Both Oars In No Sleeping Dog

Apr 9, 2010

When I was a commodity trader, I always wanted to go to China. Had I been given the chance to work in China prior to leaving trading, it’s possible that such an opportunity may have even delayed me in becoming a missionary. I was always fascinated by China and intrigued by the opportunities presented as it opened up in the 90’s. However, my interest in China and its economic potential has never dulled my contempt for their central government’s questionable domestic and foreign policies, most notably the one child policy and their refusal to allow religious freedom. 

Unfortunately, many corporations and governments around the globe seem to contract a severe case of amnesia about this when it comes to doing business with China. It is as if China’s economic hold on the world has created a global “Stockholm Syndrome.” Faced with gargantuan economic opportunities or unbeatable competition, few companies or nations seem able to say, “The Party Leader has no clothes.” China is just too big to diss.

Lured by the cheap cost of manufacturing and a market with one billion plus consumers, companies rarely take the piracy of intellectual property to the mat. They just keep coming back for cheaper versions of their old models, switching without complaint from absentee manufacturer to product buyer. The new rule of thumb is, “If you can’t beat’em, buy from them”. 

I am proud of Google for putting their foot down on this issue and on censorship. Reports suggest that Big Brother is not only watching what Google does, he is also watching HOW Google does it. It is clear that what a company does in China not only stays in China, it ends up being done all over China by competing local firms.

With Iran and North Korea looming in their thoughts, visiting government officials seem to be too busy courting favor [begging] with the Chinese Government that they forget to visit Tiananmen Square or to ask hard questions about China’s millions of missing girls. Groping for something to say in the thick, repressive air of Beijing, they settle for “Wasn’t the Olympics amazing?” Evidently, it’s easier to point out the one positive thing than to go over a thousand negatives.  

When positives are in short supply, it is always possible to deny the negatives. During her first visit to China as Secretary of State last year about this time, Hillary Clinton downplayed China as an adversary.  Motivated by the need to borrow, she went as far as to suggest that the United States and China could be good partners in the 21st century, sharing mutually in the economic benefits of ongoing globalization.

This is simply a fairytale. First, there is no doubt that the Chinese government is an adversary. The only way that will change is if there is no competition. Secondly, the Chinese government isn’t looking for partners – it is looking for land, natural resources and cheap labor. Partners are for investing and development. The Chinese government isn’t interested in investing in the world; it wants to buy it and ship it home.

Their land and resource grab is driven by the need to feed the machine and not by a monetary return on an investment. In fact, it is quite possible that the Chinese government does not even believe in money as a necessary financial construct. Perhaps that is why they lend it to us so easily and cheaply. Like old man Potter, the Chinese government focuses on controlling the things themselves and not on a return on capital.  

This makes sense from China’s industrial perspective. You can’t run a coal turbine on Euros or run dollars through a steel mill. The dollar value of a barrel of oil is simply not very important if you plan to use it and every other one you can find. The Chinese government thinks like a manufacturer on steroids, not like a financial banker. This is why China, at least currently, isn’t a good partner for the U.S., even on purely economic terms.

While the Chinese government and industrial complex may be truly be our adversary, it is also true that the wonderful, multi-ethnic people of China are not our adversaries. They are, in fact, our best ally against the Chinese government. People tend to like having freedom and choice. People are by nature traders and pro-free market. Who doesn’t want the best deal? So, we should continue to invest in the people of China.

It will be the people of China that will break the country up and reform it. What corporations and other nations have failed to do, the people will succeed in doing. Someday, the Chinese men will realize that their government has robbed them of the chance to have a family because there is no one to marry. Someday, Chinese women will reject being pressured into to preferring male children. Even non-monks will tire of the religious suppression and the jailing of bishops. When 1.2 billion people get mad at their government, they are going to need someone to listen. That is when we should be there and not a day sooner.