The Surprising Ways That China is a Part of Our Lives
Did you eat a Smithfield ham sandwich today? Go to an AMC multiplex? Drive a Volvo?
The ham, the movies and the car are from Chinese companies.
One reason that Hong Kong based Shuanghui International bought Smithfield is because China needs more pork. Although close to 476 million pigs now reside in China and they even have a Strategic Pork Reserve (not as easy to preserve as the oil in a Strategic Petroleum Reserve), they need more. As increasing numbers of Chinese households enter the middle class, they eat more meat. The result? A Chinese company makes a foreign direct investment (FDI) in the United States so it can export US pork to its homeland. Both countries win. China ups its pork supply and the US has more exports.
Our story began when Shuanghui bid $34 a share for NYSE-listed Smithfield and its stockholders overwhelmingly voted “yes.” But the acquisition had to be approved by the US government Committee on Foreign Investment in the United States. Even though it was the largest Chinese takeover of a US company and one Senator expressed concern about foreign control of the US food supply, the committee concluded that the takeover was not a national security threat. With the Bloomberg Smithfield page saying, “acquired,” by the end of September it was a done deal.
Looking at OECD worldwide stats, the US is #1 and China, #6 for outgoing FDI.
This is where the Chinese money is going:
Also, I was curious about whether these Chinese firms were government controlled:
Finally, I can’t leave a discussion of global trade without thinking that 19th century economic thinker David Ricardo would be applauding as he reminded us of comparative advantage.
Sources and resources: USA Today had the best stories on the Smithfield deal, an OECD study, a Heritage paper, and detailed research from Rhodium had the statistics. H/T to Quartz for alerting me to the topic.