Stanley's blog

The following article was published in New Europe on 12 July:

China is rightly proud of its achievements – particularly the way it came through the global and financial crisis – and also in its successful organizing of the Olympic Games and Shanghai Expo. But China faces the danger of the growth of protectionism. Protectionism will hurt everyone, but China probably the most.

This article addresses the key perceptions with which Beijing should be concerned, in order to reduce the risk of protectionism. Perception – and misperception – can be more important than reality, particularly in politics.

United States

Protectionism is likely to begin in the US, where a number of factors make it a real possibility that further measures will soon be taken. First, many Americans believe that President Obama was humiliated during his visit to China in November and at the UN Copenhagen Climate Change Conference in December. And very recently, Defence Secretary Robert Gates was snubbed when Beijing refused to meet him. Second, the views of James McGregor’s (a past chairman of the American Chamber of Commerce in China) expressed in the Washington Post of 19 May: “Time to rethink U.S.-China trade relations” are shared by a growing number of Americans.

The concern is over a perceived Chinese policy to build national champions through subsidies and preferential treatment, unfairly appropriating foreign technology. Joint ventures in key industries, local manufacturing requirements and forced technology transfers are the price of entry into the market… Many sectors are to remain “state dominated” and others will stay “largely in state hands”. Foreign companies face many legal and administrative hurdles, eg unreasonable standards and testing rules, local content requirements, discriminatory procurement policies and inadequate protection of intellectual property rights.

Third, the value of the RMB is a constant American concern. Successive administrations have resisted declaring ‘currency manipulation’ but the pressure for the government to act will mount, unless Beijing modifies its policy. And fourth, President Obama is unlikely to be able to risk taking a firm stand against protectionism, because it is mid-term election year; the trade unions advocate such measures, and they played an important part in securing an Obama victory; and, Democrats are generally more protectionist than Republicans.

The Europeans are not expressing themselves in the same tough terms as the Americans, but nevertheless see things similarly. Attitudes in Europe towards China are hardening. Protectionism may begin in the US but will inevitably spread to Europe. There is a feeling in Europe that China is becoming increasingly mercantilist and that access to the Chinese product and investment market is becoming more difficult for European companies.

China’s human rights record is regarded as regressive, particular on freedom of expression and, in particular, by the press and internet. China’s international policies are subject to serious criticism in Europe, as well as in the US. There is a feeling of increased Chinese assertiveness, and indeed aggressiveness. Europe does not, of course, have any geopolitical or military rivalry with China.

China is not seen to be acting as a ‘responsible stakeholder’ in several key policy areas, eg climate change, Afghanistan, Iran (despite its supporting the latest UNSC resolution) and Pakistan. Beijing is taking a tougher line over territorial claims in the neighbourhood.

China’s Africa policy is believed to be irresponsible because it ignores good governance and undermines other donors’ efforts. The support for appalling dictatorships, such as in Zimbabwe, is particularly criticized. (The West overlooks its own policy of supporting the dictatorships of oil-producing countries.)

What to do

What can China do about improving its image in Europe and the West? Misperceptions must be corrected by effective communication. Official communications need to be drastically improved and decentralized. Chinese NGOs should work in Africa alongside their western counterparts, which will help international NGOs to understand China better. Accurate perceptions must be addressed and compromises studied.
It is important to emphasize that this article is not judgmental, and merely identifies the main current perceptions and recommends action by the Chinese government.

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  1. “Joint ventures in key industries, local manufacturing requirements and forced technology transfers are the price of entry into the market…”

    It amazes me that the US and Europe business leaders will accept these heinous terms for short term profit potential. And a far worse one.

    But in all due respect, you left a very important one out. Lack of intellectual property assurance. I would dare say a complete disregard for it.

    It doesnot surprise me that the Chinese are the leading force in the price destroying world of counterfeiting to drive legitimate non-Chinese companies out of business. My company is a victim of it. And it has Military Level security that has been cracked. Likely with the help of the Chinese Government.

    Intel is having it’s i7 Nahalem chips counterfeited, when BMW’s X5 is counterfeited, when Russia notes that China is counterfeiting it’s MIG planes (and refuse to send them any more) when Italian motorbike manufacturer Ducati has to ask that companies selling counterfeits of their products outside of the Italian Motorbike Show … be removed.

    The supply demand curve gets destroyed when you can’t trust supply. Or that Chinese manufacturers are willing to steal product right from the production lines to sell locally.

    “It is important to emphasize that this article is not judgmental, and merely identifies the main current perceptions and recommends action by the Chinese government.”

    I can’t be so humble. It is my judgement that China has willful disregard of intellectual property rights.

    I can only conclude that Europe and North American business managers who willing to give their intellectual property away for short term profit gains, are disregarding and abandoning their shareholders interests.

    I take interest when class action suits are filed against those business managers.

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