Eyeing China, US business community waits for Washington to make next move

David Hoffman recalls a time when American business interests weighed heavily in Washington, particularly with regard to American economic policy toward China. Hoffman, who previously worked at PricewaterhouseCoopers, previously led the company’s technology and entertainment consulting practices in that country.

But sympathy for those interests disappeared under former President Donald Trump’s administration, Hoffman says. And it hasn’t gotten better under President Joe Biden.

“Business is vilified by being in China in every respect,” said Hoffman, now at The Conference Board, a global business and research think tank.

An annual survey released this week by the American Chamber of Commerce in China found that China remains a “top global priority” but many companies are not planning major investments there this year.

Geopolitical challenges

Sino-US relations continue to be strained and further exacerbated by China’s close ties to Russia and Beijing’s desire to remain neutral on the war in Ukraine.

Even before Russian troops entered Ukraine, U.S. regulators and lawmakers had weighed policies aimed at restricting business and investment between the two nations on a range of competition, national security and human rights issues. man. China’s crackdown on its own companies has also affected American investors and companies, some of which have pulled out of the country over the past year.

“One of the things I’ve noticed about the difficulties that American companies face is pleasing Beijing and Washington,” said Scott Kennedy, senior adviser at the Center for Strategic and International Studies at an event. recent.

The Chinese market

For multinationals, there is still no substitute for a presence in China, which, after the United States, is the world’s second largest economy with 1.4 billion inhabitants. Despite sometimes hostile political rhetoric, China remains the United States’ largest trading partner.

During his administration, Trump accused China of failing to provide a level playing field for foreign companies. The result was a trade war in which both countries imposed high tariffs on each other’s products.

Decoupling of efforts

While cutting back on the rhetoric, the Biden administration has continued Trump’s hard line. “Engagement,” Washington’s approach to China for decades, has given way to harsher rhetoric of decoupling or even punishing China, members of the business community complain.

In Washington, some recent China-focused laws and proposals are capturing the attention of the business community. They include a regulatory battle over Chinese companies listed on US stock exchanges and proposals to review US investments in Chinese companies.

US business concerns

At a recent Asia Society of Northern California event on the future of US-China relations, some speakers said they were concerned about moves from Washington and Beijing that appear to be severing trade ties between the two nations.

Nicholas Borst, vice president and director of China research at Seafarer Capital Partners, argued that the US business community should have a say in US policy toward China.

“It’s one of the few areas between the United States and China where we can really move away from a lot of zero-sum thinking, where China’s economic development doesn’t have to come at the expense of of the United States,” he said.

Myron Brilliant, executive vice president of the United States Chamber of Commerce, told the assembly that Washington would tighten export controls and investment controls.

“The political environment in Washington is that one thing that unites the two parties is China and the threat of competition,” he said.

Washington will pressure corporate America “to divest a bit, bring resources back here, invest domestically, and think about our own national security through the lens of economic competitiveness, which jeopardizes the long-term American engagement in China,” he said.

Washington’s concerns

In Washington, where U.S. corporations are focusing their considerable lobbying efforts, consensus has shifted to a more aggressive stance toward the Chinese government due to the growing role of the Chinese government under President Xi Jinping in taking over large parts of the economy, says one legislator.

“The development of state champions in key industry sectors should have been a wake-up call to businesses in the American business community,” said Rep. Rick Larsen, a Washington state Democratic congressman and chairman. of a bipartisan US task force on China.

“If there are individuals and companies or industries within the business community that feel wronged or are not being listened to, the government they should look to first is the government of Xi Jinping. Chinese government policy has been very clear over the past decade on its direction – more regulation, more state involvement in the economy, in fact, not just state involvement, but the state taking over large parts of the economy.

However, American businesses have a role to play in helping the administration and Congress understand the implications of its decisions, Larsen said.

“It doesn’t mean it’s going to change those decisions, just that we could make them with our eyes more open,” he said.

Business climate in China

Ken Wilcox, former CEO of Silicon Valley Bank, traveled to China in 2010-11 to set up a joint venture. From experience, he says the Chinese Communist Party controls the performance of foreign and domestic companies there and “the party wants to control the whole economy.”

Washington and business are too extreme in their views of China, the former too negative, the latter too positive, “giving China a free pass,” Wilcox said.

In the current climate, companies would be wise to rethink their China strategy, said Martijn Rasser, a former senior intelligence officer at the U.S. Central Intelligence Agency and now a senior fellow and director of the technology and national security program at the Center. for a New American. Security.

“Yes, there’s a lot of money to be made, but these companies have to think much longer term and ultimately design business strategies that don’t rely on the domestic Chinese market for long-term growth, because that’s ultimately fleeting and there is a time limit,” he said.

Hoffman encourages American companies to work with regulators to address national security concerns while doing business in China.

If they don’t, he argues, “any future regulations on ‘safe trading’ are likely to be more restrictive, less effective and more costly than they need to be.”

Comments are closed.