Doing Business In China

No sooner than President Trump signed the Hong Kong human rights and democracy act into law, China announced retaliatory measures, banning U.S. warships from Hong Kong and restricting the work of American NGOs. These responses were narrowly tailored—perhaps in part because China is wary of rocking the boat too much, in a way that could lead to additional economic pain, at a time when it’s feeling the economic strain of tariffs and other pressures. It’s worth pointing out though that there is a lot China can—and probably prefers to do—quietly. In this post, I will focus on possible actions that could be taken against the U.S. diplomatic mission in China: a perfect target for sub rosa retaliation. In a follow-up post, I will focus on what our China lawyers have been seeing by way of retaliation against Western businesses and what we see coming on that front in the next few months. Small hint: a lot.

There are already reports that U.S. diplomats in China “are now required to inform the foreign ministry five days ahead of meetings with local [governments] and academic institutions”. Mind you, having served as a U.S. diplomat in China, I never experienced a time when it was easy to set up meetings, but the point is that it can quickly become much harder to do so. In fact, I hear from former State Department colleagues that meetings with officials below the central level have been rare for some time now. These limitations affect diplomatic work more broadly. The same obfuscation and slow walking that prevent a meeting with an official can just as easily be used to kibosh a planned cultural event or trip by the ambassador to the provinces.

Not only can China (or any host country) do a lot to make life difficult for foreign diplomats, it can often do so under the cloak of good intentions. Take for instance the issue of access to diplomatic facilities, including residences in some cases. If you’ve ever walked through one of Beijing’s embassy quarters, you might’ve noticed that the Chinese take their diplomatic security obligations very seriously, fencing in buildings and posting People’s Armed Police (PAP) guards. Not only do they want to guard against North Korean defectors and random crazies (such as one who crashed a car into Consulate Guangzhou’s gates while I was posted there, briefly gaining access into the premises), but also keep tabs on who and what is going into the missions. And this is perfectly reasonable, given diplomatic premises’ special status under international law.

At the same time, I can tell you from experience that there is a fine line between legitimate oversight and harassment. PAP guards may not be able to do much more than scowl when a diplomatic identity card is thrust in their face, but it’s a different story with non-diplomatic visitors, including family members and local friends. Moreover, diplomats themselves are only human, and sometimes forget (or lose) their IDs. These situations present an opportunity to mistreat U.S. diplomats, particularly—in the case of China—those of Asian descent (“How could we have known she was an American when she looked Chinese and spoke perfect Mandarin?”). This is not conjecture.

Host governments (again, not just China) can also mess around with foreign missions’ communications. Article 27 of the Vienna Convention protects diplomatic correspondence, but host governments can—and in fact do—impose limitations on how it can be transported and protected. Back when I was working at Consulate Guangzhou, regular officers took turns escorting the diplomatic pouch to and from Hong Kong on the through train, following strict procedures; most of the time, dedicated couriers handle the work. In his book In Our Dreamtime, diplomatic courier James Burrill Angell describes the restrictions on the size and weight of pouches during his time, and how they were “strictly enforced on disembarkation”:

After the 1400-mile journey north through the heart of China the international train’s arrival in Beijing was where things got interesting, as customs and immigration officials would wait the diplomatic couriers with a scale, measuring tape and attitude… If any of the Chinese restrictions were violated the diplomatic pouches would remain at the train station with cleared American guards for forty-eight hours until the international train returned to Hong Kong.

Additional restrictions, even seemingly minor ones, could have a serious impact on a mission’s ability to operate properly. As Wired puts it:

Though most communication is digital in the 21st century diplomatic world, physical objects—vital supplies of all sorts—still have to move by secure channels. (Though in fact, with the ever-present threat of hacking, very rare communications might indeed still be delivered via orange pouch.) Employing 103 couriers at 12 hubs around the world, the [Diplomatic Courier Service] boasts a delivery success rate that would be the envy of FedEx and UPS. [In 2017], the service transported 116,351 items weighing approximately 5,353,000 pounds.

