A123 business plan changes

The connection may not be direct, but a lot our investments in the US do end up in the hands of the Chinese government, which in turn are used to prop up a lot of quasi state owned companies.

 

Can you name one directly to support this statement? I'm sure they probably do end up there (eventually) but, either way, its not a direct investment of my tax dollars. A123, and companies like it, are a direct and forced investment of my tax dollars. If my tax dollars are being directly invested in Chinese government owned companies, I'll be really pissed but, I still won't be able to do anything about it.

 

I would say china is subsidizing US domestic spending in two ways. They keep their currency artificially low, which reduces prices of imported goods. They buy US debt. Both reduce inflation and transfer money in the short term to US households.

Let us face it, things like Solyndra and Ener1 looked bad on paper when they were done, but this is only a small part of government waste. A123 looked promising when its grants and loans were made, but the government rules made it expand too fast as a condition of getting the money. This has in reality after this sale reduced the competitiveness of the only american company still in Li batteries JCI, and given money to Japanese, Korean, and now Chinese companies.

 

For all the talk in recent years about the extent to which China has embraced capitalism, huge sectors of the economy still have not fully done so: those dominated by the country’s 145,000 state-owned enterprises.

... Many Chinese economists argue that the biggest conglomerates, especially banks and the leading oil and telecommunications companies, have grown so large that they swallow a large part of bank lending, crowd out more creative small companies and line the pockets of the politically well connected. The state sector ultimately threatens to choke the country’s economic growth and even damage its political stability, they say.

... Companies in which the state owns a majority represent 35 percent of all business activity in China, according to official figures. Yet they earned 43 percent of profits last year. Their hammerlock on a long list of strategic industries has allowed them to charge relatively high prices for their goods and services, even as they borrow at artificially low interest rates from state-owned banks...

http://www.nytimes.com/2012/11/10/world/asia/state-enterprises-pose-test-for-chinas-new-leaders.html?pagewanted=all&_r=0

 

We cannot know for certain how much of our tax dollars go to support Chinese SOEs. But since China state banks hold a lot of our debt and receive interest payments from us, we can deduce that their SOEs eventually get some of our money via their state banks.

Note also that the Chinese government designates certain industries as key enablers for the long term development of their domestic capabilities. SOEs in those industries, e.g. aviation, automobile, etc. get special treatments in order to obtain foreign technologies and know-hows.

I would not be surprised if the A123 acquisition was a direct result of this policy.