Corporate America Turns Against China

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FOREIGN POLICY JULY 19, 2010

Corporate America Turns Against China

A couple of weeks ago, Jeffrey Immelt, the chief executive of General Electric, complained indignantly about China’s current and bitter hostility toward multinational corporations. According to the Financial Times, Immelt groused at a private dinner in Rome that the Chinese government was becoming ever more protectionist. “I am not sure that in the end, they want any of us to win, or any of us to be successful,” he said.

Immelt’s remarks point to a noteworthy shift in the dynamic that moves American policy toward China, one tinged with irony. Over the past two decades, the business community has been more upbeat about China than any other constituency in American society. Business leaders led the charge in loosening trade restrictions with China. They dismissed concerns about human rights with the argument that the simple presence of multinational companies in China would conduce to political liberalization.

However, over the past year or two, and to their evident surprise, their earlier assurances were revealed to have gotten things exactly backward. Immelt was merely the latest representative of corporate America to ring the alarm about restrictions on business operations in China, taking his cue from the leaders of Google and other major companies. Both the American Chamber of Commerce in Beijing and the European Chamber of Commerce in China have issued reports in recent months conceding that the business climate for foreign companies there has steadily worsened.

American and European companies have vied for centuries, through all of China’s upheavals, to dominate what used to be called “the China market.” Now, increasingly, China wants to keep that market for itself. It opened up to foreign companies in the 1980s and 1990s not because it believed in free trade or because it thought the visitors were wise and wonderful, but rather because it wanted their technology and know-how. But China no longer needs the multinational companies as it once did. The Chinese government has proved ever more adept at running an industrial policy that privileges its own companies, many of them state-owned.

In turn, the disenchantment of the Western business community colors the larger political and diplomatic landscape. In the past, corporate executives would lobby their presidents or prime ministers for an improved relationship with Beijing, one, needless to add, that would open the way for more investment and trade. That was the world Bill Clinton faced in the 1990s. But today, CEOs descend upon Washington or European capitals to ask their presidents or prime ministers to adopt a tougher stance with Beijing in commercial disputes.

Sometimes, even presidential appeals to China produce nothing. Last November, during Obama’s visit to the country, he made a quiet appeal on behalf of Xue Feng, an American geologist who had been jailed in China. An employee of an energy firm, Xue had been charged with stealing state secrets, accused of trying to purchase information about China’s oil industry. On July 4, despite Obama’s plea, Xue was sentenced to eight years in prison.

Occasional hints emerge that Obama himself has become irked—not so much at China as at the way his predecessors helped to bolster China’s position. Buried in a recent column about trade in The Wall Street Journal was this revealing tidbit about Obama: “He needles aides who worked in the Clinton administration that they let China into the World Trade Organization with a better hand than the one he had to play. Aides counter that China would be even more of a threat if not bound by WTO rules. He is un-persuaded.” (And who might be the aides in question? Among those who worked on economic issues in the Clinton administration are Treasury Secretary Timothy Geithner and Lawrence Summers, the head of Obama’s National Economic Council.)

Obama’s complaint amounts to this: When the United States had more economic leverage, it didn’t use enough of it. By contrast, now that China has economic leverage, it’s taking full commercial advantage.

Western business leaders still don’t seem to grasp fully the extent of this fundamental change. Some of them still speak as though they have the same clout they wielded in the 1990s. “The Chinese authorities should not take the presence and commitment of European companies for granted,” Jacques de Boisseson, the president of the European Chamber in China, said last month. “We do not want to have to vote with our feet to be heard by the Chinese government.”

He seemed to assume Chinese leaders would be dismayed if the companies departed. On the contrary: China might be happy to see them go.

James Mann has written three books on America’s relationship with China. He is an author-in-residence at Johns Hopkins University’s Paul H. Nitze School of Advanced International Studies.

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posted in: foreign policy, beijing, european, rome, washington, general electric, google, the financial times, america, china, america, american chamber of commerce in beijing, chinese government, bill clinton, jeffrey immelt, obama, xue feng

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