I did a post last week on Andrew Browne’s article on China in the Wall Street Journal. What it says is that China is not going to be “more like us”, and “The game of make-believe is winding down.”
From a business standpoint, I have been saying that for the last 6 years. Chinese businesses, many of which are state-owned, and all of which are state influenced, are not like our businesses, though they go to great lengths to keep that illusion. They pretend that businesses that come to China will be allowed some flexibility in meeting Chinese rules for ownership and cooperation with State Security. They pretend that intellectual property will be protected. They pretend that censorship rules will not be applied to companies that come there. They pretend that U.S. companies will not be spying on China’s citizens, and maybe a few other citizens too.
He asks an interesting question : “What is the appropriate response to an increasingly predatory Chinese state that takes advantage of Western openness to acquire technology even as it shelters its own markets behind protectionist barriers?” Cooperation with their approach isn’t it. Browne says a “reset” is in order.
For years, business leaders have been saying that the free world can “out-innovate” China even if they steal our intellectual property and use it to manufacture their own goods. We might have to think about that approach more. By the time Boards of Directors realize that approach fails more than it succeeds, it is largely too late. They are looking at losses caused by unfair competition from state controlled industries subsidized by China’s banks and partner businesses. The reset has to be on both sides for it to work well. Business leaders have to know that short-term profitability is not enough to satisfy shareholders with long-term interests.
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