Monday, November 15, 2010
Chinese Companies function a little differently
This article talks about how Chinese privatized companies are given monetary backing, support, and help to succeed for political reasons from the Chinese government, and it is in the best interest of the politicians to do so. To me, this sounds like soft budget constraints that we have studied this semester in class, that seem to be typically unsustainable. However, this article is saying that this government money is being used by the firms to help them grow and expand into the more global markets, owning 1/5 of the global stock-market, and soon expected to be the most large economy in the world.
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2 comments:
Can this government money be subsidies to firms in order for them to be able to produce at lower costs and thus charge lower price while exporting these goods? If so, this is what is driving their positive trade balance!
It seems the deeper issue in this article is the threat foreign nations think China is posing by spreading its capital to international markets. The fact "America thinks that Chinese telecoms-equipment firms pose a threat to its national security", in my eyes, show a lack of commitment to global development. It is plausible that the U.S government knows information the average American does not, but i find it hard to believe in the middle of this historical time of increasing standards of living across the globe that China is attempting to cause an upheaval through international markets. China currently owns only 6% of global investments in international markets as compared to past countries such as America and Britain owning over 50% foreign investments. I think it is save to say China is just trying to expand their wealth and maybe more optimistically using that money to better their society.
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