The Chimera of the China Market

BY LYNN CHU

THE STORY OF BUSINESS IN CHINA USUALLY TAKES a back seat to the story of high politics and human rights. But as the West eyes the opportunities arising from the apparent collapse of communism in Eastern Europe, it might be instructive to review our experience during the decade of American business’s romance with China, which ended so abruptly on June 4 of last year. Its illusions fed by cultural and geopolitical cant, American business in China in the eighties fell victim to the naive optimism with which it contemplated the vast “China market.”

The legacy of America’s obsession with the China market was President Bush’s decision, in May, to renew most-favored-nation status for China. Sending a humanrights message by denying MFN, it was thought, would only provoke obstinate defiance and might worsen internal repression. Established joint ventures and American importers of Chinese products, under the general rubric “American business,” had lobbied for MFN, and the Bush Administration was ideologically hostile to linking human rights with trade policy. Still, the Administration hesitated over MFN longer than anyone expected, because, apart from U.S. importers and those who had already sunk large amounts of capital into China, American business was becoming increasingly ambivalent about that nation. U.S.-China bilateral trade totaled $18 billion in 1989, scarcely half of U.S. trade with Taiwan, and today direct U.S. investment in China amounts to less than half of one percent of direct U.S. investment worldwide. And these days Eastern Europe would seem to provide business with far more fertile ground.

Moreover, business may be beginning to recognize that human rights and business success are intricately linked. For one thing, repression increases the risk of political instability, and that’s bad for business. But more than that, the events of June 4 made it suddenly much clearer that the abuses of the Chinese totalitarian state go hand in hand with other problems that have been hindering the free conduct of business in China for years. American business often, and rightly, credits itself with being the means by which China first began to yearn for a free-market system. But the relationship may have reached the point of diminishing returns, for both parties. It’s time to ask whether American business is being used as a tool to prop up and legitimize a corrupt and bloody-minded regime.

America has always had a deep fascination with and admiration for China. The most recent chapter in this historic obsession opened dramatically in 1972, with a U.S. President and Secretary of State trading toasts with Zhou En-lai. The eighties brought the increasingly frenzied spectacle of American businesses stumbling over one another in their zeal to get a foot in the door of a mesmerizing but chimerical China market. From the beginning, even Western “China experts" (perhaps especially China experts) fell prey to media hype, wishful thinking, and their own optimism about the new rapprochement. Few seemed to take seriously such matters as the unwieldy nature of communist totalitarian regimes and the all but insuperable difficulties of doing business with them. Being wined, dined, charmed, and beguiled by Chinese officials became a prized executive thrill, one reeking of high politics and historic portent. Delighted to conduct their personal versions of economic diplomacy—to play at being Nixons or Kissingers of commerce—American executives entered eagerly into partnerships with Chinese government agencies, with the big U.S.-China joint venture being the preferred deal-making mode. As the eighties progressed, welcome wagons arranged by the Chinese government, composed of fancy banquets, excursions to famous sights, and elaborate signing ceremonies, became de rigueur.

Only a public-relations catastrophe on the scale of last year’s could have served to correct more than a decade of boosterism about China. But even before that the excitement had started to wane. With hall space on Tiananmen Square booked solid for signing ceremonies, with the inevitable “mao tais" and multi-course meals, by the end of the eighties the business romance with China was taking on a weary, mechanical air. Prices for hotel rooms and basic services for Westerners had skyrocketed, far outstripping demand. A three-room apartment at the Great Wall Hotel in 1985 ran to $125,000 a year, with laundry service around $400 extra a month. The Chinese proved themselves masters of monopolistic techniques, such as price discrimination between Chinese and Westerners; intricate exclusive-supplier relationships; endless contract renegotiations, which business simply had to accept (after all, when there’s effectively no contract law, one party can’t enforce a signed contract, and the other can’t breach it); patent, copyright, and trademark infringements; and simply charging whatever the market would bear. Fleecing visiting business people was starting to look like a national sport.

The Lure of Those 1.1 Billion Customers

AMERICA IN THE EIGHTIES LIKED TO ENVISION China in terms of the vast markets that might emerge in the twenty-first century—the only recorded instance, it would appear, of long-term planning in the history of American business. America’s romantic fixation on China compares oddly with its apathy toward India, with its 800 million citizens, and even toward Japan, with its seemingly limitless disposable wealth — a market really worth swooning over. But the China market was always a myth. Even if China were to meet the goal its leaders optimistically set in the early 1980s—a per capita gross national product of $800 in the year 2000—this would bring it only to the level Nicaragua and South Yemen reached in 1985. Today per capita GNP in China is about five percent that of Taiwan, and an even smaller percentage of those of Singapore and Hong Kong.

