There was a good article in the New York Times on Saturday that describes the turmoil for a company called Aixtron, a German high-tech business. Several business news outlets reported the sale of this company to China's Fujian Grand Chip Investment Fund LP (FGC) in May. What the Times article does is give the back story to how this purchase came to be. If we want to play with Chinese investments, it is a good thing to know how they play. More important however is the central question the article poses: How do we treat bids that cross between private investment and state-orchestrated takeovers?
The cancellation of an order at the last minute put Aixtron's stock on a downward spiral. The company that pulled the plug on that order was San’an Optoelectronics, another Chinese company with funding from some of the same people who worked out the M&A on Aixtron. The story in the Times documents the connections between the different companies that were related both to the purchaser and the business relationships Aixtron had in China. This purchase and one other major one made Germany the biggest recipient of Chinese capital in Europe. German concerns about technology transfer are well founded.
The biggest mistake we make in dealing with China is believing their businesses are just like ours - independent of government, managed by Boards with their own independence, and acting in their own self-interest. The only interests they serve are those of the central government.
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