Redstate

blogger doesn't try to plagiarize your report.

Google and other companies will operate in China for not a day longer than the Chinese tolerate their presence. China has no lack of home-grown competitors, and our guys will get thrown out with the garbage on the same day that the Chinese companies decide they have nothing more to learn from us. Smith is talking like Google actually has some power over there.

But I've got my privacy screen on :)

I hate the Communist regime there, but I hate show hearings by Congressmen trying to look good in front of the media, too.

This hearing is just an election-year attempt to get a free ride on some headlines.  It's can acheive no more good than those stupid steroids hearings.

If China is a threat, Cisco routers and Google filters are the least of our worries.  Certainly in a state where people are jailed and tortured on whims of the regime leadership, those companies are the least of the Chinese peoples' worries.

And I hope you find a polite way to tell them that, Clayton, heh.

I actually think it is Oxymoronic to have someone from the NY TImes in "bloggers row".  That all said, and I've commented on this elsewhere, I find it unusual that the new progressive companies, like Yahoo, Google, Microsoft, etc, are doing business, and even in bed with the Chinese.

I know there are global economic realities, but I really believe you have to seel out a lot of your ideals to do business in China.

I agree that these companies have little influence there and run the risk of being tossed out of the country if they don't abide by Chinese rules. (Although, I'm not so sure isolating the country from the global culture wouldn't eventually weaken the gov't.)

My problem with these companies isn't that they knuckle under to the Chinese gov't. But they look like total hypocrites when they assist in censorship there, but refuse to help assist the gov't. here, or when their CEOs try to portray themselves as wonderful philanthropists out to help those that can't help themselves.

They should shut up and run their businesses.

 I agree, and I wonder which, if any, congressional members will care to point out the role they had and have in working with China to address it's weak human rights stand. Fortunately these companies have no problem pointing out where the realresponsibilty for changing China lies (emphasis mine):

In addition to common action by Internet companies, there is an important role for the United States government to address, in the context of its bilateral government-to-government relationships, the larger issues of free expression and open communication.

While we believe that companies have a responsibility to identify appropriate practices in each market in which they do business, we think there is a vital role for government-to-government discussion of the larger issues involved. We urge the United States government to take a leadership role in this regard and have initiated a dialogue with relevant U.S. officials to encourage such government-to-government engagement...

 Who really has the power and the position to influence change in China? And what will those persons do in the future that is different than what they've done in the past? That's what this hearing should be about.

I agree that this is grandstanding. It seems like they are hoping that private companies act as government agents because they havent been able to fix the problem themselves.

Either our policy is to allow business with China (the overwhelm them with capitalism strategy), or it isnt (suffocate the governments power by denying capital).

Unless these businesses are doing something against US law, what is the point?

Now, whether our policy should change is a different complex story.

Google et al will get tossed out of the PRC as soon as they are no longer useful. It has nothing to do with abiding by the PRC's rules, and in fact the rule violations might just be the cover story for kicking them out.

China is in the process of developing an economy driven by final demand rather than by exports. They're playing Western companies like violins, to transfer technology and business acumen under the false promise of continuing access to lucrative markets, and they've been playing this game for 25 years now.

When you ask really serious investors what they're doing in China, the answer is almost always: Not much. No one has figured out how to actually make any money there.

Regarding China's exposure to "global culture" as a way of opening them to liberalization: the Chicoms laugh up their sleeves whenever they hear us say that.

Either we favor free trade with unfree countries, or we don't.

It's not fair to endorse free trade agreements, Chicom WTO entry, and such on one hand, but then ont the other hand blast the companies that take advantage of the lowered trade barriers.

The original post, your first comment, and my response were in regards to the companies doing business there. Your last response deals pretty much with the Chinese government's strategy and actions. (As an aside, I'm in the institutional investment industry. "Really serious investors" don't put money down sinkholes without the prospect of a reasonable return. A good example is Manulife. They have been operating in China at least since 1992 and make plenty of money there.)

My main point is the same. These companies and the people who run them look like hypocrites and ought to keep their mouths shut.

By the way, its nice that you have an inside line with the Chinese gov't. and know what makes them laugh. Maybe you could distract them with some jokes while Google sneaks past the censors.

Willing to discuss offline? I assume you have invested successfully in China and would love to know more.

They're playing Western companies like violins, to transfer technology and business acumen under the false promise of continuing access to lucrative markets, and they've been playing this game for 25 years now.

 I like your perspective on things but this doesn't add up. For one thing, you say they've been at this for 25 years now... that's a pretty long time already - how much longer do you speculate they'll continue their subterfuge until they "spring the trap", kick all American (all foreign?) companies out of the country, and divest themselves from the world economy?

 For another, I find it difficult to match this idea up with the growing number of American (and I'm sure other foreign) companies doing business there. For example, Walmart now has upwards of 50 stores open in China - not just operatonal locations that support it's U.S. business but actual retail outlets or supercenters as it were. All I see is increased activity, and increased consumer spending by Chinese citizens to American vendors on the ground there - do you assert China will not only remove American businesses, but also commandeer their property and take over their operations (and profits) as well?

