China Talking Points Podcast: China’s post-bin Laden Foreign Policy by ChinaTalkingPoints

With over 60% of the world’s future nuclear power plants destined to be built in the PRC, their decisions on technology, safety, and international cooperation will have in impact well beyond the nation’s borders.

Join us as we discuss China’s response and likely next steps in the nuclear energy game.

China Talking Points Podcast: China’s Nuclear Future by ChinaTalkingPoints

Chinese telecommunications manufacturer Huawei is 0-2 in its bid to acquire American technology companies that begin with the letter “3.”  Their first attempt was back in 2008 when Huawei moved to acquire the struggling networking company “3com.” That $2.2 billion deal was scuttled by U.S. legislators on the grounds it presented a security threat if a Chinese company that once had (or may still have) ties to the PLA and an opaque relationship with the central government in Beijing would acquire sophisticated American networking technology. Roll the clock forward to 2011 and it’s “deja vu all over again.”  Huawei’s latest efforts to build a foundation in the US market was rejected by the US government on similar grounds. Huawei sought to buy the California-based cloud computing company 3Leaf yet once again the Committee on Foreign Investment in the United States (CFIUS) determined that it would be too risky for 3Leaf’s technology to be acquired by a Chinese company that allegedly has ties to the PLA.

So what went wrong?

In a recent interview on the new “China Policy Pod” podcast, lawyer and China Hearsay blogger Stan Abrams explains how the CFIUS review process is highly political.  That suggests then that Huawei’s is not eternally condemned to be shut out of the US market but rather that it must refine its approach. “It boils down to a question of strategy. Firms simply have to do a much better job of understanding America’s political climate, its investment-review system, and how to navigate both successfully,” explained Adam Goldberg and Joshua Galper in a recent Wall Street Journal opinion piece.

“Chinese companies must understand that legal box-ticking is only part of their challenge. Improving the political climate arguably is even more important. Western businesses long ago realized this, and expend considerable resources to educate policy makers about business concerns and to inform the public debate on business issues. It’s called lobbying and public affairs, and Chinese companies could benefit from doing these themselves.” – Adam Goldberg and Joshua Galpern

Interestingly, Huawei and other Chinese companies appear to fail at taking their own advice about how to enter new markets. It is now common knowledge that US and other foreign companies that seek to enter the China market must do massive due diligence to find the right partners, understand the evolving legal environment, establish the necessary relationships within the appropriate governing ministry and put a finger to the wind to understand the prevailing political climate. It is that public affairs piece that Huawei and other mainland Chinese companies are failing to effectively execute. Huawei transform its public image in the United States from being the type of company featured in a Richard Gere movie about “the evil Chinese corporate empire” to one that is “building communities in America and jobs for Americans.”  Huawei has steamrolled its way into developing markets in Africa, Asia and South America on the merits that its technology is more affordable and, in many cases, the only option available. That hard-nosed approach obviously does not work in the United States.

The Taiwan Example

Mainland companies, Huawei in particular, may want to look to Taiwan as an example of how to make friends in Washington.  For decades, Taipei has been among the most effective foreign governments that operate in Washington, successfully lobbying on behalf of the island’s political and corporate interests.  All that time and money has paid significant dividends over the years and now offers Huawei the ideal template on how to build an effective public policy agenda on how to succeed inside the DC-beltway.

Interestingly, editorial boards seem to believe that the classic job-loss case that is being so loudly trumpeted has created an opening to highlight many different differences and conflicts that are currently roiling US-China relations.

As an election cycle, we think we’re just hearing words without action, but it is a good time to remind yourself about the multifaceted relationship.

This time, multiple sources are looked at to see how the overall relationship between China and the US is being positioned. If perception is reality, then this summarize the perceptions being promoted by the media outlets.

Enjoy!

[NOTE: Full transcript is provided below.]

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Multisource political news, world news, and entertainment news analysis by Newsy.com

[BEGIN NEWSY.COM TRANSCRIPT]

BY TRACY PFEIFFER
10/13/10

The Association of Southeast Asian Nations — or ASEAN — is in the middle of its first Defense Ministers’ Meeting in Hanoi, Vietnam, with U.S. Secretary of Defense Robert Gates in attendance. Reports coming out of the closed-door meeting indicate a warming relationship between the United States and China, which had suspended high-level military communication in January over an arms deal between the U.S. and Taiwan.

We’re analyzing coverage from The U.S. Defense Department, The Wall Street Journal, Voice of America and The Washington Post.