Still, for a while certain Western businesses in China prospered: those making up the service industry, for instance, which relied more on the prospect in the minds of Westerners that China would open than on China’s own markets or resources — lawyers, consultants, China experts, contact-makers, middlemen and fixers of every stamp. The China market itself, however, remained through the eighties an abstraction, an enticement the Chinese became adept at dangling, carrotlike, before American businesses, always a few steps out of reach. The vision of 1.1 billion Chinese consumers was mesmerizing. It was an image carefully nourished by the Chinese, who, it must be remembered, draw on a mastery of propaganda and spin control perfected over thousands of years.

In what was apparently a great leap of faith, American executives in China seemed to assume that the legal and social foundations of a functioning capitalist economy, and the political structure to support it, either were of no consequence or would naturally follow once business deals were struck. The strength of this assumption, and the depth of its imprudence, are well demonstrated by Americans’strange preference for large capital investments enshrined in joint ventures with agencies of the Chinese government bureaucracy. The American penchant for the big joint venture contrasted sharply with the cautious Japanese approach, which was to sell China VCRs and passenger cars for cash. As usual, the Japanese had the right idea. Consumer retail turned out to be the only sector of the economy that the Chinese ever re-

formed enough, and perhaps ever had any intention of reforming, to work more or less like a free market. So Japan wound up making a killing on the China trade during China’s consumer-goods explosion of the mid-eighties, while American ventures foundered.

The Case of AMC

AMC, THE U.S. AUTO MANUFACTURER LATER CONsumed by Chrysler, was one of the first U.S. companies to suffer the peculiar frustrations of undertaking a large joint venture in China. Jim Mann, formerly the Beijing bureau chief for the Los Angeles Times, details AMC’s travails in his engaging, revelatory book about China business, Beijing Jeep, setting them within the broader context of American business’s excess, naive optimism, ignorance, and gullibility in China. Admittedly, AMC, that perennial loser in the American market, brought many of its problems on itself. Visiting executives evidently forgot to take either a lawyer or their critical faculties along with them when they negotiated the initial deal. The result was a major failure to achieve a meeting of the minds between the Chinese and the Americans. The Chinese came away thinking they’d be getting a shiny new operation in which an entirely new model of jeep would be designed and built to Chinese specifications—that is, to meet the requirements of the People’s Liberation Army. The PLA was eager to update its vintage 1950s Soviet-style army jeep with the latest in automotive technology. It wanted special appurtenances, such as four doors and a soft top, so that soldiers could conveniently lower the top and open fire with AK47s from inside the jeep. Doubtless such an innovation would have come in handy on Tiananmen Square, or in Tibet today. AMC, though, wanted to capture its share of the China market with a jeep pretty much on the lines of its newly developed suburban runabout Cherokee, not to engage in large-scale new-model R&D. This meant that AMC saw Chinese factories as being set up initially just to assemble parts imported from the States (and the parts as being paid for out of Chinese coffers with foreign exchange). Otherwise the venture wouldn’t generate enough profits to make it worthwhile. AMC seems only belatedly to have realized that it needed to firm up this detail with the Chinese.

But even then, AMC had been assuming that a Chinese factory is basically what a U.S. factory is: a place of employment. In China, AMC soon discovered, a factory is more like a municipal government—far worse, from the standpoint of the bottom line, it is a communist municipal government. Factories in China are like little fiefdoms, providing workers with the full plate of social services—housing, day care, schools, medical care—and monitoring workers on a scale that in America would amount to a mass invasion of privacy. Far from displaying the expected Asian industriousness, the work force was accustomed to three-hour lunches, mid-afternoon siestas, and sleeping on the job. And having constantly to deal with Party officials to get anything done was an ordeal, to put it mildly.

AMC’s man in Beijing, Don St. Pierre, became convinced that the Chinese objective was simply to grab as much Western technology and know-how as possible while keeping Americans at arm’s length from the vaunted China market. Chinese negotiators affected puzzlement when AMC explained that it needed to make profits by operating efficiently and to develop market penetration. The Chinese found it especially hard to grasp the concept of the enforceability of signed contracts. Business people in China all have horror stories about endless contractual “renegotiations.” Contract files bloat into filing cabinets as the Chinese decide, after the long negotiating sessions and elaborate signing ceremonies, that, after all, they prefer not to be bound—prefer to make some other arrangement, more favorable to themselves. Perhaps some of the Chinese puzzlement was genuine, but it was remarkable how often “cultural differences” coincided with a hard Chinese bargaining position.

