China Will Play a Role in the Microsoft-Yahoo Deal

Implications: China’s influence is felt in technology, medicine, toys, food, banking, and now the Internet. The question of whether or not China will play the role of conciliatory or a nationalistic role on the world stage is an important question but in the scheme of things not completely relevant. The real question is what will companies have to do to get approvals period?

Analysis: The mere fact that China is playing any kind of role is important.  It means that one day they can be nice and the next day not so nice.  The Chinese market is far more important than the European market and is fast becoming more important than the U.S. market.

Frankly, China uses the U.S. as its benchmark for all things.  Europe is nothing more than a place to do business for China.  Africa is far more important to China that Europe.

Africa is a massive trading partner for China.  Africa is a source of many raw materials and minerals that cannot be easily obtained in China.  These resources can be used to support China’s technology complex.

China is a massive market.  The Chinese government is obviously thinking through all of the issues involved in propelling the country into the 21st Century and beyond.  Despite global protests in the areas of intellectual property for the last dozen years, very little other than lip service has been done.  Yet, technology companies charge into the country with careless abandon.  It is absolutely amazing what money can do.

Now that the entire world is focused on China, aside from the Olympic Games, China can flex its regulatory muscles and start laying down the law to the rest of the world.  From a business perspective this is absolutely frightening.  Europe is almost a non-issue to many investors.  By the way decreasing importance spells opportunity to me – I love vacuums but that is just me.

Most investors are all focused on making fast and large returns in China.  Now China will be setting the rules.  There is absolutely no way a combined Microsoft-Yahoo will be allowed to operate in China without some sort of significant “quid pro quo”.  Goodness knows what Microsoft will have to do to get a deal done now.

On the one hand the situation is alarming.  On the other hand you have to admit when you know you (China) are holding all of the cards you may as well play the hand for all it is worth.