AN OBSERVER’S MUSINGS ON THE US/CHINA STATE OF AFFAIRS
Honolulu, Hawaii. 9 August 2022
It was early December 2000 when I arrived in Hong Kong. Here in front of me was the gateway to China – a vibrant entrepot filled currents of Cantonese culture mixed with British flair and Mainland Chinese implied threats. What a vision; arriving at one of the world’s storied hotels along the waterfront with the backdrop of an impressive skyline comparable to my native New York.
Exhausted as I was – a few moments after I was checked in, I literally ran to the ferry terminal to board the famous Victoria Harbor ferry to Kowloon. That image will forever remain emblazoned in my mind. To this day, as I bring up that crossing over Hong Kong Harbor it is colored by Clavell’s immense story of “Taipan”. Here I was on the water joined with countless historical figures that served to shape not just Hong Kong but modern China.
Now, I must state that until 2000, my focus both culturally and economically was Eurocentric. In fact, as a university student my senior thesis in 1967 was wishfully written as a design for a pan-European marketplace. For me, anyway, China remained a backwater, Asia was Japan and Vietnam was becoming a serious challenge for a misled American public. Asia, except the intensity of the Vietnam conflict did not exist for me.
Let’s return to 2000 in Hong Kong. I came to China to serve as a strategic marketing operation executive in a trading firm. That meant immediate engagement with a culture I knew nothing about – clearly if our firm was to trade, best we knew how trading worked and the relationship dynamics of the participants. A very steep learning curve indeed. Yet, it wasn’t too difficult to understand the driving forces behind those western business leaders that succeeded verses those that failed.
What I quickly observed were several dynamics in play:
Building relationships was of utmost relevance as trust was the paramount lingua franca of successful business leaders. The Chinese call in guangxi.
Remaining respectfully humble. Avoiding bravado was an instrumental component of opening and maintaining strong relationships.
Being conscientious in negotiations; not to play the zero-sum game. Losing face was catastrophic for either party.
Keeping a clear boundary between public and private behavior was vital. Even as Hong Kong and China are immense, everyone seems to know everyone else’s goings. A taint in personal behavior will have a devastating impact.
Learning key words in Mandarin to open discussions was useful, but not critical to long term relationships. Foreigners were not expected to speak Mandarin or Cantonese.
Understanding and respecting Chinese history and the complex psychology that impacts every Chinese was immensely useful. Yet many of my contemporaries working in China simply employed their Western training thinking. They expected it could be overlayed onto conducting business in China. All those executives failed.
Bargaining for everything is part of any transaction. Get used to it. If you are uncomfortable with bargaining – don’t even bother to do business in China.
My first impressions of China were formed in Hong Kong. Interestingly, these initial formative concepts of China were just a scratch on the surface. Nevertheless, at the end of six months I was totally hooked on the culture and people of China.
From Hong Kong, one afternoon I was invited to go “shopping” in Shenzhen. Riding the MTR to Lo Wu, I had to cross a bridge and step into the PRC for the first time. I never imagined that I would be in China. Hard to recall all the feelings, but one feeling stands out – awe.
I was awestruck by the drive and curiosity of the people. As I walked into a huge market, filled with western branded knockoffs, I was stunned. Here was Louis Vuitton, Rolex, Cartier, Hermes and many branded products available as if I was walking into Bergdorf Goodman in New York. Not only were these knockoffs available, but they were offered in varying classes of quality. Shocking.
Since my career was in advertising and brand strategy, this display really upset me. Stealing intellectual property was verboten and severely punished in the West. In China, it became clear that using someone else’s IP was acceptable. Over time, I grew to understand this IP theft process – its depth especially in technology and military systems was very much a part of the competitive drive of the Chinese. On one hand I was appalled; on the hand it was clear the Chinese relished what the west had and sought to advance toward equity with their western competitors.
As I soon learned, the Chinese have been employing IP theft for hundreds of years. They first learned the need to copy, disastrously, during the Opium Wars in the 19th Century. The Chinese were slammed by the west’s better munitions and military hardware – the British and other western nations easily demolished well-manned Chinese garrisons with far fewer personnel and resources. Copying western technology was defensive. Of course, the west too was party to this. It actually became a good business strategy for the west to open its intellectual resources to the Chinese. By leveraging and sharing their IP, the west found it could reach what was the world’s most prosperous and largest market even in the early 19th century.
The west, too, was active in the process of IP theft with gunpowder, paper, moveable press all taken from China. It’s all about competition – and I recognized that with the concept that “all is fair and love and war” IP theft is a fact of life in China and the West’s long term commercial exchange. In short, it’s part of doing business – I’m not excusing or providing rationale here for either side – just pointing out that IP theft is a historical fact of business. It’s caveat emptor to the commercial world – so be aware, be nimble and of course be as protective as possible – but again, here I digress.
These initial observations were formative as my professional exposure in China expanded to the mainland. Early in 2001, things changed as I re-joined a global advertising agency network as business development officer assigned to Shanghai. One of the first acts I instituted was to grow our presence in Beijing. After all, even as Jiang Zemin was following Deng’s opening and decentralization, China remained centrally controlled by the CCP. Beijing was the power center – so it was vital to maintain a visible, high-level presence in the capitol.