The U.S. has found itself — crossways with China on a number of issues, from arms to territorial disputes China has had with several neighboring countries. The U.S. has taken a hard-line stance, but this week, that softened a bit. In a U.S. Defense Department release, Gates is quoted as saying,

“The United States does not take sides on competing territorial claims, such as those in the South China Sea… Competing claims should be settled peacefully, without force or coercion, through collaborative diplomatic processes, and in keeping with customary international law.”

Part of the dispute in the South China Sea is over a string of natural resource-rich islands claimed by several nations, including smaller countries like Vietnam who want U.S. support in the face of China’s dominance in the area. (Video: Wall Street Journal)

Voice of America interviews a former U.S. Foreign Service Officer who says the U.S. is in a complex position on the issue.

“China and the United States have a relationship that is very, very important, and I don’t think that’s going to be disrupted… I think we’re quite confident of the nature and scope of American influence and power in Southeast Asia and China should be part of the equation there.”

An analyst for the Wall Street Journal explains how Gates went about handling this complex task — noting his very presence at the meeting was a big show of U.S. support.

“By not inflaming things too much, because as much as there is friction in the region, Japan and other countries don’t want the U.S. kind of bowling in and making things worse. A third thing that he did, Adam, was he didn’t really roll back anything that the U.S. has said about China or about the region in recent weeks.”

Finally, the Washington Post says China’s counterpart to Secretary Gates attempted to calm fears of China’s naval aggression, such as the recent arrest of nine Vietnamese fishermen in disputed waters. He is quoted as saying,

“China’s defense development is not aimed to challenge or threaten anyone, but to ensure its security and promote international and regional peace and stability … Security of a country relies not only on self-defense capabilities, but also on mutual trust with others.”

Chinese officials have invited Secretary Gates to Beijing for a meeting which is expected to take place early next year.

[END]

China utilized its fast growing control of rare earth metals as leverage in the rapidly resolved dispute, and this serve as a harbinger of future tactics or it may just serve as a lesson for how to deal with the multiple conflicts that will continue to arise as the world order adjusts to China’s prominence.

No wreaths laid or candlelight vigels held.  This was just the Chinese government implementing policy on a company that has agreed that it couldn’t adhere to them.

Google is not leaving China and China surely isn’t leaving Google.  But the US media finally has enough perspective (or learning) to consider it relatively unremarkable.

This is probably the biggest disappointment out of the whole issue.  I’d certainly like to see unfettered internet access in China, but I’d really like to see less knee-jerk reporting by American media professionals.

Sadly, this isn’t an issue that only pertains to news on China.  I fear our news cycle is starting to  illicit rapid and uninformed actions on many fronts.  Something our Chinese friends are probably more aware of than ourselves.

We have been exploring the question of “China Going Global” for several weeks on CTP, in our blog, podcast and for a series of articles commissioned by Fortune magazine’s Chinese website.  In our first installment, we discussed the trend of how more and more Chinese companies are engaging Lesser Developed Countries (LDCs) in the Southern Hemisphere where the obstacles to market entry are significantly lower than in the United States, Europe and Japan.  In these various LDCs across South America, Africa and the Middle East, the Chinese can compete on price and their ability to build informal distribution networks among the Chinese diaspora.  Overall, Chinese companies operating in LDCs around the world are displaying their characteristic dexterity going into markets that most companies from the developed world either ignore or abandoned.  In places like Bolivia, Zambia and Bangladesh, product liability laws are weak, competition in many sectors is thin and the non-contract-based business cultures there all play to Chinese companies’ strengths.  In contrast, the United States offers the Chinese none of those advantages.  It is a huge, diverse market, with establish competitors in a system that is built on a legal system dedicated to contract enforcement.  If Chinese conglomerates want to play in this sandbox, they will have to adopt an entirely different approach to how they run their businesses.  In short, they will have to learn to be less “Chinese” and more “American.”

In this episode of the CTP Video Podcast, we explore the challenges confronting China’s emerging global conglomerates as they venture across the Pacific into the United States market.  Some of the questions we explore include:

• A “brand’s” value has very different meanings in the United States than it does in China.  Chinese companies will have to follow the lead of Korean and Japanese conglomerates who spent considerable time and money to learn the subtleties of American culture so as to effectively market to this diverse population.   Whereas price and value are among the driving forces of a brand’s value in China, that is less so in the United States where a pair of Diesel jeans, for example, can sell for over $300.  If the consumer is drawn to the Diesel brand, than the $300 spent on those jeans is within an acceptable value range.  Understand that concept of “value” will be critical for Chinese companies as their adapt their marketing strategies to accommodate the US market.