As Angell puts it, pouch runs are a lifeline to embassies and consulates—and unfortunately easy ones to disrupt. For instance, through trains between Hong Kong and the Mainland are operated either by Chinese state railways or Hong Kong’s MTR, which has been accused “of colluding with the police” by pro-democracy protesters, who “playing on the system’s Chinese name, scathingly call it ‘Communist Rail'”. How easy do you think it would be for these entities to change their rules governing the transport of bulky freight?

Of course, regular mail is an easier target. All a host government needs to do is slow-walk customs clearances or the delivery of postal services to create inconveniences for foreign diplomats. Again, not conjecture. And lest you think this just means Christmas cards arrive in January, keep in mind that not all work-related material is sent via pouch. For instance, immigrant visa petitions were not sent by pouch back in my day (and probably aren’t these days either). This means the family members of Americans—spouses, parents, adopted children—could experience delays when applying for U.S. visas. And given the numbers involved, it’s not as if a consulate can catch up easily. (You’ll only see Guangzhou on the list because it handles all immigrant visa applications in China.)

Host governments can also exert pressure on foreign diplomats through surveillance. If you’ve never had the experience of being overtly tailed, I can assure you it’s not fun. Foreign diplomats and visiting government officials must assume that their hotel rooms are fair game, as are residences (unless they’re within a secure compound; even then, there are vulnerabilities). However, there is a huge difference between conceptually accepting that your belongings are being rifled through, and having concrete evidence of it. One anecdote that made the rounds at the State Department involved agents in a Latin American country using the toilet at a U.S. diplomat’s residence and not flushing—could you blame the diplomat if he or she is a little less aggressive going forward when covering their human rights beat? To make things more interesting, a host government may allow agents from other countries to conduct surveillance, meaning that the local expat pub is not the oasis a Western diplomat might think it is. Conversely, the harassment activities of a government might not be limited to its territory.

With the potential for further tension very much present, it’s worth thinking about what else China has in its toolbox, especially targeting regular Western businesses and citizens. (See e.g. China’s recent threat to bring Sweden to its knees in response to Sweden complaining about China human rights violations). We’ll be looking at that in more detail in future posts, but the recent denial of entry to  AmCham officials by Macau authorities gives a preview of what’s to come, both for diplomats and for everyone else.

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Photo of Fred Rocafort Fred Rocafort

Fred is a former diplomat who joined Harris Bricken after more than a decade of international legal experience, primarily in China, Vietnam, and Thailand. His wide range of experience includes starting and operating his own business in Asia, working as an in-house counsel…

Fred is a former diplomat who joined Harris Bricken after more than a decade of international legal experience, primarily in China, Vietnam, and Thailand. His wide range of experience includes starting and operating his own business in Asia, working as an in-house counsel for a Hong Kong-based multinational, as well as many years as a State Department official, providing a client-centric perspective to his legal work. Fred co-hosts Harris Bricken’s weekly Global Law and Business podcast, which covers legal and economic developments in locales around the world to decipher global trends in law and business with the help from international guests.

Fred began his career overseas as a U.S. vice-consul in Guangzhou, China, adjudicating thousands of visa applications and advocating for fairer treatment of American companies and citizens in China and for stronger anti-counterfeiting enforcement. After entering the private sector, Fred worked at a Shanghai law firm as a foreign legal advisor and later joined one of the oldest American law firms in China. He also led the legal team at a Hong Kong-based brand protection consultancy, spending most of his time out in the field, protecting clients against counterfeiters and fraudsters from Binh Duong to Buenos Aires.

Fred is an ardent supporter of FC Barcelona—and would be even in the absence of Catalan forebears who immigrated to Puerto Rico in the mid-1800s. An avid explorer of Hong Kong’s countryside, he now spends much of his free time discovering the Pacific Northwest’s natural charms.