The Eastern and Western Investor Dilemma

French-Red-Wine-©-User-PRA-Wikipedia.org_1

Both Western investors in China and Chinese investors in the West have been at a loss recently. Currency exchange is colliding with culture exchange. In reality, it is an international business challenge. Western investors do not know how to view their investments in China and also have no idea about China’s future direction.

Western investors’ complaints

The biggest concern for Westerners is that the Chinese regime limits inquiries into a company’s financial and shareholder information. This kind of limitation is unthinkable for people living in a free society. During my MBA study, our professor asked every one of us to pick 10 companies to research by calling the companies and asking them to send their most recent earnings reports.

The Chinese business sector now actually requires investors to obtain permission from a company in advance before receiving the company’s earnings and shareholders’ information. Outside analysts interpret this as the Chinese Communist Party’s (CCP) concern that it will be revealed that Chinese companies falsify their information.

Perhaps the Party wants to prevent the rest of the world from knowing that CCP officials take advantage of state-owned enterprises in order to steal from the nation’s treasury.

Chinese investors’ complaints

Meanwhile, Chinese investors also complain when they try to invest in the West. Wealthy Chinese bought French wineries and shipped the wine to China, selling it at high prices. The French seemed to play a trick by retaining the best wineries and selling the second-best to the Chinese. It was the same when foreigners came to China and bought many second-rate wine cellars, but if you wanted to buy Maotai and Wuliangye, you would be clueless.

French Red Wine chinese investors

French Red Wine (PRA/Wikipedia.org)

The Chinese have been interested in French wineries since 2008 when the world financial crisis began and China printed a large amount of money to stimulate the economy. Obviously, the central regime’s 4 trillion RMB ($US633.4 billion) and local governments’ billions of RMB brought the pain of inflation for all the Chinese people to endure.

However, China’s wealthiest men were smart enough to channel the capital to Bordeaux in France. Of course, this is the way capital escaped and a large amount of foreign exchange was easily transferred.

Acquisition of French wineries by wealthy Chinese has continued to expand over the past few years. Currently, the owners of more than 20 wineries in Bordeaux speak Mandarin. The process of acquisition is ongoing. Judging by its outlook, more than 10 additional wineries will be in the hands of Chinese investors this year.

The main purpose Chinese businessmen have in buying French wineries is to bring red wine into China. A bottle of French wine in China sells for five times more than it does in France.

Control of the wine merchants from the production locale can establish credibility for Chinese consumers and eliminate suspicion about adulterated liquor.

Bordeaux wine is a symbol of French culture. Facing the influx of Chinese capital, French businessmen were caught off guard and they began to think about whether or not selling wineries was a good thing. Chinese tycoons have not yet acquired the best winery in Bordeaux.

The locals are still very proud of themselves, saying that although many foreigners have bought local wineries – the Chinese, Irish, Americans and Belgians – the best and most expensive winery is still controlled by the French people.

The common root causes of East and West

The French hold back their best winery and refuse to sell it to the Chinese. In actuality, it is probably a good thing for red wine consumers around the world.

Maotai chinese wine

Maotai, a Chinese wine. (Mark Bussinger/Wikipedia)

If French wine carries one iota of Maotai or Fenjiu style, it would lose its real meaning. Why do Chinese entrepreneurs want to control the French wine industry? If they do not participate in the management and operation, but rather hold it as an investment, it will result in the inevitable decline of French wine prices in China due to the habitually unfavourable swarming trend.

When supply exceeds demand and the market becomes saturated, vicious competition becomes unavoidable. In the end, investors will find the great wine market has been ruined by the speculative Chinese capital.

Even if China’s new owners were willing to learn and adapt to the management practices of the French, it would probably take a long time to break in.

When money flows from the West to the East, the Chinese regime’s policy impedes it. When money flows from the East to the West, Party cultural factors play a negative role. The troubles for both the Chinese and the Westerners are tinged with elements of the communist regime. And that is rather unfortunate.

 

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