Beijing and Washington: On a Collision Course?

Post the Occupy-Hong Kong protests, Dr Mark Michelson explores whether foreign business is seemingly less welcome in China than in the past 


“Washington demanded that [US Consulate in Hong Kong] continue to forge ahead with the democratic movement in Hong Kong advocated by community and social forces and to promote adolescents to play pioneering roles in social movements…”
Zahongguo Xinwen Wang, website of China’s official news service for overseas Chinese


Accusations by China-affiliated media, officials and friends in Hong Kong that the US government and “associated” groups have helped train and organize the tens of thousands of mainly young people blockading city business centers underline the generally deteriorating relations between the US and Chinese governments since Xi Jinping became president and Barack Obama began his second term.

This often adversarial relationship has adversely affected Americans and their companies and other organizations operating in China. While this situation has contributed to increasing demand for public affairs consultants, American and other foreign firms and individuals have been subjects of investigations and prosecutions by Chinese authorities related to various areas including corruption, antitrust violations and possession or exchange of sensitive information.

A survey of its members by the American Chamber of Commerce in China during August 2014 revealed that 60% of respondents believed that foreign business is less welcome in China than in the past, compared with 41% in late 2013. Half of them agreed that foreign companies were being singled out in recent government and media campaigns against corruption and “high prices” for products and services. Microsoft, Apple and leading US, European and Japanese car and auto parts makers have been among the targets of these accusations.

AmCham reports “growing perceptions that multinational companies are under selective and subjective enforcement by Chinese government agencies. More specifically, the report cited the government’s “discriminatory use” of the antimonopoly law to favor its industrial policy and domestic companies, and raised the possibility that pressuring foreign firms to cut prices may “violate Article XI:1 of the GATT 1994, which generally prohibits restrictions on the importation of goods.”

The productive discussions between Presidents Xi and Obama on the fringes of the APEC and G20 meetings in November may have lowered the bilateral temperature – for a while. By finding common ground on complex and divisive issues such as climate change, IT, services and rules on air and maritime encounters in the Pacific, China appears to have taken a step back toward the system of dialogue with the US and its other main economic partners and toned down the nationalistic rhetoric.

Yet tensions between China and the US and various Asian countries will persist and could well worsen. Not only the US, but Australia, Japan and various ASEAN countries are increasing military spending and relationships that reflect unease about China’s intentions as the fast emerging great power. TIME’s Emily Rauhala’s description of Beijing’s attitude toward hosting the APEC meetings — “We’ll be cordial, but this is a new era, and we can play by our rules “ – resonates with the US and many of China’s neighbors.

Domestic political considerations will play an increasingly important role in the Sino-US relationship in the next two years as a beleaguered President Obama approaches the end of his final term in office and President Xi revs up his campaign to strengthen his power and authority in the run-up to 2017 Party Congress to secure selection of his supporters as the new members of the Standing Committee of the Politburo. With both houses of Congress now controlled by the Republicans and competition for the 2016 presidential nomination already begun, China and the Obama administration’s China policy is likely to be increasingly under attack. The proposed revival of the Hong Kong Policy Act requiring regular reports to Congress on the SAR’s “political status” is one example.

In China, campaigns against corruption and anti-trust violations may intensify, with foreign, especially US companies and NGOs expected to continue to be tempting targets. At the same time, more international firms may find greater difficulty in gaining access to various sectors reserved for domestic companies. Potential geopolitical confrontations in the South or East China Seas or over Hong Kong or Taiwan, especially after the “pro-independence” DPP’s strong resurgence in December’s local elections, would exacerbate this situation.

All of this means challenging times for US and other international companies/organizations in China. The current Rule of Law campaign, including anti-corruption and anti-monopoly investigations, has regarded them as easy targets for regulatory action, at both local and national levels. US and other foreign organizations still can succeed in China, but will need to develop and implement an effective public affairs strategy that involves key stakeholder identification, relationship-building and determining how best to contribute to helping Chinese leaders achieve their economic priorities.

Dr. Mark Michelson is Chairman, Asia CEO Forum at IMA Asia

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