December 2001 capped what was a monumental industrial, economic and cultural miracle for the Chinese. In twenty years, the nation had moved from abject poverty to join the World Trade Organization. Here I was, a westerner, observing this incredible transformation. In a small corner of this economic wonder, here I was working to secure Chinese brands as clients – sharing western knowledge of building product value by developing brand strategy and character. I guess I was a first-hand example of giving up western IP to secure Chinese business!
Let’s fast forward through the lackluster regime of Jiang’s successor, Hu Jintao, to Xi Jinping. The ten-year reign of a weak leader, Hu, devolved into escalating corruption and jockeying for power in the CCP. There were no shortage of princes seeking to the lead the CCP. Bo Xilai, mayor of Chungking was a top-level competitor to be the head of the CCP. But not strong enough. He was sidelined by Xi’s faction of the CCP. Accused and tried for major corruption, he and his wife were summarily removed from the pinnacle of power – leaving an open road to Xi.
Xi’s ruthlessness was a harbinger of things to come. Building on a platform of anti-corruption, Xi consolidated his position, ascending to the head of the CCP and presidency of China in 2012 and paramount leader since 2013.
After a decade as paramount leader, now rivaling Mao and Deng in the rarified pantheon of modern Chinese leaders, Xi is about to win an unprecedented third five term as President. My guess is we’re looking at Xi as China’s president for life.
This brings me to our current mess with the Chinese. The reality here is that this mess was avoidable. Our American national leaders starting with Barak Obama followed by Donald Trump began a diplomatic zero-sum policy. Fearing China and jealously witnessing the Chinese miracle, its impact throughout the world and its potential to replace western hegemony they began a process of shaming the Chinese for many economic, IP, military, cultural and related transgressions. Raising tariffs, labelling China an oppressive regime, increasing military activity as well as pushing the disengagement of mostly American multi-national businesses ran counter to the Chinese will.
Xi and his CCP allies saw these acts as early as 2014 for what they were – a zero sum game. The US, especially initiated policies which alienated Chinese leadership, eroding what good will had been established since Deng opened China. To the Chinese these acts demonstrated a reversion to the west’s classic image. More importantly, it provided a platform to the hardliners within the PLA and CCP to push for greater resistance to the west. In short, the west, and the US specifically, sowed the seeds of today’s antipathy and high tension between the west and China.
Now, from my observations the Chinese are not absolved from the current divisive equation. They did aggressively create a new hegemony through Belt and Road. They have forcefully punished their Uighur minority; albeit there is some rationale for this. They have undermined Hong Kong democracy. They are increasingly strident in seeking to reunite Taiwan with the mainland. They are supporting Russia in its war in the Ukraine. They have devasted much of Africa in mercantilist fashion. They continue to associate with Iran buying their oil. They are building an advanced blue water navy and powerful air force. All these and more acts reflect China’s internal desire for leadership and respect that will return the Chinese to the world’s leading power.
Clearly, this does not work for western democracies. How did we get here and is there a road ahead leading to peaceful coexistence. The answers are muddied today, as the west is mired in internal cultural squabbles and is not unified in its policy toward China. If this this scenario becomes the status quo, we can expect an unsettled world order as China ascends, unbowed, to lead a new world hegemony.
The question today is: Can the US and its allies develop a platform to engage China without entering military combat? The answer is opaque – but affirmative.
Going backward in time, from my experience in dealing with Chinese business I found that building a win-win platform established trust, enhanced “face” and led to greater cooperation. Since I am not a diplomat nor an active military intelligence officer, all I can offer is through my eyes a business executive on how to build trust with a win-win strategy. Here are my ten points to building a win-win platform with the Chinese:
Re-engage with the Chinese government, first in jointly critical political and cultural projects, followed by more globally relevant projects.
Stop lecturing the Chinese on their internal issues, we’ve got enough of our own. Focus on identifying winning platforms of shared interests.
Stop bellicose jingoism and focus on the bilateral association.
Recognize the Chinese miracle – don’t diminish the miracle that brought a billion humans into a middle-class life. Learn from the Chinese experience – embrace it – don’t knock it. For example, teach Mandarin in schools – much like the Chinese taught English. That way we educate our next generation to better engage with China.
Provide for a domestic competitive tax structure in the US that encourages investment in US industry.
Encourage more export industries in the west. Competition is a win for the west.
Re-establish profit making ventures with the Chinese companies. Apple and Microsoft both offer incredible examples on how this can succeed.
Begin to allow the flow of IP to travel both ways.
Allow Chinese business to invest in the US on an equal basis as we invest in China.
Finally, recognize there is a new world, multi-polar hegemonic structure. Live with it. Understand it. Shape our national priorities to take advantage of this new world, rather than fight it.
These my thoughts. They are formed from my three years on the ground business experience as an advertising executive in China, enhanced through twenty years of study and travel through more than twenty major Chinese cities and many villages. To me, it’s about people. The people of China call America Mei Guo - beautiful land. The Chinese identify their nation as Chung Guo – center nation. Both are true representatives of each nation – today our mission must be driven by learning the win-win way to respect, engage and grow this truly dynamic and vital bilateral relationship.
Stephan Bassett
President & CEO Synomica, Inc.
9 August 2022