Chinese companies are now acting very short-term in their dealings with foreign companies, by David Archibald. What’s going on?
Lawyer Dan Harris writes that Chinese companies are now acting very short-term in their dealings with foreign companies. The situation reminds him of Russia in the 1990s. The Russians then, straight out of communism, would sign a deal but then immediately renege and run off with the cash, foregoing a large future benefit for a much smaller immediate gain. They did so because they did not expect there to be a future.
Harris’s words:“I am writing about this now because China today is feeling a lot like Russia in the 1990s. I am getting the sense that many Chinese companies are pessimistic about their futures and they are acting accordingly.”
And: “On top of the economic issues, many Chinese companies have become both wary of and angry at the West, particularly the United States. This too makes things riskier for foreign companies. We are seeing the results of all this in many ways.
Practically every week, one of our China lawyers will get an email or a phone call from someone who bought product from China and received nothing in return or nothing even approaching what they actually ordered. This sending of ‘junk’ instead of real product has spread to pretty much every industry in China.”
Further from Harris: “Sinosure is China’s state-owned export insurance company that pays Chinese manufacturers that were stiffed by their foreign buyers and then seeks to collect from the foreign buyers that allegedly failed to pay. … We are now seeing Sinosure cases where the Chinese manufacturer has made what we think are fraudulent policy claims to Sinosure because they are desperate for cash and they don’t care about maintaining their relationship with their foreign buyer.” …
So Chinese companies are burning their bridges and attempting to monetize the last scraps of goodwill left in the system. They are effectively eating their seed corn.
David wonders if the Chinese Government is going to be starting a war soon. Perhaps invading Taiwan, which would be consistent with Xi Jinping’s instruction in November 2012 for the PLA to be ready to attack Taiwan by 2020.