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PAC 52 – An Erroneous Concept of Power The Acquisition of European Firms by China

By Alexandre Bohas

Translation: Davina Durgana

Passage au crible n°52

Many observers are moved by the iconic movement of firms operated on the Old Continent by the Chinese, while at the same time, they regret the outsourcing and Foreign Direct Investment of European firms outside of Europe. In these two cases, these Cassandras were saddened by a decline. This leads us to further define the concept of power in order to better understand the multi-dimensional relations of power that have taken place on the world stage.

Historical background
Theoretical framework

Historical background

In recent years, Chinese companies have invested heavily in Europe taking advantage of the weak economies. Making headlines, they have acquired leading companies such as Volvo (Sweden), the Chateau de Viaud (France), Club Med (France), and Rover (Great Britain), but also specialized and innovative entities such as Medion (Germany), Elkem (Norway) or BorsodChem (Hungary), as well as logistics and distribution companies, such as Marionnaud (France), the Port of Piraeus (Greece) and Priceminister (France).

In total, from 2007 to 20100, Foreign Direct Investment by China grew by 339% compared to 133% in North America and 115% in South America. Representing 64 Billion Euros for the single period of October 2010 to March 2011, they have pursued foreign exchange reserves in China amounting to public value of 3,620 Billion Euros. In other words, the opportunity to acquire the 80 largest firms in the Euro area has emerged. Note, however, that there are presently only 2% of invested funds from outside the European Union.

These acquisitions mean, without a doubt, a dependence on Chinese companies, technology transfers in their favor and up-market moves. Some relate this breakthrough to the policy of Beijing Zouchuqu (“Spirit of Conquest”), which supports the commercial ambitions of its companies thanks to Eximbank, a dedicated credit agency. All of these issues have not failed to cause many hostile reactions in Europe, a continent engaged in a financial crisis and anticipating economic recession.

Theoretical framework

1. An Irreducibility of Power to the Sum of Assets. Power must be seen structurally as the result of political, cultural, social and economic arrangements. It must not be understood in a substantive manner, as this does not hold. In other words, we could not in a strict sense, have power, but still remain powerful. So it is important to abandon the Neo-Realist ontology that evaluates power according to only a small number of divisions, such as military or economic strength.
2. A Competitiveness of Actors in Interdependence. Far from pervasive Neo-Realism, it must be seen that competition is based on complex interdependent relationships: these territorial collectivities benefit from direct and indirect foreign investment of non-state actors such as these most recent thanks to strategic locations in centers of excellence developed with private-public partnerships. If Neo-Classical economists – following the studies of Heckscher-Ohlin-Samuelson or Michael Porter – rightly use an abundance of production factors to explain international trade, and take into consideration contemporary globalization resulting in a triple transnationalization: such as in trade, firms and investments.


As with Western firms, the Chinese seek to hold transnational corporations through their purchases of intangible assets mainly such as new technologies, notoriety and ingenuity as reflected in the icons and symbols of European luxury products. The value of these has increased in a configuration of a saturated market and characterized by a homogenization of production for demanding clientele. Now, the experience of consumption, rather than simply purchasing products, has created the value that Chinese covet and seek to acquire. Note how these narratives will always be inherently commercial creators and associated with high technology research centers of the Old World, all from its own place and particular culture. Additionally, they develop thanks to the institutional concentration and socio-industrial tissues that relocation would reduce to nothing.

Additionally, the innovation and business management taken over by the Chinese are the result of “symbolic manipulators” (R. Reich), whose functions are not easily interchangeable. In fact, the different steps of production require highly qualified and well-paid workers. One understands better, in this regard, the issues of information, knowledge, and the crucial place accorded to research. In other words, the non-replication of work accomplished has proven to be the main foundation of European power and its value worldwide. The direct investments of China represent the source of future locations in Asia and a surplus of activity for Europe. Well-aided by the Beijing government, they are based on firm strategies that have estimated the potential of more promising growth potential than other assets existing in the United States, Japan or even China.

Finally, these invested funds in the socio-cultural and symbolic domains and consecrate the dominance of the Western lifestyle and within which the Euro-American consumer functions as the principal client and Western societies are the reference. Such as one often sees in the Chinese consumer, a source of growth for the Middle Kingdom, it must be stated that this is not the case. These enterprises remain centered on the West, implicitly recognizing its global-economy despite the systemic crises and challenges to the system that the West is currently facing.

If care is taken to overcome a misconception of power, then it is impossible to jump to the conclusion today that these Chinese redemptions signify a systematic change in favor of the Asian continent.


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