Crash-out (2)

update at November 13, 2019 to Crash out -

Crash out may not happen.  We will find out in January.  But the wounding of the British economy is happening as we type, and this piece in Foreign Policy - Chinese Firms Can't Avoid Being Party Tools - is a good example of how and why Brexit is great for business ... in China.

If you can't get Foreign Policy, let me summarize.  British Steel, an old-line British manufacturer, is being sold to Jingye Group, ostensibly a private steel-maker in China.  This should save thousands of jobs in Britain and help towns in northern England devastated by privatization (!) and changes in the market for British Steel.

This deal is promoted as a private transaction, since Jingye is not owned directly by the government.  But no matter.

As we have discussed many times, there is no such thing as a private company in China, particularly now that CCP has decided that all companies must have a CCP cell within top management and all - all - internal information, patents, contracts, revenues, orders, suppliers, employee information - must be available to the government upon request. See IP Theft in China - No More Worries.   Once a business is beyond the mom-and-pop stage, there is no such thing as a private business as we understand the term.

From the article -

In China, the power of the CCP is an underlying reality in every sector—not a goal for the party so much as an assumption about the state of the world. The CCP simply must lead and thus, all measures that defend and further entrench the position of the party are permissible.

That has produced a state of affairs where no organization is beyond the orbit of the CCP.

The author reminds us of two illustrative events - the first hypothetical - thre absurdity, if it had occurred in China, of Apple defying the FBI in 2015 over encryption of an iPhone; the second, all too real - the Sanlu milk formula scandal in 2008, right before the Olympics in Beijing -

Take the Sanlu milk scandal, in which at least half a dozen babies died as a result of tainted formula, and tens of thousands became sick. The company’s board belatedly decided to issue a full product recall in the face of overwhelming evidence that its product was damaging infants. The board was supposedly legally autonomous, but its decision was overruled by the Shijiazhuang city government as political considerations took precedence over public health. Baidu, China’s internet giant, was reportedly part of the cover-up that followed, all while catastrophic damage to Chinese infants occurred. The scandal only came to light because of actors entirely outside China. Sanlu’s New Zealander partners at the dairy multinational Fonterra, after extensive deliberation, eventually reported concerns themselves to the central government via their country’s ambassador in Beijing.

What marks out the British Steel acquisition is not the pyrotechnics but the mundanity of the deal. Each time a CCP entity acquires a company in this way, the U.K. becomes slightly more entangled in the party-state’s networks. Such entrenchment makes pushback harder should a reckoning ever come. Other countries, such as Australia, are holding a national conversation about their involvement with the Chinese party-state. The U.K., distracted and divided by Brexit, is in no position to do so.

All you need is the background music to the movie Jaws.


original and prior update here.