“I really worry about China,” Jeffrey Immelt, General Electric’s CEO, reportedly told a group of Italian business leaders last summer. “I am not sure that in the end they want any of us to win, or any of us to be successful.” It was a rare moment of corporate candor, lifting the veil that masks growing frustration in the U.S. business community about competing in, and with, China—a market that companies once thought offered them limitless opportunity.
The rose-colored glasses are off, and the clear-eyed vision of economic behavior by China is grim. The emerging picture is of state capitalism marked by widespread subsidies, growing restrictions on foreign investment, and mounting efforts to force the transfer of foreign technology to China, according to reports published in the last year by the American Chamber of Commerce in Beijing, its European counterpart; the U.S. Trade Representative’s Office; and the European Commission’s trade office. Inside government circles as well as the business community, concern is growing that China’s economic practices are diverging from, not converging with, the freemarket rules that govern commerce in much of the rest of the world. This is contrary to widespread expectations when China joined the World Trade Organization a decade ago. Until recently, the Obama administration’s obsession with the overvalued Chinese currency had stunted any real debate about how to deal with a China that is not like us and has no intention of becoming like us. Now that discussion has begun, both within and outside the administration. Longtime China critics have suggested pursuing novel litigation against Beijing at the WTO, testing the limits of global trade rules that were clearly designed to govern a different kind of capitalism. European officials have floated the idea of tit-for-tat reciprocity against Chinese treatment of foreign investment and government procurement.
A trade war with China is not imminent. Companies are still eager to do business there. Late last year, GE formed a major avionics joint venture with a Chinese partner despite Immelt’s worries. Congress remains relatively quiescent. And in 2012, Beijing will pick a new leader who could set the country on a path more compatible with Western freemarket capitalism.
From the National Journal