Wednesday, November 07, 2007

Will GA be an American or Chinese company?


Suppose there exists one American company called GA (something like General American Company). Before 1991, most of GA’s production and sales are taken place in the United States of America. Since 1991, GA has expanded into China over the last sixteen years. Its production and sales about evenly distributed in the two countries: China and USA.

Let’s expect GA’s growth rate in USA in the 10% range while its growth rate in China in the 20% range. It is expect that in some future time, GA’s production and sales are mostly taken place in China.

Now the question arises when people in China ask GA to move its headquarters from USA to China. If GA does not make such a move, China will take necessary steps to penalize GA.

Let’s suppose that the USA does not like such a move. The USA’s argument is that GA has always been an American company. So GA should not make such a move. Otherwise, the USA will take necessary steps to penalize GA.

What GA should do in this case? Will it split itself into two separate entities? Or a new corporate structure will emerge? Like dual-citizenship, can a corporation take dual corporate citizenship as well?

Globalization will have challenge questions for corporation to solve over the coming decades. Will politics or economics determine the final solutions?

Over the last several years, the US stock markets have done very poorly relative to the international markets, especially the emerging markets. I am thinking if there are delayed impacts of globalization for American companies.

Supposedly the American companies have the necessary capital and resources to compete with other international companies in the global market. Why don’t these benefits show up in their books?

One possible reason is that these American companies have heavy initial investments which need many years before they can show up in there books. How long is the delaying period if there are such delaying impacts?

If there are no such delayed impacts of globalization, then why American companies bother to move its production bases to China or its service enters to India?

I resort to believe that there is a delaying period for American companies to harvest the globalization benefits.

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