CFR Presents

Asia Unbound

CFR experts give their take on the cutting-edge issues emerging in Asia today.

Print Print Email Email Share Share Cite Cite
Style: MLA APA Chicago Close

loading...

In China, Foreigners Come First

by Elizabeth C. Economy
August 26, 2013

A flag (L) bearing the logo of GlaxoSmithKline (GSK) flutters next to a Chinese national flag outside a GlaxoSmithKline office building in Shanghai on July 12, 2013. GlaxoSmithKline executives in China have confessed to bribery and tax violations during one of a string of investigations into foreign firms. (Aly Song/Courtesy Reuters) A flag (L) bearing the logo of GlaxoSmithKline (GSK) flutters next to a Chinese national flag outside a GlaxoSmithKline office building in Shanghai on July 12, 2013. GlaxoSmithKline executives in China have confessed to bribery and tax violations during one of a string of investigations into foreign firms. (Aly Song/Courtesy Reuters)

Chinese often complain that foreigners come first. During the early years of reform, foreign companies received special incentives for investing in China, and the few nice hotels in the country were reserved for foreign visitors with their foreign currency—no ordinary Chinese allowed. Even today, if a crime is committed, many Chinese will argue that the police are more likely to take action if a foreigner is the victim than a Chinese. Foreigners also may come first however, when Beijing needs a scapegoat for the ills of the country.

Witness the recent crackdown on price fixing. The Chinese government has targeted the pricing policies of a number of foreign firms in a wide array of industries, such as powdered milk, pharmaceuticals, medical supplies, and now apparently autos. A number of analysts have suggested that at least part of the reason for the crackdown is that the middle class is unhappy with the cost of consumer goods, and higher priced—albeit generally higher quality—foreign goods make an easy target. The government, in turn, claims that the crackdown is merely an effort to support the rule of law. The headline of one Xinhua editorial—“Foreign firms should adapt to better regulated Chinese market”—suggests as much. Some reports also claim unfairness in the pricing of foreign luxury goods in China relative to other markets: a luxury car can cost more than 60 percent more in China as compared to one sold in North America or Europe. Breaking down the extra costs to account for transportation, Chinese import tariffs as high as 25 percent, and any special features included in cars made for the Chinese market can likely explain some, but not all, of the differential. Foreign automakers, therefore, might want to address this charge head on. Nonetheless, if indeed this campaign is about enforcing Chinese regulations, and not just an effort to gain advantage for Chinese firms or appease Chinese consumers, we should soon see similar broadsides against the telecom and banking sectors in China, as Chinese regulators have promised.

Foreign firms are also held to a different standard in other respects. In the environmental realm, Chinese non-governmental organizations (NGOs), such as the Institute of Public and Environmental Affairs, have long targeted multinationals ahead of Chinese firms for environmental wrongdoing. It is less politically treacherous: attacking a foreign firm for not adhering to Chinese environmental regulations will not jeopardize the future of a Chinese NGO. In addition, foreign firms have traditionally been more sensitive to bad publicity and more likely to respond when alerted to their environmental failings. Of course, the multinationals should not need to be reminded to do the right thing, but holding them to account while allowing their Chinese counterparts a free pass not only disadvantages the foreign firms but also does little to address the real source of China’s environmental challenge.

And it is not only foreign businesses that face extra scrutiny in China’s political world. According to the South China Morning Post, a recent report by the Chinese Academy of Social Sciences blames Western-funded environmental organizations working in the Mekong River region for harming China’s reputation by “irresponsibly attacking Chinese investors and misleading local communities with biased reports.” The intent of these NGOs, according to the report is apparently to limit China’s economic influence in the region. When questioned about the foreign sources of funding, however, the report’s authors refused to answer.

Foreigners don’t want special treatment. They want a level playing field—preferably one that is rooted in the rule of law and devoid of political conspiracy theories. Within the next few months, if core sectors dominated by Chinese firms are scrutinized also, we will know whether this is what Beijing wants as well.

Post a Comment 2 Comments

  • Posted by Neil Cassidy

    Ah, the Chinese double-standard. It is alive and kicking, if a bit stained by acid rain. Scapegoating and bullying are the favorite tools of narcissists everywhere–and who could be more narcissistic than the dictators who run China?

  • Posted by robert boyle

    Your closing argument gave me quite a laugh. My experience, after 10 years in China, tells me that the average laowai, a loser in his own country, looks distainfully on the average Chinese and that they are above China’s laws. Using the code term, “a level playing field,” has been the American gambit of politicians and businesses dating back to the late ’60s and ’70s when it appeared that the Japanese were beating the corporations at their own game; now it’s the Chinese turn. “Devoid of political conspiracy theories” like the American decision to stop the Chinese purchase of Conoco? Don’t make me laugh!!

Post a Comment

CFR seeks to foster civil and informed discussion of foreign policy issues. Opinions expressed on CFR blogs are solely those of the author or commenter, not of CFR, which takes no institutional positions. All comments must abide by CFR's guidelines and will be moderated prior to posting.

* Required

Pingbacks