Though we do not ordinarily delve much into China-US politics, I have been following the recent Obama-Hu summit so closely I cannot resist. Here are my thoughts on the business aspects of that summit.

Overall, things have seemed to go well. The United States did the pomp and circumstance thing in grand style, which gave China the symbolism it wanted. On the flip side, President Obama has made it appear as though he made real progress on various trade issues and, heck, even if he didn’t, he spoke out firmly on the various “sensitive” China issues which ought to get him more votes at home.

An English language 41 point joint statement was issued that included many clear commitments by China, but until we see the official translation of that statement in the China Daily, their clarity has to be in some doubt.

It appears China is trying to make nice with U.S. business, though it is not clear to me why. The business community has for many years been one of China’s biggest (only?) defenders in the U.S., but over the last year or so their enthusiasm for China has dimmed considerably.  Is China trying to shore up its standing with this group for economic/business or political reasons? Either way, I do not see the business lobby warming up to China unless and until it sees real on the ground results. Just by way of example, the Chamber of Commerce noted that while it is great that China has now formally renounced “indigenous innovation” and promised to work with China’s local governments on this issue, the proof will be in the pudding. I cannot resist noting how back in October we wrote a post, entitled, “China’s Indigenous/Domestic Innovation Policy. Everyone Just Move Along,” in which we asserted that foreign businesses were overreacting to the policy.

The White House Fact Sheet had this to say:

The United States and China committed that 1) government procurement decisions will not be made based on where the goods’ or services’ intellectual property is developed or maintained, 2) that there will be no discrimination against innovative products made by foreign suppliers operating in China, and 3) China will delink its innovation policies from its government procurement preferences.

China agreed to eliminate discriminatory “indigenous innovation” criteria used to select industrial equipment for an important government catalogue prepared by the Ministry of Industry and Information Technology, to ensure that it will not be used for import substitution, the provision of export subsidies, or to discriminate against American equipment manufacturers in Chinese government programs targeting these products.

Though it sounds like the death knell of indigenous innovation as a formal policy, my bet is that very little will actually change. It was never as bad as it was made out to be, but I also do not for a minute believe that this summit is going to lead to American companies getting a fair shake in bidding for Chinese government contracts.

China also made the following commitments regarding intellectual property protections in China, none of which sound very new to me:

Private sector experts suggest decreasing China’s software piracy rate by 50 percent could increase legitimate software sales by $4 billion. The United States supports China’s commitment to assess and ensure its government’s use of legal software, by, among other measures, 1) allocating government budget funding for legal software purchases, 2) auditing the use of legal software and publishing the results of those audits, and 3) promoting the use of licensed software in private companies and in state owned enterprises through software asset management programs.

The United States welcomed China’s agreement to hold accountable violators of intellectual property on the internet, including those who facilitate the counterfeiting and piracy of others, and to strengthen IPR protections in China’s libraries. China has also agreed to clarify the IPR liabilities of relevant third parties, like landlords, managers, and operators of markets that sell counterfeit products.

I would love to opine on the various business deals that were announced, but for various reasons, I simply cannot. Sorry.

What do you think?

Update: The Seattle Times, in a story, entitled, “China’s ‘new’ jet orders anything but,” writes how the Boeing order announced by the White House as though it had just occurred, was actually a “re-announcement of a previous order.”

  • Cathy

    Love this blog.

  • Matt Bianco

    Really? Now that the whole world is on open source?
    Every ministry and government office in EU, Russia and China is already on an open source OS and open source office apps, open source pdf readers, etc. As usual, China wants to be seen as having done much on this issue, without doing much.
    It also underscores how behind the times Microsoft is. The piracy battle has been made irrelevant with open source, and they are still barking that someone ate their lunch. Five years ago.

  • Webster

    I think the phrase you’re striving for is “same-old, same-old” rather than have those O’s there.

  • Masterpiece

    Good analysis and good to see. The press acts as though so much was accomplished for U.S. business but near as I can tell, the summit at best merely affirmed what had already been put into place a long time ago.

  • Tom

    Wasn’t the most recent proposed national indiginous innovation product catalogue the work of MOST? Also, the spate of local/provincial indiginous innovation catalogues have been put out by local bureaus of MOST, yes? Does anyone have any insight on this “important government catalogue prepared by the Ministry of Industry and Information Technology”? When did MIIT enter the mix?

  • Element Fresh

    This is really very good information. I liked it a lot, and not just because I completely agree.

  • Through regulations and concessions, the Chinese government controls the profitability of American and Chinese corporations in their country. In this they follow Deng’s admonition that capitalism must be “kept like a bird in a cage”.
    American corporations control our country’s policies through their campaign contributions: money which comes from their increasingly profitable Chinese subsidiaries.
    This points to the greatest vulnerability of our (American) system: our corporations owe no allegiance to our country. They are global monsters, refusing even to pay taxes to the country that gave them birth. We see their mercenary nature daily in their willingness to export not only American jobs but also technology that was developed in America’s taxpayer-funded universities.
    Less visible is their eagerness to advocate the Chinese government’s policies in order to sustain their quarterly results.
    If American legislators become unruly the Chinese government simply opens the profit spigot slightly–on the condition, of course, that the corporations bring their legislators to heel. Simple, quick, cheap, and very effective.

  • I found it interesting to note that VP Bidden was dispatched to receive Premier Hu and his delegation. Next time will it be the President? That would signal more than any American could comprehend to the Chinese people … particularity if the “kindness” is not reciprocated when the President afterward follows with a trip to China.