Twofish's Blog

October 3, 2007

About Huawei

Filed under: Uncategorized — twofish @ 11:02 pm

http://www.rgemonitor.com/content/view/217776/86/

About Huawei…. 
 
Please, if you are going to quote an article, do quote the article accurately. The article itself said nothing about the Pentagon opposing the deal, quite the reverse in fact. It’s the usual Bill Gertz stuff…… Except that over time, fewer and fewer people care what he thinks…. 
 
Whether or not there will be any objections depends on whether or not there is any commercial interests that wants to scuttle the deal, and I doubt there will be. The investment bank involved likely made a list of every company that would want to block this sale, and invited them to join in. They also likely made a list of Congressmen who might be opposed to the deal, and had a talk with all of them. This likely involved lobbyists having lunch with Congressmen, making promises about investment and jobs for their districts and assurances that plants won’t be closed. 
 
Linking this back to international economics and my previous posts. The PRC is about to go on a massive buying spree with its currency reserves, and it’s paying a lot of attention on how to do these sorts of deals without a massive backlash. One important rule. Don’t gloat. If the people involved walked around, and said “HA HA!!!! China is taking over industries from you stupid, lazy Americans and we are going to kick your rear end out of East Asia!!!!!!!” what do you think the chances are of these sorts of deals going through???? 
 
Instead, what the investment bank did was to talk to everyone. Find out what they wanted, and gave it to them. Congressmen want jobs. Businessmen want money. Beijing wants technology to be a superpower. Shake hands and make the deals. 
 
This leaves Bill Gertz and some unnamed defense department officials totally outmanuevered, and this is just the beginning. There is bunch of Chinese money about to make its way back to the United States, and its probably not going to be the case that politics is the limited factor. 
 
So lets see. $200 billion/year of US capital going to China. $200 billion/year coming back in the form of Chinese purchases of US equity. For this to be sustainable the US would have to generate that much equity per year. Since total capital stock in the US is about $90 trillion, So it looks like this system is indefinitely sustainable barring some political shock. 
 

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