See No Evil
How American businesses collaborate
with China's repressive government
by G. Pascal Zachary
In These Times magazine, November
Everyone I meet is afraid. The chief executive
of one of China's largest hotel groups is afraid to complain to
the police about the hustlers who sell fake watches outside the
lobbies of his hotels. A Buddhist who runs a network of factories
is afraid to speak openly about the Chinese occupation of Tibet.
A sports marketing official, one of the agents for China's basketball
stars, is afraid to speak out against misguided policies of the
national sports system.
What is unusual about these people is
not that they are afraid; many people in China are. What is unusual
about these people is that they are Americans doing business in
China-some even doing business successfully. What they fear, of
course, is the same thing that China's people fear: the arbitrary
power of government.
For Americans doing business in China,
it is a short step between fear and collaboration, as I recently
found during a two-week visit to Shanghai and Beijing, the two
leading destinations in China for American "expats."
My first meeting in Shanghai was not with
Americans, but with Chinese nationals working for them. On a Sunday
afternoon I sat in a shiny Starbucks near the city's central park,
tucked into the rear corner of the shop, drinking coffee with
five young people (three men and two women) who each work for
a large American company in China. They all agreed that working
for an American company had benefits over employment with a Chinese
company. There was more openness at work, more emphasis on performance
and more room to take chances. But one thing was the same: If
they were caught criticizing the government, or even breaking
the petty rules that govern their social lives-such as the ban
on meeting in formal associations that might touch on political
and social issues-the American company would not intervene to
A few days later, an American who used
to work for Nike explains to me why he won't stick his neck out
for the Chinese or even his own principles: fear of retaliation.
The American has his own sports marketing company, organizes amateur
basketball tournaments throughout China and even advises China's
version of the NBA. He knows Yao Ming, star of the Houston Rockets,
personally. When talk comes around to the poor performance of
China's international basketball team, the American offers an
explanation: China's government officials are ruining Yao Ming
and other top players by making them play year-round for China's
national team, often sacrificing time for much-needed rest and
skills building. The American knows of what he speaks, since he
is the agent for the country's leading point guard who, like Yao
Ming, is a victim of the government's sports policies.
I say that this is a shame, and the American
agrees. But he isn't about to campaign for better treatment of
these stars. In his office we are surrounded by posters of leading
Chinese athletes. He points to a poster of Wang Zhizhi, a tall
Chinese man who backed up Shaquille O'Neal last year for the Miami
Heat. Wang rebelled against the Chinese government by refusing
to play for the national team at last year's Olympics. He is now
persona non grata, not only to the Chinese government, but the
sports marketing establishment here. This American won't touch
him, nor will anyone else, out of fear of antagonizing the Chinese
government and losing lucrative deals.
Free speech be damned
The sports marketer is guilty of keeping
his mouth shut. But other Americans actively assist the Chinese
government in the maintenance of its repressive regime. Even as
I talk to the sports marketer, Microsoft is concocting an Orwellian
policy for its new Chinese version of MSN, a news site and search
engine. Microsoft has decided (and publicly confirmed this summer)
that anyone in China doing a search containing the words "freedom"
or "democracy" will be shown a message explaining that
those words are banned and the requested search query will not
Now, Microsoft is one of the richest companies
in the world and its founder Bill Gates has spent billions of
dollars on a foundation to reduce global inequalities in health
and education. And yet his own company is so intimidated by China's
government that terms basic to free expression are banned from
its search engine.
American collaboration gets even uglier
than that, however. In September Internet company Yahoo admitted
that its employees in China assisted the government in making
a case against a dissident journalist named Shi Tao, jailed since
April, apparently for revealing information about a crackdown
by the Communist Party.
In response to a question about the journalist's
fate at a Beijing Internet conference in September, Jerry Yang,
an American co-founder of Yahoo, confirmed that his company had
helped the Chinese government arrest and prosecute Shi Tao. Yang
didn't give specifics, but Reporters Without Borders, a Paris-based
advocacy group, has said that Yahoo officials in China helped
the government track Shi Tao down using the IP address from which
he read his Yahoo e-mail account.
Yang said that Yahoo receives "a
lot" of requests for information from the Chinese government.
"I do not like the outcome of what happens with these things,"
he said. "But we have to comply with the law. That's what
you need to do to stay in business."
That kind of pragmatic attitude might
pass muster in the United States or Europe, where courts are independent
and the line between business and government is usually clear.
But in China, the American who blithely assists the Chinese government
is likely contributing to a heavy-handed injustice.
During my trip, American business people
were fond of telling me that they could do more good being engaged
with the Chinese than by openly complaining and taking the sort
of adversarial position against government that is common in the
United States. "The idea is to retain our credibility, our
influence in China, so we can work behind the scenes for the right
thing," the sports marketer told me.
Naturally, there is some truth to this.
In Shanghai, I visited the home of an American who adopted Tibetan
Buddhism as his religion some years ago. He first came to China
in order to help rebuild monasteries and temples in Tibet that
were damaged or destroyed during the '60s Cultural Revolution.
His high-rise apartment in a fashionable part of Shanghai is festooned
with Tibetan artifacts, and he is clearly pained by the hypocrisy
of the Chinese government today, promoting Tibet as a tourist
destination while at the same time repressing any authentic expressions
by Tibet's people or religious leaders. And yet he tells me, "The
price of getting to restore Tibet's cultural heritage is staying
silent about China's true aims."
When I bluntly respond that he is a collaborator
in China's occupation, he nods his head sadly and says he is "resigned"
to China's domination of Tibet. Speaking out on Tibet would only
draw the scrutiny of the Chinese government and, of course, doom
his growing business of supplying low-priced manufactured goods
to American chain stores.
