BEAUTY OR THE BEAST: WESTERN COMPANIES VS THE EAST (Fight For Market Share)

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There is nothing flawed about international trade in principal. Lets look at the second largest economy in the world, China https://www.worldbank.org/en/country/china/overviewand its trading partners in the West.

China began initiating market reforms in 1978, which included moving from a centrally planned market to a market based economy. As a result of its efforts China has seen its GDP grow on average 10% per year, which lifted approximately 61.5% of its 1.3 billion citizens out of poverty. https://www.worldbank.org/en/country/china/overview

Obviously China saw the importance of and benefits of having a market based economy, which explained its willingness to open up its country to Western Multi-National Corporations. China believed that its citizens and economy would benefit immensely from the 1978 Reforms, which proved to be correct as I discussed earlier. China’s reform also included facilitating Joint Venture Agreements between local companies and multi-national corporations, economic incentives to multi-national companies for doing business in China, collaboration with foreign countries and the facilitation of adapting to foreign technology. http://www.globaltimes.cn/content/1112977.shtml

Multi-National Corporations also saw the importance and benefit of entering into Joint Venture Agreements with Chinese Companies because of its vast and untapped markets. The opportunities at that time for both sides to achieve its desired goals were immeasurable while both sides benefited from the other. As a result of those agreements, Western Multi-Nationals didn’t mind sharing its intellectual property and the multi-nationals’ partners didn’t mind receiving it.

As China’s economy grew Chinese companies began to compete very successfully with its Western counterparts, which caused those companies to reevaluate its presence in China especially in light of their concern that those Chinese companies may be exploiting its intellectual properties that may have been obtained via Joint Venture Agreements. https://www.bloomberg.com/opinion/articles/2018-04-25/how-the-u-s-should-handle-china-s-high-tech-ambitions

Regarding those agreements, as with any contract there are certain terms and conditions, which both parties agree to abide by. Generally, such agreements call for China to allow multi-national companies into its markets in exchange for those companies sharing its intellectual property. Before such an agreement is finalized, both parties thoroughly review its terms and conditions and make their decision to sign said agreement based upon their individual interests and objectives.  

I assume that Joint Venture Agreements are not negotiated in a vacuum and that both sides are accompanied by competent legal representation. I also assume during those negotiations that both sides have ample opportunities to recommend counter terms and conditions, which they hope will become part of the final Agreement.

If after those negotiations one side believes that the negotiation did not result in its desired outcome that party certainly has the right to walk away from that deal. Often time greed takes over reasonable thought and objectivity when it comes to money, which result in agreements being signed under silent protest. 

Can either side refer to the other as the Beast?

Lets consider the side of the multi-national companies who are now concerned and frustrated by the terms and conditions of the Joint Venture Agreement that they had signed earlier. They may refer to China as the Beast because it refuses to renegotiate those terms and conditions. With that said, I am not aware of China jailing leaders of multi-national companies who decline to execute Joint Venture Agreements with local Chinese companies, if so we would have definitely heard about it.

In fact, there would have been an outcry from that company’s home State and a demand for action at the United Nations. 

China may consider the multi-national companies as the Beast because it didn’t force those companies to enter into those Joint Venture Agreements. Sure, China may have a take it or leave it policy when it comes to multi-national companies entering its markets, but those multi-nationals are big boys and knew exactly what they were agreeing to. With that said, now that China has evolved into the 2ndlargest economy it certainly doesn’t need Western intellectual property to maintain its current growth. 

Western companies are now pushing back against China’s insistence that they sign Joint Venture Agreements, which requires the sharing of intellectual property with local Chinese Partners. Western Multi-National companies in the United States are urging their government to force China to drop that term and condition for entry into the Chinese market. https://www.nytimes.com/2018/11/28/us/politics/intellectual-property-trump-xi.html

Are there other markets that multi-national corporations can enter, of course there are but none as large or potentially lucrative as China’s.  So who’s the Beauty and who’s the Beast?

For multi-nationals, China was initially the great wall of beauty until Chinese companies began to compete with them. For China, Western Multi-Nationals initially looked like a beautiful silk road to economic prosperity and industrial growth. Now both sides view each other as the Beast.

No one wants a repetition of the Smoot-Hawley Act. That law imposed tariffs on multiple countries, which benefited Russia as other countries shifted their

There is nothing flawed about international trade in principal. Lets look at the second largest economy in the world, China https://www.worldbank.org/en/country/china/overviewand its trading partners in the West.