In addition, China’s reluctance to expend its reserves of foreign exchange made it loath to agree to buy from the West, or to permit the conversion of any American earnings of Chinese currency—useless to the treasuries of American companies—into internationally negotiable tender. This reluctance, whenever the Chinese could use it in bargaining, tended to translate into “traditional Chinese xenophobia” and a powerful aversion to foreign “exploitation.” China experts and other middlemen sagely advised AMC to be sensitive to these complex, mysterious Chinese cultural differences. It might have been better all around for the company to call a spade a spade and a hard bargain a hard bargain, right up front. Explanations of Chineseness proffered by Orientalists, China experts, and soothsayers created great clouds of mystification through which the Americans sometimes found it hard to see their touchstone to reality, the bottom line.

Desperate politicking by St. Pierre finally saved Beijing Jeep from collapse. After pulling a lot of high-level political strings and creating an embarrassing public-relations situation for the Chinese at an opportune moment, he managed to get Zhao Ziyang, once China’s commissar of economic reform and heir apparent to Deng Xiaoping, to intervene directly on the company’s behalf. Beijing Jeep became a “model joint venture.” The arrangement with Beijing Jeep beautifully served Chinese public relations as well as Beijing Jeep. In exchange for cooperating with government campaigns aimed at attracting new capital to China, Beijing Jeep got special privileges, like permission to convert currency into precious foreign exchange. This political patronage helped Beijing Jeep, in the end, to survive and even prosper. But at what cost? If politicking with Party bosses for special favors becomes the template for the conduct of American business in China, then perhaps American business is simply retooling itself in the old ways of the international cartels— fostering noncompetition and jimmied markets under cover of structural reform.

The Snare of “Technology Transfer”

OF COURSE, CHINA WAS JUST AS UNHAPPY WITH American business as American business was with China. Throughout the seventies the world had engaged in an orgy of America-bashing. The Third World, including China, thought the developed nations owed the world an enormous debt for their past imperialist sins, for which restitution might be made, in part, by “technology transfer.” Seventies rhetoric in the United Nations about technology transfer to the less developed participants in the “new international economic order” seemed to encapsulate the Chinese notion of what American business should have been in China. China wanted Westerners to come, build major factories, transfer to government-selected Chinese personnel Western management techniques, expertise, and sophisticated equipment, and then, as soon as possible, return whence they came. The idea of allowing Western businesses some rational profit incentive for doing all this came belatedly, in fits and starts, and generally as the Americans were hailing a taxi to catch the next plane back to the States.

American business people and exiled Chinese can often be heard to mutter in private that China trumpeted attempts at “structural legal reform” not to foster any real rule of law—and certainly not to create checks and balances on the power of Party bosses—but quite cynically, as public relations, to attract Western investors and give them a false sense of security by creating the appearance of a Chinese commitment to fundamental reforms. China mounted an intensive public-relations campaign, for instance, about Chinese intellectual-property “reform.” The launch came complete with a snazzy-looking glossy magazine filled with reassuring but basically vacuous tidbits about developments in Chinese copyrights, trademarks, and patents. At the same time, Western intellectual-property owners were being wooed with earnest talk of reform of a “structural" kind, but somehow none of this did anything to dent piracy. Of course, in reform, as in life, the devil is in the details. At bottom, to China’s rulers the law obviously always remained a tool for entrenching their own political positions, not for checking such power in the service of abstract justice. Law was a mere rationale, through which any kind of repression might conveniently be legitimized by surrounding it with suitable legal theater.

