The China Fix
China Economic Forum
By James McGregor
In my more than two decades in China, I have seldom seen the foreign
business community more angry and disillusioned than it is today. Such
sentiment goes beyond the Internet censorship and cyberspying that led
to Google's Jan. 12 threat to bail out of China, or the clash of
values (freedom vs. control) implied by the Google case. It is about
the perception that antiforeign attitudes and policies in China have
been growing and hardening since the global economic crisis pushed the
U.S. and Europe into a tailspin and launched China to its very
uncomfortable stardom on the world stage.
Visiting CEOs' banquet-table chatter is now dominated by swapping
tales of arrogant and insolent Chinese bureaucrats and business
partners. The litany includes purposefully inconsistent and
nontransparent enforcement of regulations, rampant intellectual-
property theft, state penetration of multinationals through union and
Communist Party organizations, blatant market impediments through
rigged product standards and testing, politicized courts and agencies
that almost always favor local companies, creative and selective
enforcement of WTO requirements ... The list goes on.
The foreign business community in China has deep respect and affection
for the Chinese people and their hard-earned success. But more than a
few foreign business leaders are asking themselves if they have been
bamboozled by the system. Multinationals have been solid citizens in
China, handing over heaps of capital, technology, training, source
code, best practices and proprietary products to joint-venture
partners they were forced into bed with. They have funded schools,
orphanages, disaster reconstruction, overseas scholarships and all
manner of poverty-alleviation programs. But now that the China market
matters more to them, it appears that China couldn't care less.
Increasingly difficult China-market access is the immediate worry. But
many are looking ahead and losing sleep over expectations that their
onetime partners are morphing into predators — and that their own
technology and know-how will be coming back at them globally in the
form of cut-price products from subsidized state-owned behemoths.
At the same time, I have also seldom seen the Chinese government and
business community more unsettled and uncertain. Theirs is an
arrogance borne of insecurity. The global financial chaos and China's
rocketing global status threw off the meticulous national development
schedules carefully crafted by the risk-averse and surprise-allergic
engineers who run the Party.
The pressures on Chinese President Hu Jintao and Premier Wen Jiabao
are overwhelming. They are white-knuckling their way through their
final two years in office, focusing on 8% or higher growth and
crushing any dissent that could derail it. The Chinese people are
generally pretty happy, but the Party leadership is terrified of their
outsized expectations. People under age 40, the progeny of the one-
child policy, didn't live through Maoist poverty and upheaval. They
are pampered, impatient and demanding. They consider exponential
growth as a basic benchmark of life, and access to information to be a
civil right. China's rich are powerful opponents of further reform and
opening. They made money the local way and are determined to block
foreign competition so this can continue.
In their spare time, China's leaders are reaching under the carpet to
tackle the country's endemic corruption, epidemic pollution, emaciated
health care, shredded social services, entrenched industrial
overcapacity and swiftly aging population, to name a few. They have
little remaining bandwidth, and no experience or desire to be the
visionary and magnanimous world leaders who can look beyond China's
own often desperate needs that the world wants them to be.
So both Chinese and non-Chinese have legitimate challenges and
understandable phobias. Google is just a proxy in this intensifying
dispute. It's really about rebalancing the economic and political
dynamic between China and the developed world, with the U.S. as the
key negotiator for the West. It won't be easy. China and the U.S. are
past masters at blaming their domestic policy failings on outsiders.
Finger-pointing politicians and chest-beating nationalists in the two
nations will make rational discussion nearly impossible. Yet it is
time for leaders on both sides of the Pacific to lift their heads
above overwhelming domestic concerns and fix China's deteriorating
relationship with foreign business and the developed world before
things get out of control. One thing's certain: they won't find the
answers through Google.
McGregor, a senior counselor for APCO Worldwide, is a former chairman
of the American Chamber of Commerce in China and author of One Billion
Customers: Lessons from the Front Lines of Doing Business in China
Read more: http://www.time.com/time/magazine/article/0,9171,1955426,00.html#ixzz0kDFwQno8