Doing business in China is difficult » Discussions


Doing business in China is difficult

  • May 7

    Companies that want to do business in China have long made compromises in the pursuit of success. Now an escalating diplomatic dispute over human rights is underscoring the stark choice facing Western executives: put profit or principles first.To get more China business news, you can visit shine news official website.


    The strains over Xinjiang — where US, EU and UK authorities have accused the Chinese government of repressing Uyghurs and other minority groups through forced labor, mass detention and sterilization — has ensnared a growing number of businesses and trade relationships in recent months.
    Beijing has vehemently denied all the allegations, and says its camps in the region are "vocational training centers" designed to combat terrorism and religious extremism. But last week, a landmark investment deal between the European Union and China was cast into doubt after officials traded sanctions over Xinjiang.
    Days later, H&M (HNNMY), Nike (NKE), Adidas (ADDDF) and other Western retailers were threatened with a boycott in China because of the stand they had taken against the alleged use of forced labor to produce cotton in Xinjiang. H&M (HNNMY) was even dropped by major Chinese e-commerce stores.We are working together with our colleagues in China to do everything we can to manage the current challenges and find a way forward," H&M said in a statement Wednesday.
    Beijing has made it clear that multinational corporations have to follow its rules if they wish to operate in the country, and gaining favor can require anything from abiding by restrictive regulations to saying a few good words about China. Many companies have traditionally been willing to play along, given how enticing the giant economy is as a market for everything from cars and clothes to movies and luxury goods.But the escalating political blowback may make some of those relationships untenable. Just as China has whipped its citizens into a nationalist frenzy over Xinjiang, customers, lawmakers and investors are stepping up the pressure on Western companies to scrutinize their supply chains for evidence of human rights abuses. That's making it hard for companies to avoid picking sides.
    "These companies are just squeezed in the middle and there is no magic answer," said James McGregor, chairman of consulting firm APCO Worldwide's greater China division. "I think China's feeling really threatened by all of these sanctions, and has decided just to hit back as strongly as they can to try to get these companies to influence their governments to kind of tone down and back off."Foreign companies cannot simply ignore the world's second largest economy. Its growing middle class is a rich consumer market for many firms.
    "Accessing the internal market in China has always been the draw," said Bonnie Glaser, a senior adviser for Asia and the director of the China Power Project at the Center for Strategic and International Studies. "Years ago, when companies first started coming to China — even if they weren't making money for a number of years — they stayed because eventually the people are going to have more money and going to be able to spend."
    But breaking into China also means winning over notoriously strict regulators who wield vast control over who gets to enter and what they get to do.
    International firms are often forced to concede certain aspects of their business before they're allowed access to the market, including through joint ventures established with local partners. While some rules have been eased in recent years, they're still a source of tension for companies who complain that such arrangements force them to give up technology in exchange for entry.
    Other companies have been locked out altogether because of a refusal to adhere to rules. Google (GOOGL), for example, offered search in China from 2006 to 2010 with censored results, but was eventually blocked when the company decided it would end that practice. Several years later, it considered returning to China, but was heavily criticized by human rights groups wary of the ruling Chinese Communist Party's vast censorship apparatus.