When you ask really serious investors what they're doing in China, the answer is almost always: Not much. No one has figured out how to actually make any money there.

 But today we hear, as an example, that "Cisco buys slice of China game maker".

 Granted this is one example, but is Cisco wasting it's money? Walmart, Microsoft - those are smart folks too and have years of success... but you sort of paint them all as unwitting dupes about to be fleeced...

it seems to me that you could cause them a lot of trouble by depriving them of Cisco routers and effective, efficient search engines.

Well, preventing Google from operating a site under Chinese law doesn't achieve the latter.

As for the former, don't kid yourself.  In that field, there's nothing American companies can do there that a European country couldn't.  Depriving Americans of those Chinese dollars is all we'd achieve with an embargo.

As a general rule (not without exceptions), Western companies are allowed to do business in China and make direct investments only when the Western companies form partnerships with Chinese-owned entities and agree to transfer technology and other knowledge to the Chinese partners.

China are not about to pick up and throw everyone out one fine day, because they still have a use for direct investment and continuing technology transfers. But they're not about to let us get rich doing it. There's much more at work here than simple comparative advantage. The managers of Chinese enterprises are often closely allied with members of the government and the military (sometimes they are the same people), and they are definitely looking ahead to being able to challenge Western companies at our own game.

China has tremendous natural competitive assets, not limited to their low-cost manufacturing labor, and they take an exceedingly long strategic view, which is in itself a competitive asset as many American public companies have trouble looking beyond the current quarter.

In specific regard to the tech companies that were the focus of the hearing: look at Google. This is a company with at least three well-established direct competitors that are Chinese-owned, and several other up-and-comers. Given that business dealings in China are far from transparent, I (as a Google shareholder) am far from confident that Google will be able to grow into anything like the dominant position they occupy elsewhere. They aren't going to get booted out, but they will find that, strangely, their margins, growth rates and equity-returns are just not as high in China as they are here.

Cisco is well known for having been to China early, and is believed to have worked closely with Chinese authorities on the design of routers with filtering capabilities of particular usefulness for surveillance and filtering. Others here have more specific insights on Cisco's activities in China than I do so I won't say more, but even Cisco has native Chinese competitors. The Chinese aren't stupid: they will buy Cisco products rather than forego their specific benefits, but they will do everything they can to ensure that these benefits eventually appear in Chinese offerings.

I indeed know some very sophisticated investors (they are household names although I obviously won't name any) who are concerned enough about the difficulty of staking out profitable market positions in China that they won't make big bets there. TennJohn (upthread) disagrees with me on this. There's no doubt that you can make some money, but it's far from a fertile playing field, and anything but a level one. A disciplined investor who has large amounts of money to put into the ground (billions or tens of billions) should think twice about putting it in China.

Ever since China started opening to Western investment some 25 years ago, there has been the perception among Western business that the "market of one billion consumers" was a place you just had to be. Exploiting this perception was what I meant by "playing Western companies like violins." An earlier generation of companies found Japan a similarly difficult place to do business, and still do.

The biggest difference with China is that, although they are now an export-led economy, they are fast approaching the point (at least among their urban populations) at which they will rival and surpass the US as a source of final demand. And in every business ever invented (except the government business), the customer is always right. Once China becomes the world's biggest customer, they will be in a position to strongly influence global markets for strategic resources, capital, and finished goods, in ways that American companies have been used to doing for decades.

I think China has a (possibly exploitable) weakness in the relative immaturity of their financial system. They simply do not allocate capital as efficiently as we do, but that may just be in the nature of command economies. They also are net exporters of capital, which is an unprecedented position for a developing country. There are any number of theories about why they are doing this, but I don't know any convincing ones.

All of this is happening, and fast. We can't do anything to stop it. It's not malfeasance by the Chinese, it's just extremely shrewd business and investment practice. It's bizarre to see US legislators grandstanding about it.

Isnt another problem the fact that China really has no interest in enforcing US copyright laws so it is more than happy to have US companies come in and show them their trade secrets?

China has no need whatsoever to play by our rules, since they know we'll do anything they ask in order to be granted "access" to their markets.

If you want to know what their attitude toward intellectual property is, just think about the enormous amount of industrial espionage they do.

China has an insatiable hunger for prestige. They feel that the rest of the world has [defecated] on them unjustly for hundreds, even thousands, of years, and they desperately need to prove their true worth, which of course if formidable. They want everyone to know they've arrived in the front rank of the world's nations. That's why it matters so much to them to have a Chinese entrant in every competition there is.

There's no notion of fair play or of getting along nicely with the other kids in the sandbox here. Our intellectual property laws to them only matter insofar as they may be sanctioned for violating them, and there is no chance of that.