Graeme Browning, in her excellent book about American business in China, If Everybody Bought One Shoe: American Capitalism in Communist China, describes a remarkable instance of Chinese publicrelations and negotiating prowess. In 1983 the Chinese let it be known that they were thinking about building nuclear-power plants, eight to thirteen of them—or $20 billion worth—starting with Daya Bay, near Hong Kong. Nuclear-equipment manufacturers and suppliers from England, France, Italy, Germany, Sweden, and Japan rushed to China, leaving the Americans, frustrated by American nuclear-nonproliferation laws, fuming and stamping on the sidelines. In the spring of 1984 China announced it was about to sign with English and French companies, and the lobbying in Washington began in earnest. In The Wall Street Journal a Westinghouse executive gushed that the prospects at Daya Bay looked “hellishly exciting,”and estimated that the contracts his company still had some prospect of winning were worth some $6 billion. Meanwhile, U.S. intelligence spotted Chinese nuclear specialists in Pakistan, where work on a nuclear device was thought to be under way. Nevertheless, in July of 1985, after a giant congressional-lobbying push, the nuclear industry got U.S. prohibitions on nuclear trade with China lifted, despite belated Administration resistance on national-security grounds. Suddenly all the talk of Chinese nuclear-power plants evaporated. The following year, after a drop in world currency markets cut the price by half a billion dollars, China finally signed the Daya Bay contracts it had said it was on the brink of signing back in 1984. But, citing a lack of foreign exchange, China announced that further purchases of foreign equipment would be severely limited. Browning writes, “It can’t be said with certainty that Beijing deliberately squeezed a nuclear cooperation agreement out of the United States by holding out the prospect of billions of dollars’ worth of nuclear equipment sales for plants it had no intention of building—but many in the American business community think that’s exactly what happened.”

As Western business saw it, trade-offs between helping China technologically and capturing its markets were bound to be necessary—were, in fact, a precondition for doing business in China at all. But other than high-flown rhetoric, what assurance of long-term security had the West ever really received from China? China quickly discovered that simply alluding to the fabled China market gave it as much bargaining leverage with eager Americans as did substantive concessions. And on what grounds did business reach the conclusion that China would ever really permit the penetration of its markets by the West? China’s memory of its ignominious exploitation at the hands of foreign nations is long and bitter. And China has attended to the present-day lesson of Japan: The best way to get rich is to capture the American market while scrupulously protecting one’s own. From the trade figures, that would appear to be precisely what China intends. Last year the U.S. trade deficit with China hit $6.2 billion, a figure that represented a steady rise over the previous several years. Strategies of isolation and self-sufficiency come in many forms; Japan, after all, has had little difficulty institutionalizing its own brand of national seclusion in a context of capitalism and democracy.

Before June 4, 1989, beguiled by received opinion and native optimism, Americans simply assumed that “cuddly communist" China had embraced free-market capitalism with democratic features. If the Chinese people still suffered from some political repression, well, they were Chinese. They were used to it. Look how far they had already come! If there were still Chinese gulags, at least children weren’t indoctrinated to denounce their parents to the security police so much anymore. And wasn’t there a Kentucky Fried Chicken just off Tiananmen Square? The fanfare over disco and Deng drowned out any mention of the continuing absence of anything like civil liberties in China.

Inscrutable!

INVESTING IN A COUNTRY THAT ABUSES HUMAN rights on the Chinese scale entails certain cold, hard financial risks quite beyond problems of morality or sentiment or even the risk of bad press. A government ruled by a few jockeying overlords and unresponsive to the wishes of its people is eminently capable of slamming the door as soon as it feels it has acquired enough “long-term” investments of plant, know-how, and technology from abroad. Know ledgeable Chinese point out that in fact the leading beneficiaries of “economic reform” have been the Chinese military and security police, whose resources have been modernized at a far faster pace than those of the Chinese people at large. Such a government is also the kind that can most adeptly manipulate “free” markets. China, as we have seen, is surely capable of meeting American complaints about unfair or monopolistic business practices with yet more outraged bluster about American interference in China’s internal affairs. This sort of bluster, the Chinese long ago learned, falls on peculiarly receptive ears in America. Americans have a long intellectual and political history of making obeisances to a presumed Chinese uniqueness— that famous inscrutability that only China experts can penetrate. It seems that President Bush fancies himself one of these, with his expertise mystically derived from spending thirteen months in a Beijing embassy compound in the seventies. It is “Chineseness" that permits Americans to excuse in China all manner of abuses that have been loudly decried in Warsaw Pact nations. Chineseness required that many leading Western China experts for years avert their eyes from the Cultural Revolution, speculate on its good points and on Mao’s statecraft, and hail the grand continuity by which Marxism was said to be a vibrant evolutionary transplant— intrinsically compatible, somehow, with traditional Chinese culture—whose admixture was destined to yield a glorious “new China.”In 1972 John King Fairbank, of Harvard, the dean of American sinology, gushed in Foreign Affairs that “the Maoist revolution is on the whole the best thing that has happened to the Chinese people in many centuries.”This self-deceiving ideology hardened into the dominant American academic dogma, and finally, in the aftermath of the Nixon-Kissinger trip, into U.S. policy.

