Coming to China
Li Yanjun

With the robust growth of the Chinese economy and the further opening up of the Chinese market, the government is continuing to develop regulations and policies on foreign investment. Since the beginning of last year, the preferential sectors and sources of foreign direct investment (FDI) have exhibited new characteristics. After years of rapid increases, foreign investment reached a record high of $60 billion in 2004. Growth began to slow down in 2005, however, due to international competition in attracting foreign capital. Actual foreign investment in 2005 and the first six months of 2006 has declined 0.5 percent year on year.
For the time being, China’s actual foreign investment has stabilized at a relatively high level of $60 billion. According to statistics released by the Ministry of Commerce in June, the foreign capital utilized in 2005 amounted to $72.4 billion if foreign investment in financial services was included. Meanwhile, the average investment per project has continued to climb, rising 22.2 percent in 2005. The major reason is that local governments across China have shifted their focus in attracting FDI from quantity to quality. The government has given incentives to encourage investment in the hi-tech industry, modernized the services industry and modernized agriculture in order to attract multinational companies to move their R&D centers and assembly lines for high-value-added processing to China.
Cities such as Beijing and Shanghai and Guangdong Province, where foreign investment is concentrated, have formulated outlines for attracting foreign investment in the 11th Five-year Plan period (2006-10). The Shanghai Municipal Government has decided its efforts should be aimed at promoting economic growth by attracting more large corporations to base their headquarters in Shanghai and developing a modern services industry and advanced manufacturing sectors. Beijing and Guangdong Province have also started to attach importance to the quality of investment.
In the last two years, actual investment by the United States in China has declined, reaching $3 billion in 2005, 22 percent lower than in the previous year. This is largely attributable to the Homeland Investment Act of 2004, which led to a dramatic 45 percent drop in overall U.S. foreign investment in the first half of 2005. China has felt the strain of that change in policy. Since April 2005, actual U.S. foreign investment in China has shown year-on-year declines of over 20 percent each month, while in some months the drop has approached 30 percent. Meanwhile, after a three-year upsurge, investment from Japan tumbled for the first six months of 2006, falling 31 percent from the previous year. Yet investment from the European Union (EU) has maintained robust growth. Following a year-on-year increase of 22.5 percent in 2005, the first half of 2006 has witnessed a surge of 19.8 percent.
Booming financial sector
Since China’s accession to the World Trade Organization in 2001, the Chinese Government has fulfilled its commitments of opening the services sector by issuing over 40 new rules and regulations involving dozens of areas, including finance, logistics, distribution, tourism and construction. The thresholds for entering these sectors have been considerably lowered. In 2005, the actual investment utilized in the distribution sector, the production and supply of electricity, gas and water, and transportation registered annual growth rates of 17.5 percent, 80 percent and 37.5 percent, respectively. The financial services industry has seen the most spectacular performance. As the reform of the country’s financial sector and share-holding system proceeds, a total of 17 banks have attracted foreign investment of $14 billion. The pioneering reformers, the Bank of Construction and Bank of China, have attracted several foreign strategic investors, which altogether pooled $10 billion into these two banks.
Meanwhile, the actual foreign investment in the services industry as a whole has experienced an annual decline. In 2005, actual foreign investment in the sector dropped by 4.5 percent from the previous year to $11.7 billion, accounting for 19 percent of the total foreign investment, which was nearly 1 percentage point lower than in the previous year. The proportion of investment in the services industry has steadily declined.
For a long time, around 95 percent of foreign investment in China went into the construction of new production facilities. Yet in the last two years, mergers and acquisitions have become a vibrant form of foreign investment in China. According to statistics from the UN Conference on Trade and Development, foreign investment through mergers and acquisitions showed skyrocketing growth in 2005, accounting for nearly 20 percent of the total foreign investment, up nearly 9 percentage points from the previous year. Besides the enlarged scale, this round of foreign mergers and acquisitions has shown new characteristics.
