The author is Alberto Forchielli, founder of Sino-Europe private equity firm Mandarin Capital Partners
The ring of tensions between Washington and Beijing has just earned another diamond, one of the most precious gems.
After years of investigations, the Department of Justice in the U.S. has accused five Chinese military officials of illegal activities aimed as industrial espionage and information security.
Essentially, they accused the Chinese military of training its agents to fraudulently steal industrial property, presumably of high sophistication. The U.S. Federal Bureau of Investigation published photos of the five researchers.
China’s reaction was very hard, not only because the soldiers "lost face" symbolically, but also because their pictures were preceded by the words "wanted," like outlaws in the Old West or gangsters in Chicago.
China has refuted the accusations and has accused the U.S. of managing the biggest espionage information network in the world, citing recent examples in the media.
As a first response, the incident interrupted the China-U.S. Cyber Working Group. The U.S. was therefore not reticent in taking strong measures, knowing that incriminating the military officials would have pointed the finger at political leaders.
Evidently, the bilateral climate is tending strongly toward anti-Chinese positions, where even supporters of a pragmatic relationship with China are in the minority for the paucity of results reached.
It’s only the latest source of tension that’s fueling a dangerous decline in rapport between the two superpowers: from the containment of China in the Pacific to the worries over the reinvigorated relationship between Beijing and Moscow, from the arms sales to Taiwan to the nondisclosure of facts regarding Pyongyang’s regime.
Even if resounding, Washington’s decision is not unexpected. For a long time, Germany and Austria have been working to contain the dangers of Chinese industrial espionage, after being involved in political spying with the U.S.
Intelligence agencies are worried about two aspects of cyber spying: the military-political implications, given the country’s central role in the West’s chessboard, and industrial implications that could lead to economic successes or cyclical declines.
Competent authorities recommend caution to businesses: avoid the diffusion of sensitive materials, business emails, speaking about patents, and discussing discoveries over the phone. They seem like trivial worries, but they are strengthened during trips to China or when receiving business delegations.
The fear is shared by businesses that gave uncontainable instructions over the phone to employees, especially to top management.
This worry stems from a phase of declining investments in Germany. It’s simultaneously cause and effect. In principle, all of the pretexts for an advantageous exchange exist.
German Mittelstands (which is to say, the biggest in terms of PMI, production capacity, innovation, and export) are the most desirable targets for Chinese investors that need quality and have the financial resources to buy them.
Chinese manufacturing capabilities and the promise of a limitless market are the dreams of every European business—both nightmare and fantasy.
In any case, Chinese acquisitions in Germany are declining. According to the German Trade and Invest Institute, there were 593 acquisitions of German companies in 2013, of which 99 ended up in U.S. hands, 63 in the U.K.’s, 53 in Swiss, 30 in French, and only 7 in Chinese hands, and none of which were large.
Expectations of currency inflows from China have been disregarded, involving an army of consultants and analysts that predicted an easy marriage of interests.
There’s no doubt Chinese inexperience is among the causes. Managing complex situations, respecting rules and customs, and dialoguing with social groups to guarantee welfare have not been among their best qualities that characterize Beijing’s explorations overseas.
Larger doses of humility and respect for international laws would have been needed.
It was probably this very fear of sacrificing these aspects of dear, old Europe that discouraged German companies from having complete faith in their Chinese counterparts even though they had all the requisites to become credible business partners on paper.
For now, German technology seems to be a postponed interest for the Chinese, because attempts to buy it are based on a different prerogative.
You can buy a company, but the socioeconomic model is not yet for sale.
(The article has been edited for clarity)