This perceptive piece from Wolfgang Munchau underscores just how powerful China has become relative to almost every other country in the world barring the United States. Chinese power is not so much about raw economic growth as it is about China’s growing technological prowess. Munchau writes that “Last week, a German business magazine reported that a senior official of Angela Merkel’s chancellery had visited China to explore an anti-spying agreement. Such agreements are usually not worth the paper they are written on. The context of this visit was the bid by Huawei, the Chinese telecommunications equipment maker, for the fifth generation mobile licences in Germany (on which a decision is due at some point this month). A no-spying agreement would allow Germany to pretend that China does not constitute a security threat after all…Germany is ambivalent about China. It needs Chinese technology, such as Huawei’s. German mobile phone operators are particularly keen on Huawei’s 5G bid because they already use the Chinese company’s hardware in their networks”
Even as Germany is keen to maintain access to Chinese products, it is passing legislation to limit China’s ability to acquire German companies: “But Germany also worries about Chinese companies acquiring its technology. Last December, a new law reduced the threshold of equity stakes that automatically trigger a mergers investigation. The new industrial strategy, recently proposed by Peter Altmaier, the economy minister, wants to protect entire sectors from Chinese acquisitions — aircraft, finance, telecommunication, trains, energy and robotics…Germany once saw China as an export market for machinery with which China would develop its industrial base. Today, China is becoming the senior partner in the relationship.”
In contrast to this, we in India have few, if any, safeguards to protect ourselves from the growing technological might of the Chinese. Most of our electronics – including the core of our telecom networks – come from China. Moreover, Alibaba is now an omnipresent investor in the Indian tech services sector. As we spend our mornings reading the PM’s latest pronouncements regarding Pakistan, one cannot but help wonder whether we are still fighting last century’s war. The real threat is more muscular, more technologically advanced, better equipped and financially mightier than Pakistan.
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If you want to read our other published material, please visit https://marcellus.in/blog/
Note: The above material is neither investment research, nor financial advice. Marcellus does not seek payment for or business from this publication in any shape or form. The information provided is intended for educational purposes only. Marcellus Investment Managers is regulated by the Securities and Exchange Board of India (SEBI) and is also an FME (Non-Retail) with the International Financial Services Centres Authority (IFSCA) as a provider of Portfolio Management Services. Additionally, Marcellus is also registered with US Securities and Exchange Commission (“US SEC”) as an Investment Advisor.