First, in the manufacturing sector, foreign capital has switched from consumer products such as beer, cosmetics and camera film to strategic and basic sectors of equipment production and raw materials. In the steel industry, India-based Mittal Steel completed the acquisition of a 36.67 percent stake in the steel tube and wire division of Hunan-based Valin Group and EU-based Arcelor purchased a 38.4 percent stake in Laiwu Steel. In heavy equipment manufacturing, U.S.-based Caterpillar holds a 40 percent stake in Shandong SEM Machinery, one of China’s leading wheel loader manufacturers. Global private equity firm Carlyle Group has concluded an agreement to purchase an 85 percent shareholding in Xugong Group Construction Machinery, the country’s largest construction machinery manufacturer and distributor, while Germany-based Bosch Group holds a majority stake in Wuxi Weifu Group. In the cement industry, MS Asia Investment, an entity controlled by Morgan Stanley Private Equity Asia, acquired a 14.3 percent share in China’s largest cement maker, Anhui Conch Cement Co. Ltd. In March, Huaxin Cement announced a plan to issue shares to Holchin BV, a unit of Switzerland’s Holcim, making Holchin its largest shareholder. Holchin already owned 26.1 percent of Huaxin before the transaction.
Second, merger and acquisition activity has flourished in the services industry, especially in the financial sector, which has become the most important form of FDI in this sector. Along with the sale of a 16.85 percent share in the Bank of China to overseas strategic investors, including Singapore’s Temasek, Royal Bank of Scotland, UBS and Asian Development Bank, Bank of America and Temasek hold a 14.39 percent stake in China Construction Bank. The Bank of Communications, Industrial and Commercial Bank of China, Shenzhen Development Bank, China Bohai Bank and six city commercial banks in Shanghai, Beijing, Nanjing, Hangzhou, Jinan and Nanchong have sold over 10 percent of their shares to foreign strategic investors. In the insurance sector, Ping An Insurance and China Pacific Insurance have sold over 20 percent of their shares to HSBC Group and Carlyle Group, respectively.
Merger targets
Third, the targets of foreign mergers and acquisitions are increasingly the leading players in their fields. For example, Anhui Conch Cement and Huaxin Cement are the top two cement manufacturers in China in terms of market share. Wuxi Weifu Group is China’s market leader in automobile fuel injection systems. Foreign investors have massively purchased assets in the banking and insurance sectors and as a result financial institutions in some regions have been dominated by foreign capital. The merger and acquisition cases, which involve buying the industry leaders and quickly occupying a market share, will have a more profound influence on the domestic market.
Fourth, new overseas investors are more inclined to invest by purchasing existing companies. In the steel industry, unlike South Korean steel giant Posco’s investment in brand new production facilities at an earlier stage, the two largest global steel companies, Mittal and Arcelor, both entered the Chinese market by purchasing domestic companies. The advantage is that the production cycle can be greatly shortened based on updating production capacity and equipment with the input of capital, technology and management. This model has been copied by global financial groups, which differs from the previous practice of setting up branches, and features ownership or control of Chinese banks, insurance and securities companies.
Fifth, foreign mergers and acquisitions have become more closely related to the securities market by adopting new financial tools. In the past, foreign capital mainly bought non-listed companies, through acquiring shares or assets. In contrast, recent mergers and acquisitions for a substantial amount of money have involved the stock market. Foreign capital has either participated in governance reform at the pre-initial-public-offering (IPO) stage or bought a stake from listed companies. Meanwhile, foreign capital had adopted other tools, such as convertible debt offerings and tender offers.
The background of the acceleration of mergers and acquisitions in China is the new global wave of international mergers and acquisitions. Large multinational companies regard their moves in China as part of a strategic industrial restructuring. The services and heavy chemical industries are the two major battlefields for international mergers and acquisitions. In terms of China, the services sector is the key area for China’s post-WTO opening-up, where the entry barriers have become minimal. China boasts cost and market advantages in the chemicals sector, which has promising prospects and a low level of concentration. As the policies on mergers and acquisitions have become more transparent and predictable, economic growth has maintained a high speed and long-term political stability has been insured, foreign investment in Chinese companies will have a great boost.

How to influence us policies?
