Analysis:Ambition, fear means U.S. business tongue-tied on China
By Scott Malone
(Reuters) - U.S. companies want a lot out of Chinese President Hu Jintao when he visits Washington next week. They have a long list of moans and desires.
But in a sign of how fearful they are about upsetting Beijing and damaging their access to one of the world's biggest export growth markets, they won't talk about it in public.
In the middle of last year several top executives were reported to have criticized China's domestic policies, in particular its lack of laws to protect intellectual property and its protectionist stance against foreign companies.
Google Inc suffered a loss of Chinese business as a result of a big row with Beijing over censorship. Jeff Immelt, the chief executive of jet engines-to-scanning machines conglomerate General Electric Co, was even quoted as wondering whether China wanted foreign companies to be successful -- though GE disputes that account.
Six months later, the titans of U.S. industry -- typically quick to criticize Washington -- are shy of provoking the Chinese dragon. More than a dozen major companies with big Chinese businesses who were contacted by Reuters declined to comment on what they wanted out of Hu's visit.
One that did respond was Wal-Mart Stores Inc.
"Walmart has grown in step with the opening of China's retail market," said Kevin Gardner, a spokesman for the world's largest retailer. "We have aligned many of our growth goals with the government."
He did not say what the Bentonville, Arkansas-based company hoped would come of the summit between Hu and U.S. President Barack Obama.
CEOs' restraint in airing their concerns about Chinese policies reflects their fear of losing access, said Peter Klein, senior portfolio manager at Fifth Third Asset Management in Cleveland, Ohio, which holds shares of companies including GE, United Technologies Corp and 3M Co, all of which have sizable Chinese operations.
"The Chinese government will lock you out," Klein said. "It's not a command-and-control economy, but it certainly isn't a fully capital-oriented economy either. You have to be patient to get what you want. And if you have to shut up, you shut up."
Google's bust-up with China over censorship last year sent shivers through many foreign businesses.
The internet company in January accused China of launching a sophisticated hacking attack against its servers and in March began routing Chinese users' searches to Hong Kong in an end-run around Beijing's censorship practices. China renewed Google's license after the U.S. company made a change that allows users to access the Hong Kong site but does not send them there automatically.
But Google has continued to complain that Chinese censorship is hurting its business, and has reported sporadic disruptions to its service there since the summer.
'SIGNIFICANT CONCERNS'
Not that the companies aren't pushing their cases behind the scenes, using proxies within the government and lobbyists.
Obama administration officials have trotted out for a series of policy speeches this week criticizing China's trade stance ahead of Hu's state visit.
"When I talk to business leaders across America, they continue to express significant concerns -- shared by business around the world -- about the commercial environment in China," U.S. Commerce Secretary Gary Locke said on Thursday, complaining that Beijing often fails to keep promises to open its markets.
"Perhaps an agreement is made, but it never becomes binding," Locke said. "Or perhaps there's a well-written law or regulation at the national level, but there's lax enforcement."
Treasury Secretary Timothy Geithner has also been beating the drum to push China to allow its currency to rise in value.
Most succinct in summarizing the concerns this week was Thomas Donohue, president of the U.S. Chamber of Commerce.
"We are also concerned about a host of Chinese policies -- from its efforts to promote indigenous innovation, to the favoritism it shows to domestic industries, to its lax (intellectual property) protections, to its undervalued currency," he told Reuters.
But Donohue made it clear that U.S. business isn't in lockstep with a push by some in Congress to take stiff measures against China if it doesn't revalue the yuan sharply.
"Starting a trade war with one of our fastest growing exports markets is not the answer," Donohue said.
DIVIDED VIEWS
Corporate America is far from united on such questions.
For companies like Wal-Mart Stores, a sharp rise in the yuan will make sourcing Chinese goods more expensive and threaten profit margins. Others, like Caterpillar Inc and GE, aim to manufacture much of the equipment they sell in China within the country, which diminishes the effect of the exchange rate.
One rare exception to corporate America's silence came in July, when GE's Immelt reportedly said Chinese authorities do not want foreign businesses to succeed.
"I am not sure that in the end they want any of us to win, or any of us to be successful," Jeff Immelt told a group of executives at a dinner in Rome, the Financial Times reported.
A GE spokesman at the time said the comments "were taken out of context and, in some instances, inaccurately reported," but declined to provide a fuller account of Immelt's words, saying they were intended to be off the record.
Immelt remains publicly enthusiastic about GE's prospects in China, telling investors in December the largest U.S. conglomerate expects "excellent growth in China in 2011."
U.S. companies have at time been less restrained in expressing their fears that their intellectual property becomes vulnerable when they do business in China. That is a vital concern in an economy where many companies focus on developing and selling products, handing off the actual manufacturing to facilities in China and elsewhere in the developing world.
Microsoft Corp CEO Steve Ballmer identified "better global enforcement of intellectual property laws" as the world's largest software company's No. 1 lobbying priority in an interview with the Washington Post in July.
"That is particularly true in China, where the protections are the weakest," Ballmer told the paper.
U.S. businesses' fears range from outright piracy of their goods to the transfer of technological know-how that can be inevitable in joint ventures with Chinese companies.
"Sometimes Beijing mandates that foreign firms share technology, locate R&D in China and so forth, and the U.S. business community sees that as tying their hands when they go to China," said Kevin Gallagher, professor of international relations at Boston University. "They say, 'We'll do that for five years and then all of a sudden China will have its own competitor that looks just like us.'"
(Reporting by Scott Malone, additional reporting by Doug Palmer in Washington, Jessica Wohl in Chicago and Bill Rigby in Seattle; Editing by Phil Berlowitz)
Credit: Reuters (www.reuters.com)
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