China began initiating market reforms in 1978, which included moving from a centrally planned market to a market based economy. As a result of its efforts China has seen its GDP grow on average 10% per year, which lifted approximately 61.5% of its 1.3 billion citizens out of poverty. https://www.worldbank.org/en/country/china/overview

Obviously China saw the importance of and benefits of having a market based economy, which explained its willingness to open up its country to Western Multi-National Corporations. China believed that its citizens and economy would benefit immensely from the 1978 Reforms, which proved to be correct as I discussed earlier. China’s reform also included facilitating Joint Venture Agreements between local companies and multi-national corporations, economic incentives to multi-national companies for doing business in China, collaboration with foreign countries and the facilitation of adapting to foreign technology. http://www.globaltimes.cn/content/1112977.shtml

Multi-National Corporations also saw the importance and benefit of entering into Joint Venture Agreements with Chinese Companies because of its vast and untapped markets. The opportunities at that time for both sides to achieve its desired goals were immeasurable while both sides benefited from the other. As a result of those agreements, Western Multi-Nationals didn’t mind sharing its intellectual property and the multi-nationals’ partners didn’t mind receiving it.

As China’s economy grew Chinese companies began to compete very successfully with its Western counterparts, which caused those companies to reevaluate its presence in China especially in light of their concern that those Chinese companies may be exploiting its intellectual properties that may have been obtained via Joint Venture Agreements. https://www.bloomberg.com/opinion/articles/2018-04-25/how-the-u-s-should-handle-china-s-high-tech-ambitions

Regarding those agreements, as with any contract there are certain terms and conditions, which both parties agree to abide by. Generally, such agreements call for China to allow multi-national companies into its markets in exchange for those companies sharing its intellectual property. Before such an agreement is finalized, both parties thoroughly review its terms and conditions and make their decision to sign said agreement based upon their individual interests and objectives.  

I assume that Joint Venture Agreements are not negotiated in a vacuum and that both sides are accompanied by competent legal representation. I also assume during those negotiations that both sides have ample opportunities to recommend counter terms and conditions, which they hope will become part of the final Agreement.

If after those negotiations one side believes that the negotiation did not result in its desired outcome that party certainly has the right to walk away from that deal. Often time greed takes over reasonable thought and objectivity when it comes to money, which result in agreements being signed under silent protest. 

Can either side refer to the other as the Beast?

Lets consider the side of the multi-national companies who are now concerned and frustrated by the terms and conditions of the Joint Venture Agreement that they had signed earlier. They may refer to China as the Beast because it refuses to renegotiate those terms and conditions. With that said, I am not aware of China jailing leaders of multi-national companies who decline to execute Joint Venture Agreements with local Chinese companies, if so we would have definitely heard about it.

In fact, there would have been an outcry from that company’s home State and a demand for action at the United Nations. 

China may consider the multi-national companies as the Beast because it didn’t force those companies to enter into those Joint Venture Agreements. Sure, China may have a take it or leave it policy when it comes to multi-national companies entering its markets, but those multi-nationals are big boys and knew exactly what they were agreeing to. With that said, now that China has evolved into the 2ndlargest economy it certainly doesn’t need Western intellectual property to maintain its current growth. 

Western companies are now pushing back against China’s insistence that they sign Joint Venture Agreements, which requires the sharing of intellectual property with local Chinese Partners. Western Multi-National companies in the United States are urging their government to force China to drop that term and condition for entry into the Chinese market. https://www.nytimes.com/2018/11/28/us/politics/intellectual-property-trump-xi.html

Are there other markets that multi-national corporations can enter, of course there are but none as large or potentially lucrative as China’s.  So who’s the Beauty and who’s the Beast?

For multi-nationals, China was initially the great wall of beauty until Chinese companies began to compete with them. For China, Western Multi-Nationals initially looked like a beautiful silk road to economic prosperity and industrial growth. Now both sides view each other as the Beast.

No one wants a repetition of the Smoot-Hawley Act. That law imposed tariffs on multiple countries, which benefited Russia as other countries shifted their purchases from the United States to Russia and elsewhere. https://www.washingtonpost.com/news/wonk/wp/2018/07/09/sorry-china-this-isnt-the-largest-trade-war-in-economic-history/?noredirect=on&utm_term=.d20881385c2a

The answer to such an inquiry is unknown and if history is any indicator, it will lead to a trade war that will leave one side walking away with an economic limp or possible being placed on an economic respirator.

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Allen Thomas