Now that I have your attention with my Global Times-ish headline on protectionism in China, I am going to backtrack.
The protectionism that people attribute to China is wrong. I have become convinced that the protectionism that people tend to attribute to China does not really exist, or at least barely so. The Chinese government does not care nearly as much about its domestic companies as widely believed, at least those that are not State Owned Entities (SOEs). Instead, the Chinese government cares almost exclusively about the Chinese government. Once you understand this, you will be better able to know where you, as a foreigner, stand.
I just read a China Hearsay post noting how China’s Ministry of Commerce’s recent approval of Yum! Brand’s purchase of Little Sheep Restaurant should put everyone’s fears to rest about China using its M&A review for protectionist purposes. China Hearsay was not the least bit surprised by this approval, nor was I. I figured the approval would come because the buy-out was not going to impact much (if at all) the things China’s government really cares about.
The Chinese Government is still uncomfortable with private business and it rarely, if ever, steps in to assist them just to assist them. Therefore, if you as a foreign business are going to be competing with private businesses, you likely will do okay. If you are going to be doing business in an arena dominated by SOEs there is a much better chance of your facing problems.
If you are going to be doing business in areas critical to the government, such as internet, publishing, movies, mining, defense, automobiles, then you really need to be very careful about what you are doing, both in terms of its legalities and in terms of how you will be viewed by the government. Each of these industries can be very different in terms of how you will be viewed by the government. By way of example, foreigners are not treated terribly well in the movie business and many have cried “protectionism” because of this. The Chinese government’s policy towards foreign films does seem like protectionism, but because foreign films are limited for informational reasons and not to protect China’s domestic film industry, calling it protectionism may not be appropriate, especially since there does not appear to be all that much love lost between Beijing and China’s own film industry. Mathew Alderson, who represents a number of media companies in China, wrote on this in a post, entitled, Protecting Hollywood Films in China Makes Sense For China:
It is not the local Chinese film industry that wants to stop foreign films. Far from it. Barriers to entry such as China’s twenty foreign film quota, and the requirement that foreigners shoot their films in China as Chinese co-productions, are there to stem the invasion of Hollywood’s “corrupting” influences, which the Chinese government sees as US propaganda or soft power. These barriers really have more to do with the government’s desire to preserve what it deems important than in protecting the local Chinese film industry.
The same is generally true with respect to publishing.
But if your business is something like retail, or electronics manufacturing, then you probably have nothing to worry about from Beijing by way of protectionism . That is not to say you do not have other issues you need to worry about, including local governments that may not appreciate your being there, but odds are good you do not have an enemy in Beijing.
What do you think?