Daniel W. Drezner

The puzzle palace of Chinese preferences

The puzzle palace of Chinese preferences

So, you might have heard that Google is having a spot of trouble in China — and is threatening to pull out of the Middle Kingdom altogether. 

Both FP’s Evgeny Morozov and Jack Shafer suggest that Google isn’t just doing this out of the goodness of their heart — they have to be doing it because their market share is eroding to Baidu and this is the way to deflect with dignity.  Today’s stock market suggests that they might have a point. 

The thing is, a 33% share (and possibly rising) in that market is not a trivial amount of dollars.  An estimated $600 million in cabbage is not easy to walk away from.  A true cynic would have predicted that Google would have kept its mouth shut, taken its lumps, and still tried to outcompete Baidu.  Google didn’t.

The New York Times’s Keith Bradsher and David Barboza make a more intriguing argument — the Chinese government is making life increasingly miserable for Western multinationals:

Google is far from alone among Western companies in its growing unhappiness with Chinese government policies, although it is highly unusual in threatening to pull out of the country entirely in protest.

Western companies contend that they face a lengthening list of obstacles to doing business in China, from “buy Chinese” government procurement policies and growing restrictions on foreign investments to widespread counterfeiting.

These barriers generally fall into two broad categories. Some relate to China’s desire to maintain control over internal dissent. Others involve its efforts to become internationally competitive in as many industries as possible.

Then there’s this from the Wall Street Journal‘s Ian Johnson and Jason Dean:

The Google syndrome caps growing complaints by foreign businesses over a deteriorating business environment. Both the European Chamber and the U.S. Chamber of Commerce in China have issued reports sharply critical of China’s business environment. During the 1980s and ’90s, foreign businesses were assiduously courted by China’s leaders and responded by bringing to China technology, training and international best practices.

In recent years, however, foreign businesses have complained that the official line has shifted. Younger bureaucrats are more nationalistic and skeptical of the value of letting in foreign companies, [head of the European Chamber of Commerce in China Jörg ] Wuttke says. Last year, for example, foreign executives said bidding practices for wind energy were rigged to exclude foreign companies.

"There’s a general attitude in the foreign business community that it’s getting tougher to do business here," said James McGregor, a senior counselor at APCO Worldwide and author of a book on doing business in China. "This could be a bellwether."

Not all Western multinationals feel this way.  Still, this raises a question I find most interesting — how much of what China is doing is intentional and how much of it is a PR cluster f**k? 

I can see it going either way.  China is definitely more powerful than it used to be, and maybe they’ve been drinking the Robert Fogel kool-aid.   Greater power usually leads to greater nationalist pride, so I can kinda sorta see this being a conscious strategy by Beijing to throw its weight around.

The thing is, it’s a remarkably clumsy effort.  Consider James Fallows on this point:

In a strange and striking way there is an inversion of recent Chinese and U.S. roles. In the switch from George W. Bush to Barack Obama, the U.S. went from a president much of the world saw as deliberately antagonizing them to a president whose Nobel Prize reflected (perhaps desperate) gratitude at his efforts at conciliation. China, by contrast, seems to be entering its Bush-Cheney era.

China could be throwing its weight around — or it’s bureaucrats could be much less cohesive than outside observers believe. 


UPDATE:  John Gapper and David Pilling are worth reading on these points as well.