Amjed Jaaved

The simple answer is ‘through think tanks’. That’s the reason for mushroom growth and prosperity of the think tanks in the USA. To Chomsky, the American masses are like a “bewildered herd” of who have stopped thinking (Noam Chomsky’s Media Control: The Spectacular Achievements of Propaganda, Karachi, Vanguard, 2004, p.16). He asserts that, in a “properly functioning democracy”, there are a “small percentage of the people”, a “specialized class of citizens” who … analyze, execute, make decisions and run things in the political, economic, and ideological systems”.
Think tanks are, ostensibly, non-profit, tax-exempt, non-political organizations which serve as centres for research and analysis on important strategic and political issues. There are thousands of think tanks mostly based in the USA or Europe. The think tanks claim to be independent of government’s influence. But, most think tanks have clear political leaning. They are covertly funded by sponsors of industry, major political parties, or governments themselves. They are headquartered at or near the seats of government to be able to influence policy makers in the legislatures.
Their “scholarships” are meant to generate ideas justifying the sponsors’ line of thinking. Terms like “collateral damage”, “axis of evil” and “weapons of mass destruction are figments of the independent-looking but servile think tanks. Columnist John Chuckman calls them “phony institutes where ideologue-propagandists pose as academics”, into which “money gushes like blood from opened arteries to support meaningless advertisings, suffocation of genuine debate”. Tom Brazaitis, in Cleveland Plain Dealer, points out “So much money now flows in, that the top 20 conservative think tanks now spend more money than all of the ‘soft money’ contributions to the Republican Party”.
Titles (like “senior fellow” or “adjunct scholar”) imply that the resident experts of a think tank possess academic qualification in the area of claimed expertise. But, it is not always so. The experts claim to be clairvoyant enough to look into the future (futurism, Fayol’s prevoyance. But, most of them do not know even simple forecasting techniques or social-research methods. Think Tanks have an inherent tendency to make wild projections. They are sans students, sans peer review and academia pressure to correct their misprojections and miscalculations. Unlike a university which first does its research and then draws inferences, the think tanks act in the reverse. Jonathen Rowe has rightly observed that the term think tank is a misnomer_ “They don’t think, they justify”.
Research from think tanks is ideologically driven in accordance with the interests of their founders and financiers. The Washington-Post columnist, Joel Achenbach’s apt remarks encompass summum bonum of a think tank. He says, “Washington is a thoughtful town. A friend of mine worked at a think tank temporarily and the director told him, when he entered, ‘we are all white men between the ages of 50 and 55, and we have no places else to go’.
RAND alleges that Al Qaeda recruits may have connection with Pakistan’s Tableehi Jamat and Lebanese Hezbollah (not Turkish Hizbullah), Pakistan’s Jama’at-e-Islami and Ulema-e-Pakistan are “Radical Fundamental Fundamentalists”, so on. Here is a bouquet of RAND’s subjective bloomers in the 9/11 monograph: (a) Figure O.1 titled “Muslim tendencies on a Spectrum of Democracy to Non-Democracy” classifies “Jam’at al Ulema-e-Pakistan” and “Jama’t-e-Islami (Pakistan)” as “Radical Fundamentalist” (p.10, 9/11, RAND). (b) ‘Hezbollah and …Al Qaeda also capitalize on the blackmarket for African gold and diamonds. Muslim extremists routinely resort to smuggling, kidnapping and extortion to raise funds and achieve political ends. In South America, Hezbollah operatives engage in a wide range of criminal activities, including shakedowns of local Arab communities and sophisticated import export scams’ (p.46, ibid.). ‘Al Qaeda raised as much as 35 percent of its operating funds from the drug trade. Hezbollah benefitsfrom the drug business in Lebanon’ (p.468, ibid.). (c) Effects of Palestinian and Kashmir Conflicts….Successive Pakistani governments have pursued a proxy war in Kashmir. To which they have subordinated the other purposes of Pakistani state to a large extent.This dynamic has dramatically changed the fabric of Pakistan’s domestic politics by empowering extremist movemrnts and their sponsors in the Pakistan security services’ (pp. 49-50, ibid.). (d) ‘Muslim moderates… voices are often fractured and silenced… battle for Islam will require the creation.
