FOR THE UNITED STATES and other democratic capitalist nations, trade with and investment in the People’s Republic of China always posed a dilemma: how to ensure that economic engagement benefits the people of that nation without fortifying the repressive political regime under which they live. The response from supporters of Western economic engagement has been that the dilemma, essentially, will resolve itself, because the more interdependent China and the West become, the more the former will have to play by the rules of the latter. Growth and prosperity will gradually promote freedom and the rule of law.
Recent events must give pause to even the most optimistic believers in capitalism’s power to induce more transparent government in China. Beijing is in the midst of not only an intensifying crackdown on its own citizens but also in what appears to be systematic harassment of U.S., Japanese and European multinational companies in the form of stepped-up enforcement of a 2008 antitrust law.
In late July, investigators raided Microsoft offices in four Chinese cities. In August, China fined 12 Japanese auto-parts manufacturers roughly $200 million for alleged price-fixing. In September, the price-fixing police slapped Volkswagen and Chrysler with a combined $46 million in fines. Chip-maker Qualcomm, Mercedes-Benz and Jaguar Land Rover also are reportedly under investigation. All of this comes on top of China’s ongoing clampdown on the Internet, which has recently intensified to the point of hindering routine document sharing via Google and other non-Chinese firms.
Both the American Chamber of Commerce in China and its European Union counterpart have protested what they regard as arbitrary treatment. We sympathize — even though these businesses are to some extent reaping what they sowed. The rule-of-law risks of doing business in China have always been evident, as Western firms knew even as they forged ahead in pursuit of a vast market and in the belief that Beijing needed them as much, or more, than they needed Beijing.
As is now evident, however, in China there is nothing deterministic about the relationship between economics and politics. The communist authorities are bent on preventing political liberalization from flowing in with foreign capital, and, indeed, on ensuring that foreign involvement in the economy serves their policy goals, domestic and international, among which “security” is paramount. Meanwhile, U.S. markets for both goods and financial services remain wide open to China, as shown by the recent Wall Street initial public offering of a Chinese online retailer with close government ties, Alibaba.
Openness, not only to China but to all nations, remains in America’s best interest. The question, though, is whether either U.S. multinationals or the U.S. government are making the best use of their leverage in the Chinese market. No doubt China believes it can always exploit competition among U.S. firms, and among firms from this country and its rivals — especially given the stagnant European and Japanese economies’ dependence on export sales. Perhaps it’s time that the capitalist West showed that it, too, can present a united front.