The Two Chinese Economies

THE TRAVAILS OF AMERICAN BUSINESSES IN CHINA suggest, anecdotally, what many scholars of communist economic systems have suspected for years: there may be no viable halfway point between totalitarian central planning and a full-fledged free-market economy. Whatever were the hopes and dreams of American executives and politicians through the eighties, we now know that China never regarded itself as engaged in an evolution toward capitalism, much less democracy. Chinese leaders saw that the West had technology and expertise they needed. They welcomed the West on the assumption—perhaps the gamble—that Western business could give China an economic shot in the arm that wouldn’t disturb the communist body politic.

Jan Prybyla, an economist at Pennsylvania State University, has postulated that the economic reforms in China produced, in effect, a two-tiered economy, which was practically dysfunctional. The totalitarian state was run, as usual, by Party politicos to whom profits and efficiency were often just the newest government slogan to be mouthed. A second economy, consisting of the few goods and services that were permitted to be manufactured and sold “freely,”piggybacked on the command economy. This dual structure—one can hardly call it an economic system—made for an intolerable economic environment for business, and produced what a Marxist might call “irresolvable contradictions” within the society.

American businesses operating in China quickly discovered that free markets in a few decontrolled items wouldn’t function if all the materials used in production remained subject to the political directives of central, provincial, and municipal authorities. If the prices and allocations of materials used to produce an item do not respond to market forces, the market for the end product isn’t really free either. Endemic waste and corruption is the inevitable result. Party cadres in control of required raw materials wind up devising their own market-allocation mechanisms: they take bribes under the table.

Sometimes these might be simply nasty moral lapses on the part of sponging bureaucrats or officials. But Chinese factory managers often try to explain that circumventing the system’s “structural inefficiencies” is the only way they have to balance out serious shortfalls in factory resources. Corruption becomes institutionalized in business when bribes are the only way to get a regular supply of goods and services. A foreign business will feel that it has a vested interest in an existing corrupt system when it has made major capital outlays to function within it. Foreign business thus can become the ally of totalitarianism. Instead of being a positive force for freedom, free markets, and democratic change, business can often just as easily foster corruption and retard structural change. It’s an oft-noted fact, for instance, that the Chinese side of lucrative joint ventures with the United States tends to be stacked with high-level Party officials and their friends and relations. The same often goes for the rosters of Chinese participants in foreign cultural and academic exchange programs. Straight foreign financing, such as World Bank loans, has always been, and given the nature of cash will always be, easily diverted to uses calculated to entrench the existing power structure—which now means the Chinese hard-liners. And even the “neo-authoritarian” strategies of a Chinese economic reformer like Zhao Ziyang—one of the “good guys” we’re supposed to be protecting through American appeasement— are, on close examination, not particularly in line with American concepts of democracy, human rights, and structural reform. The effect on China of Western capitalist ventures is therefore not necessarily as benign and democratizing as American business people, even those with the best of intentions, might think.

In the end, totalitarian societies may simply have to replace their systems of top-down political directives with bottom-up rational market forces—to dispose of the communist system in its entirety. This quickly becomes hard to distinguish, intellectually or practically, from the outright overthrow of the communist state. Subtract the nation’s economy and what is the political power left to a communist state? Such governments are founded, after all, on a kind of equation of political and economic power. Is what’s left enough for tyrants accustomed to decades of unbridled power? Westerners in China have been required, of course, to try to make this intellectual distinction, if only rhetorically, out of courtesy to their communist hosts.

The Contribution of the China Experts

LEAVING ASIDE ABstract discussions about systemic change, how was it that calculating American capitalists could have gotten so entranced by China as to forget how little disposable income its billion people had, or were likely to have for a very long time? Americans told themselves that they were penetrating the ways of the Orient. Americans assumed, for instance, that those who first got a foot in China’s door would be rewarded as old friends with lucrative contracts. They misconstrued the concept, elaborated by the China experts, of guanxi, or “personal connections,” according to which the Chinese were presumed to scratch your back if you scratched theirs. Far from favoring old friends, the Chinese proved to be as likely as the next guy to collar the lowest bidder as soon as he got into town, sometimes reneging on done deals to do so. Americans were shocked to discover that despite their “highlevel Chinese contacts" and major capital investments, the Chinese rushed as fast to buy lower-priced Japanese imports as Americans do. Even faster. Guanxi applies to personal relationships, perhaps, but not to hard, cold business.

