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China must honour its promises

China must take responsibility and become a nation that allows a fair and equal playing field based on trust and mutual respect.

15 MARCH, 2019

Kristian Odebjer
Swedish Chamber of
Commerce in Hong Kong
Lars-Åke Severin
Swedish Chamber of
Commerce in China

Relations is the overall theme for this year’s four issues of Dragon News. Relationships are undisputedly the basis for our own life as well as the life of corporations. The English 17th Century author John Donne wrote the saying that “no man is an Island”, meaning that we all rely on others. It’s very much the truth for the corporate world as well. Trust and mutual respect are closely connected to relationships. They provide a foundation that is weakened if any of the elements is not in place. This edition’s Focus Story is about how China’s relations have developed in different ways over the past three decades, perhaps most rapidly during the last decade from a situation in which China very much was dependent on others, to the situation today, which is characterised by mutual dependencies.

China’s accession to the World Trade Organisation (WTO) in 2001 signified the country’s arrival to the community of trading nations, and its acceptance of a set of rules aimed at creating a level playing field with regard to important trading concepts like market access and the protection of intellectual property rights. There was widespread optimism in the west that by inviting China into the trading system that had so benefited the world during the second half of the 20th Century, China would be able to benefit from deeper integration with the world economy, while at the same time committing to far-reaching obligations with regard to its own economic reform programme. Looking back, now almost two decades later, it is abundantly clear that these hopes were overblown and perhaps even naïve.

China was for many years regarded as the weaker party, a nation which had suffered for years under Communism and with a huge population that had been turned into a cheap and accessible workforce. China was the factory of the world, a place where foreign corporations could mass manufacture products at low cost – and often under circumstances that simply would not be possible or even legal on their home turf. Lack of environmental protection, poisoning of vast swathes of land – and of ground water – and entirely lacking in efficient legislation to protect workers, all contributing to low cost for the manufacturing of goods. This was the basis of our relationship with China before things started to turn.

Step by step, still under the flag of the Communist Party, China started to grow and by 2008, despite the global financial crisis, the country continued to grow financially even stronger.

China can no longer be perceived as not having grown up and should therefore be expected to adapt into adulthood. China is an extremely well developed, focused and strong trading nation with a clear strategy on key questions for times to come. Through the strategic development of “The Belt and Road Initiative” and “Made in China 2025”, China has revealed its planned direction for investments and its priorities.

Through these strategic areas and identified priorities China is also, directly and indirectly, inviting foreign corporations to take part in this huge undertaking. But will it be tempting to be a part of it if the relationship is not strong enough? What if there is lack of trust and the feeling of mutual respect is damaged? China is today one of the most important countries to invest in and to develop business in for many industries. Staying out of China will perhaps be a strategy for some but not for most. But in order to attract investment, China must take responsibility to grow up and become a mature nation that provides a fair and equal playing field. It has to stop threatening other nations with sanctions due to slights as perceived by the government. There must be further development in terms of protecting intellectual property rights as well as increased transparency and less arbitrary legislation.

China can only enter the path to renewed growth by way of full acceptance of the international rules-based trading system. When going overseas, Chinese companies and individuals enjoy generous market access across a wide range of industries, as well as the protection by legal systems characterised by the rule of law. Sadly, the same cannot be said for foreign companies and individuals doing business in China; for them markets that are supposed to be open remain closed, and the legal system is still all-too-often used as a tool to protect local interests. Worse still, the legal system is also used at times to harass foreign business people (something that several of our members have experienced). In the past 12 months, it has become clear to China that its trading partners have run out of patience, and that real reforms must now be implemented. The question must then be asked; is there a real will on the Chinese side to honour promises made?

By honouring its promises, not only will the investment climate improve, but so will the odds of China reaching its goals. No person, no corporation and no country can fully commit without the fundamental elements in place for a relationship – trust and mutual respect.