As China Yearns to Join the Exclusive Club of Advanced Economies, It Must Learn to Play by the Rules

By Tasawwar Rahman (‘22)

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On an otherwise uneventful Friday in early October, Daryl Morey, General Manager of the Houston Rockets tweeted an image supporting pro-democracy protesters in Hong Kong. While seemingly benign for an American citizen to voice his opinion on an issue of public significance, it had consequences no one could have anticipated and was the catalyst to a months long petty dispute between the Chinese Communist Party and the NBA. But this was  a conflict long in the making between the rights of Americans and American businesses to exercise their free speech rights and while also doing business with the world’s second largest economy. And this is hardly the first time American firms have been forced to pander to China or risk their business interests, and it certainly won’t be the last. It is just one issue indicative of a larger long standing problem of an unequal trade relationship between the US and China; and Houston, we have a problem.

 

In the past several years, there have been numerous examples of China flexing its economic muscles to control the narrative, not just domestically but globally with foreign companies. China not only censors but goes a step further and compels certain speech from a company in order to do business with China. It has forced companies such as Marriott and United Airlines to grovel on the Taiwan issue or face retribution such as temporary sanctions or outright bans. This is an unacceptable abuse and leaves the obvious question of why. Simply because it can, as Washington has been unwilling to stand up and by doing so has emboldened such actions. 

 

However, for some companies such as Google and Facebook, the price of capitulation is too much and has forced them out of the world’s largest market for the shoddy justification of “national security.” But ignorant of its hypocrisy, China seems outraged when US regulators look at companies such as Huawei, ZTE, and TikTok with increasing scrutiny for many of the same reasons. This is emblematic of a business culture that has grown used to hyper-protectionism and subsidization which has allowed them to reap the benefits of free trade without having to confront the vices of domestic competition. Even Huawei acknowledges the help it has  received from foreign competition by saying that without Beijing’s actions “[It] would no longer exist.” Still, we can hardly act surprised, this is expected behavior in a country where the state has a stake in the actions of all of its largest corporations and where all companies by law are required to become agents of Chinese intelligence. In spite of China’s best efforts, we are approaching a reckoning where China will have to choose whether it wants access to the open markets of the West and lift its iron curtain or become increasingly isolated on an unsympathetic world stage.

 

Perhaps the most damning effort by the Chinese government, however, is its flagrant disregard for intellectual property and affinity for corporate espionage. Every year, US companies lose over $225-600 billion to intellectual property theft in China by means of espionage, blackmail, or piracy. The most appalling practice is the systematic campaign propagated by Chinese intelligence to steal trade secrets from Western firms. While we, nor any other nation, cannot claim to be above espionage, there is a fundamental difference in the way our two nations approach it. China targets foreign corporations with the express purpose of propping up its companies in a way the US doesn’t. Instead of the traditional state-on-state espionage, China opts for an unfair state-on-company approach. However, this is just the tip of the iceberg and other dubious practices have the same effect; practices such as requiring a joint-venture and transfer of intellectual property to access China’s markets; all are examples of burdensome restrictions which are not placed on Chinese companies operating in the West. It is evident by now that this is an existential threat where complacency is not an option. we cannot prosper in a system where our businesses are forced to respect Chinese patents without the opposite being true. In order to secure the blessings of trade and economic cooperation between our two nations, China must tear down these walls to truly foster the competition and innovation which serves the benefit of all our people.

 

Such an imbalanced relationship might be expected in the past. After all, it makes sense for the US with all its might to look away from the fledgling sleeping dragon. But  this is not the case anymore, as China moves past the infantile stage of its mercantilist destiny, it is time that we approach our relationships as equals and China begin to face the consequences of its actions. The very system of unregulation that made China so attractive to the West has ended as China wishes to assert its dominance and sovereignty. But if it has hopes of continued respect and trade between our two worlds, changes must be made; after all, goodwill only goes so far. China has awoken from its long slumber, we cannot snub or spurn them but must welcome it with open arms, given that they play by the rules. Yet this seems increasingly unlikely and advanced economies around the world must join together to take the necessary actions for the mutual benefit of all. Actions such as capital restrictions; restricting access to our stock markets and banking system; sanctions on pilfering companies; and non-enforcement of Chinese patents among others. All in the hopes that one day China may join us and truly embrace our competitive global economic system.

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