America’s misunderstandings about China were also deeply aggravated by the fact that many of our China experts sometimes acted more like public-relations mouthpieces for China than unjaundiced observers. There is a large literature of Western scholarship today that now looks like little more than an apologia for Maoism and its many crimes. The 1959—1961 famine, which extinguished some 25 million lives in the name of the Great Leap Forward, was for decades roundly denied by some American China experts, who, taking their cue from Orwellian Chinese-government propaganda, argued that hunger had been stamped out in China.

One could have anticipated that experts who had dedicated their careers to China might exhibit some overzealousness about promoting U.S.-China relations. But the problem in the academy went beyond a mere pro-China bias, or even a blind academic commitment to pet interpretive constructs like the “new China,”arising from a kind of ineluctable continuity theory of Chinese history —that there was something intrinsically Chinese, and on balance positive for China, about Maoism. That notion was dominant in academe for so many years that few China scholars could be found with the courage to criticize China directly or seriously to question the pace of investment. No, there was something else involved: intimidation, the most celebrated instance of which involved a young Stanford Ph.D. candidate, Steven Mosher, now the director of Asian studies at the Claremont Institute, who had the temerity to conduct research on forced abortion and female infanticide in China. Many say that Stanford University, which denied Mosher his degree, cravenly capitulated to baseless charges and Chinesegovernment threats. Many academics now admit that they engaged in tactical understatement about humanrights abuses in China, because they knew from the example of those unlucky few who had had their careers torpedoed that China would shut them out, and possibly harass, imprison, torture, or even execute their Chinese friends. The China experts took these things very seriously indeed, which is why they didn’t talk about them much. With such implicit threats the Chinese have therefore been able to impose an extraordinary level of selfcensorship among people who actually know better, and thus to generate a pervasive aura of complacency among those more casual observers, in the media, who don’t.

As has also been true of Soviet scholars in years past, many China experts gained their “expertise” during the years of isolation, and hence arrived at their professional world views in a relative information vacuum that proved highly conducive to flights of fancy. The rigid conformism that holds sway in academic departments (by which those who toe academic party lines are favored with career advancement), together with American leftist rhetoric and politics of the sixties and seventies, tended to cut a wide swath for fellow travelers during this period. Much of the American sinology establishment preferred to take for granted that the grotesque testimony about the Cultural Revolution and its aftermath which was leaking out from under the Bamboo Curtain, in distressing conflict with their rosy theories of Chinese Communist progress, must just be Taiwanese propaganda, or McCarthyite anticommunist hysteria, or mere sniping from those who wanted to take the shine off the geostrategic brilliance of Nixon and Kissinger and the experts who had advised them.

A number of China experts have had a change of heart in the eighties, and issued mea culpas for their past mistakes. However, one might also note that belated academic confirmation of the horrors of Mao’s Cultural Revolution came about only after the new Chinese leadership implemented its policy of encouraging the Chinese themselves to criticize the period. Hard damning evidence had long been available but of course would gain currency only after the Chinese government decided this suited its purposes. The American sinology establishment, by and large, for many years played along with the regime’s shifting constructions of reality. As the eminent Belgian-born scholar Simon Leys, who was one of the few to expose the truth long before that became fashionable, once remarked, “Paris taxi drivers are notoriously sophisticated in their use of invective. ’Hé, va done, structuraliste!’ [Hey, get lost, you deconstructionist!] is one of their recent apostrophes—which makes one wonder when they will start calling their victims ‘China Experts’!”

What Price Guanxi?

A CHINESE GOVERNMENT FOUNDED ON THE PRINciple of strangling individual initiative in subordination to Party leadership, a government that teeters on the outcome of political power plays among gerontocrats, may not, in short, be the most stable environment for long-term foreign financial security. The hard-liners’ eagerness for continuing access to Western markets and capital contradicts the theory that China’s dictators are in any position to plunge China into a state of pristine isolation; the conditions for such isolation, or for a second Cultural Revolution, simply no longer exist. But some American executives and politicians still like to assume that business is severable from politics, and that in the long run China’s despots will see to it that we are generously rewarded for our financial support. While thumbing their noses at the guanxi President Bush thought he had with them, well aware of how bewitching they are to us, the Chinese continue to insist on special treatment in both business and politics, in exchange for feints and gestures like the release of Fang Lizhi and his wife. It remains to be seen how long American business, and Americans, will feel obliged to indulge them merely because they’re so fascinating, and so Chinese. □