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China's global business strategies have met mixed results, correspondent says

A radio station in a hurricane ravaged community. Rocket scientists going back to school. An auto parts maker in Illinois.

These divergent role players in China's ever-widening global activities were among the things discussed during a recent briefing for reporters, scholars, business executives and consultants and other interested people on the campus of Indiana University-Purdue University Indianapolis.

John Pomfret, an award-winning journalist and diplomatic correspondent for The Washington Post, shared his view of China's "Going Out" strategies using the media, education, science and technology and foreign investments. He also spoke to reporters and IU students and faculty in Bloomington.

The experienced Asia correspondent told a group of about 40 people convening at the Kelley School of Business that China's efforts, while ambitious, also have met with mixed results.

He cited as an example China Radio International's acquisition of a struggling AM radio station in Galveston, Texas, which it erroneously felt would reach the Houston market about 50 miles away. CCTV, which airs on American cable and satellite television systems, often is buried among the many offerings and shows that don't attract U.S. viewers.

"While they have a very serious motivation, to change the narrative about China around the world, they often spend an enormous amount of money without any bang for their buck," Pomfret said.

China today remains at a relatively low level of development and "really wants to move up the food chain in terms of innovation," he said. It has more than 100,000 students enrolled at U.S. universities as well as more than 70,000 in Australia and many others at institutions across Western Europe to study management, engineering and science and technology.

"China wants to bring many of those students back … to also bring the top-level technologies back to China. This includes pharmaceutical technology; it includes military technology. Indeed, Chinese missile engineers are studying in the United States," he said. "This is fascinating. We have this sometimes difficult relationship with China's military, but nonetheless we have an open educational system in which people can study anything they want.

"Many of these people have gone back to China to help with military modernization and science modernization," Pomfret said.

Back in China, the government has poured billions into developing science and technology. For example, the National Institute of Biological Sciences in Beijing is totally staffed by people who had green cards to study in the United States. Interestingly, for now, it is the only national research institute that does not have a Communist Party committee, which was a requirement for all of the returnees.

While China has actively pursued education and development, it also has been marred by the fact that it is the No. 1 country in the world in terms of "junk patents," based on plagiarism and unsubstantiated research.

In terms of diplomacy, Pomfret said China has had several missteps recently, including with its handling of Nobel Peace Prize winner Liu Xiaobo and aggressive relations with Japan, Vietnam and other countries in Southeast Asia.

Perhaps of more interest to many Americans have been China's foreign investments, which have increased substantially over the course of the last decade and now have reached between $50 billion to $60 billion. Most of that funding has gone into countries with significant natural resource development, including Australia and its natural gas, iron ore and coal supplies and Brazil and its offshore oil and agricultural potential.

"The Chinese in many ways are more adept at competing in that global marketplace than many American companies," Pomfret observed. "In China, the foreign aid budget is run out of the Ministry of Commerce, so they can target their aid … in a much more deal-focused way."

He said the Chinese remain interested in investing in the United States, primarily by private enterprises, rather than state-owned enterprises. Politically motivated investments -- where "the Chinese bring money in to employ Americans to make good with the United States" -- are being phased out.

More common are Chinese strategic investments for the purposes of obtaining technology and companies that create local American affiliates so they can make money here.

As an example of the latter, Pomfret cited Wanxiang Group, an Elgin. Ill.-based auto parts maker that employs about 5,000 Americans.

"The Wanxiang model is probably the most sustainable model and the most politically palatable model for this country, because they're really interested in growing in this country," he said. "They also believe in American manufacturing and leveraging what we do well here to what they do in China."