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How US auto companies can survive and thrive (2)

10:23, December 21, 2010

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The Wall Street Journal and other American media suggested that such an investment by a Chinese company would not be welcome. If that remains true, in the foreseeable future the capital markets will wonder why Chinese consumers would continue to buy General Motors products as China's domestic car companies grow and offer their shares on stock exchanges in China and globally? If General Motors or Ford loses their Chinese sales because of their resistance to Chinese investment or hostile U.S. government policies toward China, why will anyone buy their stock? Will General Motors go bankrupt permanently if it rejects its Chinese partner company's interest in investing in its joint venture partner? Actually, allowing such investments is essential to protect the economic and national security of the United States.

If American automakers are not profitable in China, they will not be profitable at all.

Is it wrong for China's SAIC to desire to invest and own part of General Motors, its long-standing joint venture partner in China? The U.S. economy, automakers and employment will not grow if the U.S. government and companies cannot adjust to changing economic realities.

Why should SAIC invest in General Motors? Why not let global market forces operate? Why not let General Motors go out of business? The issue today is not whether America's government and businesses should permit reciprocal economic globalization by encouraging Chinese companies to invest in U.S. automakers. It is why should Chinese consumers buy General Motors, Ford or Chrysler products. Will Chinese consumers buy automobiles from companies in which the Chinese do not own more than 1 percent of the equity?

China's auto sales hit more than 13.6 million units last year, overtaking the United States as the world's top car market. Sales in 2010 are forecast to hit 15 million units. At the end of 2009, there were 76.2 million vehicles in China. Ford, for example, expects 70 percent of its growth to come from the Asia-Pacific and African regions in the next decade.

In September 2010, it signed an agreement with the Chinese government to open a second engine plant in China with a 500-million-U.S.-dollar investment for the period between 2011 and 2013 that will be funded by a joint venture of Ford with Chinese and Japanese auto companies. A Ford spokesman said, "This new engine plant will help power our ambitious expansion plans here in the world's largest automotive market. The growth potential in this part of the world in the next 10 years is astounding." Is it smarter to invest in the global growth of U.S. or Chinese automobile companies?

Many Americans object to state-owned companies, whether they are SAIC or GM and American government and corporations have often blocked Chinese companies from investing in and acquiring American companies. But more than 400 American Fortune 500 companies have major investments and create employment in China. Many want to increase their investments in and acquire Chinese companies or to take market share away from Chinese companies in China.

The Obama administration is seeking to create an "even playing field" for American companies to compete with Chinese companies in China. However, it is not yet committed to creating an even playing field in the United States for Chinese companies. It is increasingly taking aggressive, confrontational measures seeking to increase American exports to China and block Chinese exports to America.

President Obama seeks to reboot the crashing U.S. economy, increase exports to China and create 12 million new jobs. He can do so only by aligning America and China's economic success and national security. But how?

There is a clear and present danger of a full-blown trade, currency or other war between the United States and China. That can be prevented if the United States allows Chinese companies to acquire and invest in failing U.S. enterprises that depend on sales in China to survive and if U.S. companies establish global joint ventures with Chinese counterparts.

That evolution in U.S. government policy and business strategies, which is called "reciprocal economic globalization", needs to be the next stage of the globalization of the U.S. economy. How it will be achieved in 2011 is proposed in the China-U.S. China Grand Strategy Agreement between Presidents Obama and Hu described in our previous column. It is available for free download at the publication section of the Center for America China Partnership website www.CenterACP.com.

John Milligan-Whyte has been called the "new Edgar Snow" and "21st century Kissinger" and is the winner of Social Responsibility Award from the 2010 Summit of China Business Leaders. John Milligan-Whyte and Dai Min are co-hosts of the Collaboration of Civilizations television series, founders of the Center for America-China Partnership, which has been recognized as "the first American think tank to combine and integrate American and Chinese perspectives providing a complete answer for the success of America and China's success in the 21st century," and the authors of the America-China Partnership Book Series that created a "New School of America-China Relations."

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The articles in this column represent the author's views only. They do not represent opinions of People's Daily or People's Daily Online.

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John Milligan-Whyte and Dai Min are the executive producers and co-hosts of the Collaboration of Civilizations television series adapted by the eight books they wrote in the America-China Partnership Book Series published in English and Mandarin in 2009-2010. They founded the America-China Partnership Foundation and Forum in 2008 and the Center for America-China Partnership in 2005. E-mail: [email protected]