The politics of protectionism are turning America inward at roughly the same moment high valuations have forced Chinese firms to seek profits abroad. From a macro perspective, globalization marches on, albeit with a different leader. But if Chinese firms will increasingly be at the center of a global economy, the nature of that market will certainly reflect the Chinese style – one that is noticeably distinct from the American and European styles of business. What will that development mean for tech firms outside of China?
Pay attention to Beijing — and ask Chinese counterparts to interpret
Late last year, the Chinese government placed strict controls on overseas investment. The stated reason for the shift in policy was to prop up domestic growth – a pressing concern given the fact that China’s 6.7 percent growth rate is the weakest annual economic growth the country has seen in 26 years. But if Chinese companies are seeking growth, changing the rules won’t necessarily spur domestic investment because Chinese firms already know that domestic investment won’t deliver the returns they need. So, what’s going on here?
To be blunt, only the Chinese truly understand the dynamics at play between the private sector and government regulation in China. To some extent, that’s true for anyone trying to understand a foreign society, but China represents a special case because its political and economic system represents a hybrid that’s neither the Communist regime of the 20th century, nor a free market economy like what we expect in the West.
Commenting on last year’s rule change, commerce minister Gao Hucheng said the government would “promote the healthy and orderly development of outbound investment and cooperation in 2017.” In other words, this isn’t about closing China off forever; it’s about finding new investment equilibrium. But where do Chinese authorities draw the line?
Reading Chinese government statements only gets you so far. Speaking with Chinese business counterparts can shed a lot of light on government thinking. By their reckoning, restrictions on capital leaving the country are a reaction to the overseas investment boom of 2016. The message the Chinese government is sending isn’t exactly “no” so much as “not so fast,” and the expectation, at least in the…