Look at the puerile revelations in the think-tank’s report: (a) Pakistan has spread its tentacles throughout India. India has identified Inter-Services Intelligence activities in nine states besides ISI-sponsored Madaaris throughout the country. The report even gives number of Madaaris in different states, besides claiming existence of 330 Madaaris on Indo-Nepal border. (b) “In addition to the Madaaris, 10,000 people are working for the ISI in various capacities”. (c) “In 1986, China ‘transferred Pakistan enough tritium gas for ten nuclear weapons”. (d) “By 2010, with its imminent collapse looming large, Pakistan would be forced to strike India to consolidate its own domestic failure. An impending defeat might lead the Pakistan military or the ISI, or the extremist elements to take over nuclear command and launch a nuclear strike on India”. Till the day, the people re-assume thinking for themselves; the think tanks will continue to stink.


India’s irresponsible attitude
Mamoona Ali Kazmi

India is theoretically secular but practically it is a state of Hindu fundamentalists, who want to eliminate Muslim minority from India and do not want to see a prosperous Pakistan and peaceful South Asian region. For this purpose they are employing different techniques such as attacks on areas of Muslim concentration, demolition of their holy places and accusing them as terrorists. Besides India is alleging Pakistan for their internal problems as well as suggesting punitive action against Pakistan in the wake of Mumbai blasts. Hence, in pursuance of this nefarious agenda Pakistan is being accused of Mumbai blasts without any solid evidence.
The activities of Hindu fundamentalists proved that India is a so-called secular state, which cares only about Hindus and leaves other communities at their disposal. It is not the first time they are blaming Indian Muslims for the 11 July incident. Indian history is full of discrimination and suppression of Muslims by the Hindu fanatics in collaboration with the Indian government. In the beginning of the 90s Babari Mosque, a 430 year old mosque in Ayodhya (Uttar Padesh), was demolished. On 6 December 1992, a mob of 300,000 Hindu fanatics brought together by the BJP and other extreme right wing groups demolished the mosque. They claimed the site to be the birth place of Ram, but the Muslim place of worship was nationally recognised. The incident resulted in series of riots in which more than 1500 Muslims were killed.
BJP and Vishva Hindu Prashad assumed extremist postures and threaten minorities, which resulted in Gujarat carnage. BJP’s main goal is to convert India into a Hindu nation. BJP turned a blind eye to the attacks on the Gujarat Muslim minority that killed more than 2000 Muslims in March 2002. Hindu fundamentalist groups targeted Muslim homes and shops. Local and national security forces failed to control the situation. The state police did not intervene and the central government sent in troops to Gujarat at a time when a lot of damage had been caused to Muslim property and a large number of innocent Muslims had been slaughtered.
The Indian electronic media linked 7/11 blasts to Pakistan and local Muslim population. But the reality is that these blasts were executed by Hindu extremist groups such as Shiv Sena and RSS in collaboration with some extremist elements in the Indian government. These blasts have multiple purposes such as seizure of peace talks with Pakistan, creating a negative image of Pakistan in international community, to start back lashing against Indian Muslims and to create anti-Pakistan sentiments among Indian public.
These blasts were executed by the Hindu extremists. Now they would use these blasts as a scapegoat to start violence against Indian Muslims as they did in Gujarat. Human Resource Development Minister, Arjun Singh sources said, quoted a Maharashtra judge retired as having alleged that the attempt attack on RSS head quarter in Nagpur was a frame up by the Sangh itself. The Minority Affairs Minister A R Chaudhry cited reports that a mystery blasts in Maharashtra’s Nanded in April last was orchestrated by Hindus themselves posing as Muslims. So Shiv Sena conducted these to start backlash against Muslims in the state of Maharashtra to fulfill their ideology of converting all Indians to Hindus by eliminating Muslims. Hindu rightwing organization Vishwa Hindu Parashad (VHP) has asked the Indian government to follow Israel’s example and take military action against Pakistan in the wake of the Mumbai blasts. VHP president Ashok Singhal said in a statement that India should immediately act in a similar way with Pakistan without bending to any pressure from the Muslims and international community.