Fletcher in the News

Dean Bhaskar Chakravorti On China’s Successful Purchases of U.S. Companies

Bhaskar Chakravorti is a Senior Associate Dean at The Fletcher School of Law and Diplomacy, Tufts University.

Why China is Buying up the US

In the 1980s, a string of purchases of iconic U.S. assets by the Japanese – from Rockefeller Center to the Pebble Beach golf course – stirred up national anxiety about losing our status as world leader, and at least a little xenophobia.

A recession killed off the trend. But a similar wave is now under way.

This one has Chinese buyers aggressively picking off U.S. icons – most recently, the Sunday ham, pork sausages and many of our beloved movie theaters. Chinese direct investment in U.S. companies – as opposed to debt or stock purchases – shot up 42.5% in 2012, to $6.7 billion, according to Rhodium Group, a New York-based research firm. It’s on track to jump again this year, with $2.2 billion worth of deals announced in the first quarter and an additional $10 billion in the pipeline, Rhodium says….

…The biggest ever Chinese purchase of a U.S. company was announced May 29 when Shuanghui International said it plans to buy hog producer Smithfield Foods (SFD) for $4.72 billion. The deal makes sense on many levels, but it may bring risks for U.S. consumers.

First, the benefits. Pork is a mainstay in the Chinese diet. With a growing middle class able to afford more meat, China is going to need a lot more pork, says Bhaskar Chakravorti, [senior] associate dean of international business and finance at the Fletcher School of Law and Diplomacy at Tufts University. Plus, the Chinese buyer gets access to trade secrets on the best way to raise pigs, including inside research on pig genetics.

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