Saturday, January 30, 2010

Ryan Pyle Blog: The China Fix


Every now and then you read something that completely captures the moment. It's not just a case of great journalism but also a case of vast experience, knowledge and the canny ability to step back from a situation and see it clearly and objectively. Below is just such a piece of writing.

The timing is important because Google have called out China and support from other tech companies is thin. Few are willing to stand up against what many consider a harder stance and more threatening business environment in China. James writes with an openness, an honesty and with two decades of China business experience. Please read below:

Online LINK: The China Fix

Copywrite: James McGregor
Monday, Feb. 01, 2010
The China Fix
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. (Read "Google Ends Policy of Self-Censorship in China.")

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. (See "Google Earth Adds Historical Photos.")

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. (See the top 10 Google Earth finds.)

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

Ryan Pyle

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Ryan Pyle