The roles have reversed: The United States (US) and the West from being champions of openness, lasses faire, free trade and responsible economic behaviour are suddenly looking inwards cum turning protectionist, and China – once regarded to be a closed kingdom – takes over as the new global economic leader by choosing to look outwards. Today, it promotes increased global trade, cross-invests its surplus in poor and developing economies, bids to connect the world through its one belt-one road vision, and from being a violator of green houses gases it, more than any other industrial nation of the world, champions the cause of environmental protection. Anyone accusing Chinese motives to be driven by greed will have a hard time explaining its rationale, as Chinese investment goes to regions that are high risk, poor or developing and may not necessarily yield high returns; at least in the short-term. Recipients include: Pakistan $50 billion, Indonesia $40 billion; Sri Lanka $20 billion, Myanmar: $10 billion, Liberia $6 billion, Kenya $15 billion, Iran $20 billion, the list goes on as the total outlay under the one belt-one road connectivity vision is set to surpass $1 trillion.

While some may argue that Chinese ultimate plan or goal is to establish its hegemony, but the reality is that its engagement is such that most recipient countries are confident that they will be able to safeguard their national interests when settling for inflows from Chinese investments and loans. They believe that they can not only harness a great opportunity to develop, but also gain access to new markets, which otherwise would have been impossible to reach. Also, by connecting so closely to China they feel that they will progress by simply piggybacking the most vibrant economy of the world. Obviously the US and the West would like to think otherwise, but the pendulum has perhaps already shifted and despite concerns being raised by them on China’s real economic health, the latest figures reveal otherwise. China’s economy grew by a healthy 6.9 percent year on year in the first half of this year (data from the National Bureau of Statistics released in July, 2017), and this has attracted considerable international attention. Also, the latest reports from the World Bank and the IMF tend to be generally optimistic about China’s growth, believing that China’s strong growth showing in infrastructure-investment and domestic consumption well support its goal of achieving an economic structure that sustains itself on in-house dynamics rather than having an over-dependence on international markets.

Meanwhile, China’s economic management philosophy in recent years has transitioned significantly. It is revisiting its toxic assets’ accumulation by ringing reforms in its national debt management practices; reducing overall financial risk by introducing responsible lending in its banking sector; and endeavouring to reduce excess manufacturing capacity by instead focusing on productivity. And the results on these steps are also already reflecting in recent figures: Value addition in high-tech industry showed an increase of 13.1 percent year-on-year. Online domestic consumption increased 33.4 percent year-on-year. The number of daily average new registered enterprises has moved up to 15,600. All this eye-catching data in China’s interim report bears testimony to the fact that its economy is finally seeing new drivers of growth.

However, the question then arises that if China is in essence vying to generate home grown growth then why is it investing so heavily abroad? Since the financial logic behind China’s spree of overseas mergers and acquisitions (M&A) is often hard to define, the answer to this question may also not be very cut and dry in financial terms and have more to do with attaining glory that takes China back to the economic leadership days of the Ming Dynasty. In the last 6 months alone, Chinese companies have announced cross-border deals worth $107 billion. Few bring any of the financial benefits typical of conventional M&A. So-called synergies are usually absent, and the buyers generally tend to leave the incumbent management in place. Analyze this more deeply and three factors seem to be at play: The first and probably the most likely driver is the desire to acquire foreign technology and management expertise. For example, the $43 billion offer by the China National Chemical Corporation, known as ChemChina, for Syngenta, the Swiss pesticide and seed giant, fits into this category. So does the $5billion bid by Midea, the Chinese appliance maker, for Kuka, the German robotics company. Such deals/offers appear to be motivated by the fact that even a minority stake may bring seats on the board of a target company and afford access to information otherwise behind closed doors. Such deals that are perceived to be in the national interest also benefit from cheap finance: China’s state owned banks lend at interest rate of 2% to finance acquisitions involving new technology or expertise.

Second, some of these Chinese acquisitions represent a search for value, compared with inflated asset prices at home. Chinese equities still look expensive: Shares on mainland exchanges trade at an average premium of 36 percent to shares in the same companies listed in Hong Kong. Overseas purchases also provide a hedge against currency devaluation, as well as diversification. For example, given the cheap financing available to most M&A, this notion perfectly fits the bill for China’s Anbang Insurance Group’s offer of $14 billion to Starwood hotels – the bid though was not accepted! Lastly, the third factor: These can be termed as ‘trophy’ purchases for China. They may lack financial logic but are a part of a broader political calculus. President Xi Jinping’s love of football helps explain the recent rush by Chinese buyers to purchase European football clubs. And when Mr. Xi recently visited New York, he stayed at the Anbang-owned Waldorf Astoria hotel – a privilege he must have felt to be beyond price!

The writer is an entrepreneur and economic analyst.