A communist nightmare for U.S. businesses
China was the land of opportunity when it welcomed U.S. companies in the 1990s, but like so many naïve corporate dreams under authoritarian states, doing business there has become a nightmare.
President Xi Jinping and his communist regime’s bargain is crystal clear. If a CEO wants to access consumers in the world’s second-largest economy, he or she must accept totalitarianism and crimes against humanity.
If corporations are people too, how much does the devil pay for their souls? And why do executives think the Chinese Communist Party won’t eventually come for them?
Executives are squeezed between Xi’s sensitivity to outside criticism and activist consumers. If a CEO accedes to boycotts against items made by forced labor in Xinjiang’s concentration camps, China’s customers will boycott the retailer.
A conspicuously well-organized social media movement is calling on Chinese people to boycott Walmart after the retailer allegedly stopped stocking Xinjiang products in Chinese cities. The company did not comment, but Wall Street Journal reporters found some Xinjiang items on Walmart shelves.
The campaign is retaliation for President Joe Biden signing the Uyghur Forced Labor Prevention Act. The law bans importation of Xinjiang products unless the buyer can prove they were not produced with forced labor.
Party-sponsored boycotts have also targeted the Rockets, clothing retailer H&M, chipmaker Intel and other Western companies that spoke out about the government’s horrendous oppression of human rights.
Foreign companies can expect the pressure to mount ahead of the Olympic Winter Games in Beijing next month. Human rights activists will pressure companies profiting from cooperation with the Chinese Communist Party just as Xi demands greater fealty.
French retailer Carrefour’s experience is a cautionary tale that reveals what companies can expect to happen. The company is one of Walmart’s main competitors in China, but it’s no longer French.
Carrefour entered China in 1995 with hopes of tapping the world’s largest consumer market. The company was the largest foreign retailer through a legally required joint venture with Beijing Chuangyi Store.
Fast-forward to 2019, and Carrefour was struggling against fierce competition from governmentsupported, homegrown rivals. This should have come as no surprise since Xi has repeatedly promised to support “local champions” in their competition against foreign companies.
Carrefour soon sold 80 percent of its Chinese business to a local company. Amazon, Home Depot, Marks & Spencer, Uber, Google,
Yahoo, LinkedIn and other giant Western companies have also bowed out of China’s openly hostile market.
Walmart is remaining silent, but even then, there is no guarantee that acquiescence to the authoritarian regime’s demands will lead to long-term profit. Xi’s jingoism is essential to his vision for making China the world’s sole superpower.
The Communist Party’s oppression, also part of Xi’s plan, will only worsen.
Chinese police shut down the last remaining independent news organization in Hong Kong on Christmas Day, arresting seven Stand News staff and board members, including a Canadian citizen. Authorities declared the Stand seditious.
Fame offers no protection, as tennis champion Peng Shuai discovered. Authorities held her incognito for three weeks after she accused a senior Communist Party official of sexually assaulting her. When she finally surfaced, she denied ever making the accusation.
Chinese oppression of free speech does not stop at the nation’s borders. When the Wall Street Journal and London’s Sunday Times published editorials calling the Hong Kong elections a sham, officials informed the newspapers they could face prosecution under Chinese law.
The Hong Kong Economic and Trade Office told the Sunday Times it had committed a criminal offense “irrespective of whether the incitement is made in Hong Kong or abroad.” Last year, the government expelled three Journal reporters.
Western governments must protect their citizens from the Communist Party’s overreach and intimidation. The longer the West ignores such bullying, the more empowered Xi will act aggressively.
The European Union’s commissioner for economy and trade, Valdis Dombrovskis, says the bloc will use import bans, denial of research funding and suspension of subsidies as “anticoercion instruments” if communist harassment persists.
California Democrat Rep. Ami Bera, chair of the House Foreign Affairs Subcommittee on Asia and the Pacific, and Rep. Ann Wagner, a Republican from Missouri, have proposed establishing an interagency task force that could respond to China’s coercion.
Former President Bill Clinton invited China to join the World Trade Organization, believing that capitalism would overcome communist authoritarianism. Instead, Xi has weaponized economic globalization to establish dominance rather than relying on the tanks and battleships used by past totalitarians.
The world should understand that inaction in the face of Xi’s aggression would be capitulation.