• The “Made in China” (MIC) brand poses distinct problems for Chinese companies coming to the United States.  MIC is now a widely used catch-phrase for low-quality, crappy products.  Following 10 years of scandals, product recalls and sub-standard quality associated with many Chinese products, the Mainland’s MNCs will no doubt face a significant challenge shedding this burdensome baggage.

• What sector will Chinese companies likely have the most success?  Cars.  Both Michael and I agree that the auto sector is wide open for an innovative product, particularly in the mixed-fuel or hybrid sectors.  The selection of Los Angeles as BYD’s North America headquarters is yet another indication that the Chinese are going to use their innovations in hybrid and solar power auto technology to serve as the proverbial “tip of the spear.”   However, autos present tremendous risk to the brand as well.  Imagine if Geely or BYD encounter quality problems similar to what Toyota just went through.  The Japanese auto maker was able to draw on a generation of brand investment in the United States to recover its standing in the market.  Chinese companies will not be afforded the same amount of trust.  If the gas pedals on a BYD or Geely car stick as Toyota vehicles reportedly did, then the Chinese will have a public relations disaster on their hands.  Remember, all Chinese products, regardless of their quality, will have to overcome the public’s skepticism of MIC.  On top of that, there is the whole… ahem… “Communist thing.”  Yes, the American people remain oddly afraid of anything “Communist” and China is still widely referred in Washington as “Red China.”  Finally, China has built up a sizable audience of detractors who would love nothing more than to see their brands fail miserably in the United States.   In the end, the Chinese must perform exceptionally well as there is very little room for error for them to establish their brands in this environment.

• Finally, the Chinese will have to grow a thicker skin.  When things go wrong, and they will, Chinese corporate leaders and senior government officials must resist the temptation to call on their nationalistic instincts that have been used to great effect until now.  If a product is recalled, it is not a conspiracy “to contain China.”  If American consumers protest against a Chinese company, it is not because “they want hurt the feelings of the Chinese people.”  Instead, the Chinese should address the problems as local issues, work hard to influence public opinion back home (especially in the blogosphere) and show a commitment to the American consumer that Chinese MNCs are investing in the United States for the long term and will work hard to resolve problems quickly, directly and honestly as they arise.  American consumers welcome Japanese companies with a similar level of skepticism when they first started to arrive en masse in the 1980s and now, a generation later, those companies are a trusted part of millions of US consumers’ lives.  The Chinese can do the same if they learn not to over react and to communicate with their American consumer in a tone and language they are accustomed to.

So many of the requirements of how to enter the American market are similar to the necessities of what it takes to break into the Chinese market.  The Chinese always tell Western investors that in order to succeed there it requires time, patience and a lot of money.  More importantly, it also requires leaders who are culturally sensitive, speak the language and understand the consumer’s needs.  Imposing your will on the consumer will not work, either in China or the United States.  So before Chinese corporate leaders pack their bags for Los Angeles, New York and Washington, they might want to first stop by an American company operating in China to listen to their experience about what it takes to make that long journey across the Pacific.

CTP Podcast – China’s Influence on North Korea (050610)

Regardless of whether the six-party talks continue, China will always be the one with the main influence on and self-interest in North Korea’s future stability.  China doesn’t want to see a unified Korea anytime soon, and it doesn’t want to deal with turmoil on its border that could lead to a massive refugee crisis.

With leadership change on the horizon, it seems likely that Kim Jong-Il will seek to set a foreign policy course and domestic development trajectory for his youngest son, Kim Jong-un, to implement.    By providing economic security (and opportunity), China can also seek to dissemble any nuclear infrastructure that North Korea has established – but it should be noted that border security, not nuclear threats, are China’s main concern.  China is also motivated to remove the nuclear threat, but its methods and timeline are inherently different from ours.

The other variable to contend with will be the American public’s perception/opinion of this evolution and what the reaction of our politicians will be.  For example, it seems highly unlikely that the US will ever want to see the six-party talks end (despite a lack of progress over 7 years).  Such an ending would result in too many headlines.  Fortunately, China doesn’t usually seek to be the sole actor responsible for extra-territorial security.  So while reality will be China as the main actor, perception will focus on a face-saving multi-lateral management.