September 25, 2020 at 09:25AM

As China grows in its economic and military strength, global investors and companies operating in the country face a dilemma, according to one analyst. “China is converting its economic growth into military power, and I think here is the true dilemma for those that seek to invest in China. It’s understanding precisely what you are investing in, what is going on here,” said Jonathan Ward, founder of advisory firm Atlas Organization.

Speaking at the inaugural Jefferies Asia Forum last week, Ward said there are many Chinese corporations — including those in the aerospace, tech and construction industries — that are “backed by the military.” As the line between state and business blurs, it becomes harder for investors to know how much control the Chinese government has over the company, and how independent the business might be.

China’s defense spending has grown and is now greater than all its regional neighbors combined, Ward said. He cited the Pentagon’s latest report on Chinese military developments and said China’s ground troops, as well as its navy, air and missile forces, were among some of the largest in the world.

Beijing has also declared that the U.S. a threat to world peace, Ward said. China’s Defense Ministry spokesman Col. Wu Qian had said earlier in September: “Many years of evidence shows that it is the U.S. that is the fomenter of regional unrest, the violator of the international order and the destroyer of world peace.”

Ward added that American multinational companies are going to need to align with the U.S. government’s long-term national security goals. To win against China, the U.S. needs to remain the world’s leading economic power and American companies have to win the global competition against Chinese firms, Ward said. It’s also essential to maintain the military edge over China, he added.

China’s growing economic and military strength can be a ‘dilemma’ for U.S. investors, CNBC, Sep 25

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