China: Foreign Multinationals Create Distance

If foreign companies ally themselves with the criticisms, then China is really suffering from an image deficit.  The chorus of complaints and attacks is becoming louder.  Multinational corporations denounce intellectual property rights violations and the striking difference in treatment with respect to local businesses.    Many believe local companies are favored in public tenders, they don’t pay employees according to contracts, and they can violate environmental standards.  Lately, the most famous multinationals—those whose sophistication China has been unable to emulate—have been put in the dock for poor customer service, violation of security measures, and corruption.  Beyond the accusations, which cannot be verified, strikes the methodical nature of the attacks, as if they were responding to a preordained plan or a will that had been repressed until now.  Consequently, we have arrived at a situation unimaginable until a few years ago: foreign multinationals are distancing themselves from China.  A marriage that once seemed invulnerable (even though based solely on interests) has been put to the test by a chain of disputes that elongates daily.  And so, doubts regarding the Chinese model gain strength.  Relegated for decades to the spheres of sociologists, politicians, human rights supporters or unions, the criticisms straddle traditional picket fences and implicate China in the very task it has conducted masterfully until now:  generating useful reciprocal wealth, a classic win-win situation.  Although entrepreneurs are the last to be disillusioned and frequently calculate priorities, there is no doubt that their judgment casts a shadow over the Chinese model’s complexity.  Beyond expressions of circumstance (collaboration, dialogue, multilateralism) the question to ask is really whether China, with its spectacular successes, has something to teach.  Is its model replicable?  Are the values derived from China imitable and valid for everyone?  Doubts gather in the answers.  Beijing has followed its own path to a traditional formulation: the production of low-cost artifacts via the gigantic influx of both national and foreign investments.  Exports and accumulations of currencies were two consequences.  More than export-led, its growth was investment-led.  This model has produced great results but also numerous fissures over the years.  The country has broken every economic record, but hasn’t distinguished itself in innovation, ethics or democracy.  Supporters argue that it’s an inevitable historical passage, but now even they question the successive phase’s constant deferment, in which the search for quality is enriched with different components.  Even the new leader has recognized the substance of the problem when he denounced the “obsession with GDP growth.”  Effectively, one asks how many highways can China continue to build, how many dams, how many records does it need to achieve in the production of footwear, cement, glass, steel, and coal.  Xi Jin Ping knows very well that a change of direction is necessary, but he inherited an obstructed situation with a trajectory already underway mired by contrasting and conservative positions.  Change will not be easy, but it is a necessity.  In this view, international sympathy is exercised and multinationals lament as well.  Even those who viewed China’s change with hope, and the possibility of a different impetus for investments, are disenchanted.  Companies withstand, negotiate, and believe because they know that the power balance has now changed.  Decades ago they gained advantage from China’s underdevelopment; now the dragon has grown and has superior negotiating strength.  Ironically, young managers from industrialized countries are the exception, sent east exclusively for business functions.  For them, China is only the most important nation for growth, capable of boosting the value chain, an easy approach for outsourcing or sales.  They accept the rules, even when they are unpleasant.  They don’t demand unrealizable ideals, they don’t hope for diversity.  They consider China an actor like many others, even though in doing so they forget the historical lesson the Chinese safeguard the most:  the security of its own diversity, the conviction that what’s valid for China is only valid for China.