US-China Relations in the 20-Tweens
International managers and business owners in Shanghai have well-earned reputation for ignoring big-picture international politics and focusing exclusively on the business at hand. Let Beijing and Washington talking-heads blather on about the state of the world – Shanghai and New York are all about the business.
That blissful neutrality may be coming to an end in 2010. Look for national tensions to filter down to the operational level. 5 areas of potential tension for international business people in China are:
Currency
Trade friction
Fractured web & media controls
Policy-driven commerce
Localization policies
You may not care about international politics – but international politics is starting to care about YOU.
Currency
There are two separate flames boiling the currency-exchange pot, and they both got hotter in 2009. Obama’s Treasury Department seemed willing to keep the exchange-rate policy debate on ‘simmer’ and work things out with Beijing behind closed doors. Then came the financial crisis. Exchange-rate debates are economic yawners when unemployment is below 8% but they become populist survival struggles when GDP is down and joblessness spikes. Wen Jiabao lit a second flame just before the March 2009 meeting of G20 finance ministers when he publicly declared his lack of confidence in US Treasuries. Look for both themes to get louder and more tangled in 2010.
Trade
Trade wars are rarely planned or announced. After a while you just find yourself in the middle of one. China’s stimulus and the West’s recovery now seem to be in direct conflict. Tariffs, restrictions and punitive regulations are already being imposed by the US and Europe. China’s industrial production is ramping up, and dumping cheap manufactured goods on developed markets is probably going to follow. We’re passing the early stages of punitive tit-for-tat trade restrictions and sliding towards a full-on trade war. Don’t be that guy who ignores the facts because “a trade war would be bad for everyone so it can’t happen”. The history of humanity is characterized by decisions that are bad for everyone. It can happen.
The Fractured Web won’t be healed.
One of the greatest non-stories of 2009 was China’s success in blocking access to the big global media sites – YouTube, Twitter and Facebook - and severely hobbling Google. Widely ignored by the international mainstream media, a few apologists expressed confidence that right after the 60th Anniversary of the CCP in October the blockade would come tumbling down. In fact 2010 will see China’s media policy grow more isolationist, restrictive and state-directed. Alibaba and Baidu already behave like organs of the state bureaucracy – and in 2010 that bureaucracy will behave like Google and the rest of the WesterNet is a direct competitor to the Chinese government’s interests.
Statism becomes mainstream
The lines between state-owned, state-directed and private Chinese business are going to get increasingly blurry in the 20-Tweens. The pendulum is swinging away from “socialism with market characteristics” and towards “socialism with money”. Many of you who thought you were doing business with private Chinese firms will find that you are really negotiating with the bureaucracy. We are sliding back toward the bad old days when Chinese negotiations are governed by a non-economic agenda.
Localization as policy.
Beijing has already declared victory in its reform process. Thanks for all the help — now go. You may feel that China commercial development still has a long way to go, but Beijing thinks that some international influence has gone too far already. Look for ‘foreign specialists’ to require a skill set beyond general business knowledge and soft-skills to pass bureaucratic muster in the future.
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