Dalian uses this situation to buy out Silver Lake Partners and re-up its hold on AMC or if AMC will become a relic of a pre-virus era, with empty theaters dotting the landscape of cities across the world.
When you buy GE appliances, you think you're buying appliances from an American company with roots stretching back to 1892. What many of us missed is that, beginning in 2016, GE, which is headquartered in Boston, became a subsidiary of Haier, a Chinese company headquartered in Qingdao, China.
And last, but in many ways most interestingly, is Zulily. If you've ever received an email from Zulily, you know that this online merchandiser sells everything — clothes, toys, household items — and things are always at a bargain.
In addition, one of the things that sucks you into Zulily purchases is that every time you buy one thing, you get incentives to buy other things. With brand name items, good prices, and those darned incentives, you can find yourself spending a lot more than you intended. All of that is good for Alibaba's bottom line since Alibaba owns around 16% of the company.
As you probably know, Jack Ma founded Alibaba, making it China's equivalent of Amazon. Jack Ma is probably one of the good guys because he believes in the free market. In this, he stands opposed to China's essentially mercantilist system, under which the government controls the marketplace exclusively for its benefit.
It should therefore be no surprise that, on Monday, China forced Ma to break up his financial services empire. This is just the most recent in a series of steps President Xi Jinping has taken to ensure that Ma, who became the second richest person in China, does not challenge Jinnie the Pooh's absolute control over China.
And that's the note I'll end on for this post. As I said at the top, China has ownership interests in many American companies. Some of them operate solely in America. Others have entered into partnerships with Chinese entities so that the American companies can crack the Asian markets.
What these American companies would be wise to remember, though, is that they're never actually doing business just with a Chinese company or with the charming Chinese man who's president of the holding company buying them or partnering with them. That would have been true in the old days with Japan, which once had aggressive, dynamic capitalism.
The truth now is that every one of these Americans getting into bed with China-based businesses is, in fact, getting into bed with Jinnie the Pooh and the Chinese Communist Party. And as Jack Ma knows, when you're rolling around with Jinnie, Jinnie plays to win.
Image: Xi Jinping visits the United Kingdom. VOA News. Public Domain.