However, the report also points to increased political controversy around China that runs counter to fairly aggressive charm offensive by high level U.S. officials, including Vice President Joe Biden, U.S. Ambassador to China Gary Locke and Under Secretary of State Robert Hormats, all of whom expressed strong support for Chinese investment in the U.S. These comments, however, were undermined to some degree by high profile resistance by the U.S. government to some investment by Chinese technology firms on national security grounds.

Similarly, on the China side, there have been some mixed messages, with public support by China generally to foreign investment, but some resistance in specific.

China added a new layer of bureaucracy for foreign investment into China. In August, the Ministry of Commerce (MOFCOM) issued the final regulations of China’s new national security screening framework, replacing the temporary regulations enacted earlier this year. While the institutional setup of this framework is very similar to the Committee on Foreign Investment in the United States (CFIUS), there are two major differences that stand out. First, the scope of national security screening is intentionally kept very broad, including “national economic security” or “social stability” as reasons to block foreign investment.

Clearly, investment flows going to and coming from China involve a complex amalgam of politics, economics and diplomacy. The stakes are very high for the globe and it will take the best minds and the best motives on both sides of the Pacific to navigate through the months and years ahead.

Unfortunately, we’re heading into an election year and its deja vu all over again.  Whoever is out criticizes whoever is in as being soft of China.  It’s happened in every election since the ’90s, irrespective of parties.  Unsurprisingly, Mitt Romney is the worst panderer this time around, bashing Obama over China policy.

I have actually come to admire China in a number of ways, though I think their oppressive policies toward expression is abominable and, frankly, self-defeating. 

But here’s what passes for support for China in the current debate. William Reinsch, a real thought leader in foreign trade, had this to say in a recent Politico article:

“The unsuccessful policy is to try to hold these guys back,” said William Reinsch, chairman of the U.S.-China Economic and Security Review Commission. “If we don’t sell it or they can’t steal it from us, they’ll get it from someone else.”

Empress Dowager Cixi

There is an exhibit at the Smithsonian on the Empress Dowager who effectively ruled China from 1861 to 1908.  The exhibit contained a group of photographs that the Empress commissioned a series of photographs from 1903 to 1905 designed to show her to the world in a more favorable light.  Both she and China had taken a reputational “hit” by the Boxer Rebellion where mobs of Chinese rebels attacked foreign interests in China.  Some suspected that the Empress supported the Boxers.

So, the Empress decided on charm offensive in which she invited the “ladies” of foreign embassies over for tea and a number of other initiatives designed to soften her image, from the dragon lady depicted in the international press.

I’m not sure the photos did the trick.  She looks very grim in all of them.  There are a few where she’s out in the snow at the Summer Palace outside Beijing.  She’s got her entourage of attendants and eunuchs in toe.  She still looks like a dragon lady.

I was struck by the fact that the Empress knew that her image abroad was having some negative impact on China and needed to be fixed.  And I imagined the discussions that took place in advance of this “rehabilitation campaign.”  It probably sounded a lot like discussions that take place today for companies, organizations or individuals trying to enhance their reputation after a crisis.  What kind of pictures should we create?  How should we distribute them?  Who should we invite to the Palace?

The more things change….

My Panel at the 4th Bridges Conference in Geneva

With these statistics in mind, I attended The Fourth Annual Bridges China Dialogue, a meeting in Geneva, Switzerland dedicated to examining and promoting Chinese investment globally, with a special focus on Europe.  Attendees included representatives from business, government, NGOs and academia.  The senior most speaker was Jian Chen, Vice Minister, Ministry of Commerce, China.  The Ministry of Commerce, also known as MOFCOM,  is the most powerful economic ministry in China.  Minister Chen discussed China’s 12th 5 year plan, which was announced earlier this year.  Unlike in the U.S., when China announces its plans for the future, it  is wise to pay attention.  One analysis found that China typically achieves 80% of the goals it sets out in its five year plans.  As noted above, when China decided to “Go Global,” it did it and continues to do so.

While participants addressed a multiplicity of topics, what struck me was the thematic differences between the Chinese speakers and the “western” speakers.  For the most part, the Chinese speakers provided statistics that demonstrated China’s growth in outbound investment.  They also expressed some frustration with some of the challenges they have faced in global markets.

The western speakers focused on giving strong advice to Chinese companies on global business norms.  Underlying their comments was the guidance that Chinese companies need to recognize fundamentally the obligations they have to stakeholders beyond their specific business interests.  My own presentation struck that theme, as well.  Sometimes, it seems that Chinese companies have learned capitalism too well in that they believe that their only obligation is to make money, so customers and investors represent their only relevant audiences.  Recognizing their broader social obligations seems foreign to them.

Of course, assuming broader social obligations is a relatively new phenomenon even for western companies.  Corporate Social Responsibility was unheard of in the 1950′s and 1960′s.  But it is a fundamental function of companies today, particularly global companies.  So, it is understandable that the concept may not have caught up with Chinese companies.  But they do bear the added burden of the ambivalence with which the developed world watches China’s explosive economic growth over the last 30 years.   As a result, the “tone deafness” that Chinese companies  sometimes exhibit in how they communicate beyond their core audiences of customers and investors generates added obstacles to their global growth.

