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U.S. corporations have sometimes made the mistake of believing they are loved for their own sake in China. In reality an ever-calculating Beijing has welcomed the intellectual property and marketing expertise they bring. And now that they have been largely sucked dry, Beijing no longer sees any need to make nice.

Quite the contrary. Under President Xi Jinping, the Communist Party has begun the next stage of China’s development – and that means getting the gweilo out of the nation’s hair. So say Michael Wessel and Daniel Slane, two prominent policy analysts who are commissioners on the U.S.-China Economic and Security Review Commission.

Writing in Manufacturing and Technology News, a newsletter run by Annandale-based Richard McCormack, Wessel and Slane posit that recently enacted anti-trust legislation is “starting to make life very difficult for foreign corporations.” They add: “The law is being used to selectively control prices of foreign-made products and services and to demand outrageous concessions before approving mergers. The ‘State Secrets’ laws provide enormous latitude for the government to detain and potentially imprison business people engaging in what are normal western business activities.

“The Chinese government is solely interested in protecting their domestic companies and their national champions. Foreign corporations are in the way. The Party got what it wanted from Western companies and no longer needs their help……..

“Now that these foreign corporations have been exploited for their technology (to the great detriment of American workers) the welcome mat is being removed.

”The Wessel/Slane analysis accords closely with my own. As I have pointed out repeatedly, most notably in In the Jaws of the Dragon, a book published in 2008, a principle best known as selective enforcement explains why in one East Asian society after another, the real power lies with unelected and virtually invisible bureaucrats. The laws are written tightly but are enforced laxly – except when they are enforced tightly. The authorities always retain the option to tighten enforcement and they can do so at a moment’s notice against anyone who, perhaps for some reason that would be considered entirely acceptable in the United States, is not considered sufficiently deferential to bureaucratic authority.

How selective enforcement works in practice is apparent in the case of Qualcomm. As my colleague Panos Mourdoukoutas points out, only the most obvious victim of China’s new strategy is Qualcomm.

Welcome to the real new world order – one in which U.S. corporations have far more to fear from Beijing than from Washington. What is happening here is a principle I call reverse convergence. As I pointed out at length in 2008 in In the Jaws of the Dragon, unregulated attempts by Americans to engage with China will ensure that the United States converges to Chinese values not the other way around.

(Republished from Forbes by permission of author or representative)
• Category: Economics • Tags: China 
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