Profits not worth the price
Another troubling part about the collaboration
of American business with the Chinese government is that, even
in narrow business terms, it is failing. The terms of trade between
the United States and China are ever-worsening. Chinese goods
are flooding into the country, and manufacturing jobs are still
flowing out of the United States and into China. U.S. exporters
are selling an impressive $3.5 billion worth of goods per month
to China-twice the amount of goods exported from the United States
to China five years ago, and nearly ten times the amount of 15
years ago. But Chinese exporters to the United States are doing
even better: Sales topped $20 billion per month this summer, and
show no signs of slowing down. The trade deficit in merchandise
with China topped $100 billion in 2002, $124 billion in 2003 and
$160 billion last year. This year, the deficit will approach a
whopping $200 billion.
To be sure, the growth in China's domestic
economy offers plenty of opportunities for U.S. companies. For
years, spending on China's infrastructure has been rising, and
now consumer spending is exploding. An estimated 350 million Chinese-more
than the population of the entire United States-spend $10 per
month on cell phone services alone. For an American company, success
in China, even with products that are made in China, can be the
difference between survival and failure. Witness, for instance,
the great boost that ailing General Motors has had in China, where
its cars are top-sellers.
On the other hand, Chinese copycats-stealing
everything from movies and software to plans for machinery and
chip-making equipment-take unfair advantage of the relative openness
of American companies. The Chinese are also frantically trying
to nurture home-grown businesses that can compete with the best
from America. At the same time, the Chinese government has held
down the value of its own currency, making it cheaper for American
companies to invest in China-and cheaper for American consumers
to buy imported Chinese goods. While recently the country slightly
raised the value of its currency (and may do so again periodically),
most observers think that China's currency will remain artificially
low, or "cheap" in economic terms, for many years to
Because of the complex economic dance
between China and the United States, the combination of fear and
collaboration is a toxic brew for even well-intentioned Americans
doing business in the country. As the New York Times editorial
page opined recently, "Because China is too lucrative a market
to resist, American and European businessmen have ended up endorsing
the party line through their silence-or worse. They are not molding
China; China is molding them." In short, "constructive
engagement" with China is a myth.
Some senior American executives of leading
multinational corporations privately fret that their Chinese experiment
will end badly, and not the least because they recognize that
their investments in China have helped prop up an authoritarian
regime that may be incubating social revolution or worse. Underneath
the seemingly stable surface, dissent and unrest in China is rising.
Even statistics from the government's own police force show a
troubling trend: The number of mass protests reached 74,000 last
year, compared to 10,000 in 1994.
With hundreds of unreported protests now
taking place in China each week, far-sighted American executives
are beginning to ponder what will happen to their investments
if China implodes. One chief executive of a Fortune 500 company
told me after I returned from China that he has a wait-and-see
attitude, but feels increasingly doubtful that constructive engagement
with China will bear fruit.
"We're capitalists and supposed to
be running a business for a profit," he says. "So you
don't want to leave a big market. On the other hand, China has
serious political problems and the Chinese people lack basic freedoms.
I'm not in China to solve the political problems, but if they
aren't solved, foreign companies are either going to get kicked
out of China, ultimately, or leave."
So, how should Americans respond to this
First, Americans ought to squarely face
their striking cycle of dependency with China, its government
and economy. The U.S. government's huge deficits are partly financed
by the Chinese government, which, through state-owned banks, buys
U.S. Treasury bills with profits generated from exporting goods
to the American market and the savings of ordinary Chinese citizens.
The Chinese don't need to invest all or even a large part of their
savings in their own country because American banks and corporations
(as well as European and Japanese businesses) are willing to finance
a great deal of the capital needed for the expansion of China's
economy. Foreign investors do this because they believe that investment
opportunities in both public infrastructure and private enterprise
are better in China than in their own countries, and besides,
European and North American investors are awash in cash anyway.
The Chinese government makes investing in China even more attractive
to foreigners by holding down the value of its currency, the yuan.
Ultimately, however, the Chinese end up
holding a huge amount of U.S. dollars, leaving them vulnerable
to sharing the pain of any American economic setbacks, such as
steeper declines in the value of the dollar. Moveover, because
America is the largest, most lucrative market for Chinese-made
goods, China's business and economic elite are trapped in a dilemma
of their own making: Americans are now hooked on cheap Chinese
goods, while the Chinese are hooked on selling to Americans. Raising
prices could enrich Chinese producers, but also cause a collapse
in demand for their products.
This interdependency between the U.S.
and Chinese economies means that American business executives,
government policymakers and perhaps even ordinary citizens have
more leverage with the government of China than they realize.
Consider this crucial question: Who can more easily afford a rupture?
The Americans, with their vastly diversified economy, or the Chinese,
whose economic empire is essentially built on satisfying one single,
I don't know the answer to that question,
but let me suggest that, for Americans at least, the price of
having principles may be to test China's resolve more often and
more pointedly. I am reminded of this possibility when I turned
up at a Web café on one of the last days of my recent visit.
It was 8:30 and the café was just opening. I'd been there
three mornings running and a woman had helped me navigate the
Chinese keyboard and screen prompts so I could reach an English
interface. This morning the routine was different. There was a
black vinyl binder at the front counter in front of her. Inside
was a sheet for foreign nationals who wanted to use the Web. Before
I could log in, I had to write my name and my passport number
and state the purpose of my visit.
I complained to the woman about the sign-up
sheet-she showed me to a PC anyway. Before I sat down, a man appeared
and he said that unless I signed the book, I couldn't use the
I told him I refused to sign. He waved
his hand angrily at me, showing me the door. "American go
home," he told me.
And that's what I did.
G. Pascal Zachary teaches journalism at
Stanford University and is a fellow at the German Marshall Fund.
He is the author of The Diversity Advantage: Multicultural Identity
in the New World Economy.