The Never-ending Siren’s Song: China’s Pull on American Businesses

Coronavirus is forcing American businesses to reduce or halt their operations in China, but when the crisis passes, business will resume. What CEOs should consider is that Xi Jinping’s authoritarian and secretive response to the outbreak is a microcosm of how his government operates.

James Palmer, senior editor for Foreign Policy, writes, “The hostility to transparency and fear of speaking out baked into the fabric of Xi Jinping’s China can’t be thrown away for one crisis. Transparency is not a window that can be opened and shut at the state’s will when it finds it useful.”

China's mass detention of Muslims and government-backed theft of western technology has led to much talk but little concrete action from the international community. And there is no reason to think Xi Jinping will institute political reforms. Unfortunately, American businesses continue to drink at the poisoned well of Chinese commerce because the economic incentives and potential profits are too large to turn down. Instead of continuing to appease a regime that spreads fake news claiming that America created the coronavirus, American CEOs should decide to value long-term principles over short-term profit.

Last fall, the NBA experienced the competing pulls of Chinese outrage and domestic discontent when the general manager of the Houston Rockets, Daryl Morey, tweeted a message supporting protesters in Hong Kong. China reacted by kicking the NBA out of China and removing NBA games from television. The league tried to appease both sides by defending Morey’s right to free speech in an English press release while simultaneously releasing a statement in Chinese condemning his comments.

During the league’s all-star break, commissioner Adam Silver acknowledged that “hundreds of millions” were lost due to the standoff with China. The league lowered its salary cap projections because of the incident, and many players lost lucrative endorsement deals.

The story has faded out of the American news cycle, and the NBA is reengaging with China with little fanfare. Inside the NBA, players and owners alike are unlikely to speak out against China in the future after seeing how much they could lose. China has gotten what it wanted, a shaken NBA that is unlikely to resist Chinese demands.

Many other companies have discovered that money talks as American businesses are becoming more and more dependent on China. For example, KFC and General Motors both conduct more business in China than in America. The Chinese government encourages these investments by having lower corporate tax rates and fewer worker protections than most other developing nations.

Xi Jinping is rewarding the investments of American companies by pursuing an aggressive agenda that includes building islands in the South China Sea, stealing technology from companies operating in China and hacking Equifax to gain leverage over American citizens. The Trump administration will likely push for American businesses to distance themselves from China, especially after China’s coronavirus response, which has included blaming America for the virus and expelling American journalists.

Companies will have to decide between doing business with an untrustworthy regime who may steal their technology or forgoing massive profits.

Michael Bloomberg’s company faced a similar dilemma when deciding whether to publish a news story that would have exposed Chinese leadership as corrupt. Recently leaked audio shows Bloomberg News squashed the story because management was worried they would be kicked out of China if they published.

If a news company supposedly dedicated to publishing the truth gives in to Chinese pressure so easily, it is doubtful many other companies will resist Xi’s pull.

Many experts argue that China will become democratic as it adopts free-market policies. This transformation could still happen, but China has been gradually opening its economy for thirty years without significant political change. If anything, Xi Jinping is consolidating power and appears to have balanced aspects of an open economy with state control.

Instead of transforming China, businesses are being transformed by China as their executives submit to Chinese demands. Whitewashing the protests in Hong Kong or pretending that Taiwan is part of China on a map seem minor, but these actions show an alarming tendency to appease China’s authoritarian demands. Xi Jinping’s slow and secretive response to the coronavirus shows how devastating Chinese government malice and incompetence can be to the United States and the rest of the world.

American companies have succeeded in part because they take bold risks, but China is a risk that is unlikely to pay off. Xi Jinping has trapped American businesses and getting out won’t be easy.

Moving away from China isn’t only the morally right thing to do, but it also will protect American companies from a regime that has no compulsions when it comes to stealing what it wants.

Caleb Ashley is a content specialist for a public relations firm in Alexandria, Virginia

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