My message to the group was that attention to the concerns of these broader audiences must be genuine and companies should address those concerns operationally.  But it is equally important that companies communicate openly to governments, NGO’s and other stakeholders in order to expand their freedom to operate in foreign markets.  Chinese companies confront many stereotypes when they enter markets in the more developed economies.  Some of these stereotypes are irrational, but some are well-founded.  It is critical that they address both the rational and the irrational fears that their potential stakeholders hold in these foreign markets.  While my presentation was limited in time, the advice I provided can be found in a brochure developed as part of an initiative launched by my firm, Fleishman Hillard.  The initiative is the Fleishman Hillard Global China Practice.  The brochure is entitled The Eight Rules of Engagement for Chinese companies investing abroad.

WASHINGTON - The United States does not see China’s rise as a threat, nor does it seek to contain the Asian nation’s ascent, State Department spokeswoman Victoria Nuland said Monday.

“As you know, we welcome the rise of a prosperous, successful China that plays a growing role in world affairs, consistent with global rules, global norms and institutions, and a China that’s committed to advancing a positive bilateral relationship with us,” Nuland said, in response to a question about a white paper issued by China last week on its peaceful development.

“We don’t see China’s rise as a threat, nor do we seek to contain China’s rise,” she said.

She also said that any statement by China “where it elaborates its intentions geostrategically” is welcome. “But we continue to hope that we can have more military transparency,” she added.

US Vice President Joe Biden, who made an official visit to China last month, wrote in The New York Times last week that he remained  convinced that a successful China could make the US more prosperous, as trade and investment have bound the two countries together, and they share “common challenges and responsibilities” on issues from global security to global economic growth and have incentives to work together.

But here was the chilling sentence in the report:

Selective female foetus abortions because of China’s one-child policy and a societal preference for boys has created the perverse effect that there are fewer women working in China’s factories. Factory owners in southern China report that the ratio of factory workers is now 60:40 male to female, whereas it used to be predominantly female.

This matter-of-fact assertion is remarkable.  It layers a practical challenge on top of the moral one regarding abortion.  As a liberal Catholic, I have to admit I am torn on the issue of abortion.  I think it’s a bad thing.  As a liberal Catholic, I hope that I never have to confront the issue in my personal life, but if I do, I hope I have the courage to “choose life.”  But I also recognize that circumstances matter and that there are some circumstance where the moral imperative is not clear.  Even in this situation in China, when a society imposes an incentive to accept abortion for sex selection, I can understand why an impoverished family might be driven to abortion for that reason if they conclude that it is in their long term survival.  Who am I to judge.

But it still makes me very, very queasy.

The lack of public input pretty much guaranteed that this would not turn out well. It is turning into an environmental and social disaster. It has aggravated a long term drought and the people now blame the dame for the entirety of the drought, as though a dam could control the weather, but also for earthquakes and other natural calamities.

So, we see in China and phenomenon that we also see in the U.S., beliefs on the part of the public that are politically convenient and address some grievances, but that are logically unsustainable.

But what is also amazing is that the public is expressing those beliefs very aggressively. It shows that this so-called authoritarian government is not as controlling as some in the West may think.

Still, whatever the misguided convictions of the affected Chinese people, this dam is a classic man made disaster that shows the limits of authoritarianism.

Check it out:

http://wapo.st/kftYtG

In July, the China Banking Regulatory Commission complained to locally incorporated foreign banks about their low compliance rate in meeting requirements to publicly disclose their annual earnings on their websites and called on them to remedy the situation immediately.

I think capitalist democracy depends on an educated populace that, in general, recognizes the tradeoffs inherent in sound economic policy.  It also helps of the population has some kind of social conscience that will prevent gross inequity from taking hold.  I fear that large numbers of Americans, maybe even a majority of the voting population, lacks either of these qualities.  Combine that with a dysfunctional Congress (read: U.S. Senate) and the future looks bleak.

But there may be another way and China is, I think, testing the proposition.  Maybe if you concentrate solely on generating economic growth and ignore the luxuries of democratic governance or government provided social programs, you can create a functioning society.  Maybe the best way to maintain social peace is a free market economy, with a tightly controlled political system.

In today’s Financial Times, there is a story about economic growth in Tibet.  The Chinese government is focusing heavily on making sure the economy is robust in this tumultuous region, while maintaining strict control over political activity there. 

Nearly two years after Tibetan regions of China were engulfed in riots and protests, Beijing is doubling its bet that rapid economic development will win the political loyalty of its Tibetan population.

This will be an interesting experiment.  Let’s check back in two years and see if the Tibetan resistance to Chinese political control subsides as the population begins to enjoy the fruits of a strong economy. 

Maybe James Carville was more right than he knew when he said, “It’s the economy, stupid.”

Here’s a brief excerpt of from an article from the Wall Street Journal:

The movie includes jokes about many controversial topics, such as tainted food, soaring home prices, and a bitter class controversy that erupted last year after a wealthy driver ran down and killed a poor young pedestrian. A common theme is frustration over injustice and a sense of powerlessness.

This video, based on a an online game called World of Warcraft, is a thinly veiled critique of the efforts by the Chinese government and, tellingly, the government has not sought to shut down the video, which is shared online….yet.

What it shows is that no government can permanently suppressed free expression.  Some can do it for a very long time (see Soviet Union).  But one of the wonders of the web is the extent to which power has shifted to the people.  China cannot, at the same time, present itself as a modern society and also suppress the Internet.  It will have to choose which is wants to be.  It can’t do both.

Hooray to “Corndog,” which is the psuedonyn for the creator of World of Internet Addition.  He reminds me of this guy: