Bo, Chen and Doing Business in China

English: US Secretary Gutierrez meets with Chi...

English: US Secretary Gutierrez meets with Chinese Minister Bo Xilai (Photo credit: Wikipedia)

Political events in China have dominated the news over these past few months, overshadowing stories about the country’s economy that usually make the headlines.

It began on February 6 when Wang Lijun, Chongqing’s chief of police, sought refuge in the United States Consulate in Chengdu. Fearing for his life at the hands of Bo Xilai, Chongqing’s powerful Party Secretary, Wang told U.S. diplomats that Bo’s wife had poisoned a British businessman and one-time confidante to the Bo family. Wang’s action was the event that triggered the fall from grace of the former rising star of the Chinese Communist Party that has been playing out in the press ever since.

Over the past two weeks, Chen Guangcheng, the “blind lawyer” and dissident from Shandong province, has taken center stage. Under house arrest in Shandong Province for the past two years for railing against forced abortions and sterilizations that occur as part of China’s “one-child policy,” Chen somehow managed to escape the week before last, only to show up at the U.S. embassy on the eve of a high level visit to Beijing by U.S. Secretary of State Hillary Clinton and Treasury Secretary Timothy Geithner. “Should I Stay or Should I Go,” the 1981 hit song by the English punk rock band The Clash, could have been the theme for last week’s talks between Chen and U.S. diplomats.

The Bo and Chen sagas have once again raised questions as to China’s stability and the impact that local and international politics may have for companies doing business in the country. As serious as these recent events might be, though, it’s important to keep in mind that we’ve encountered similar bumps in the road over the past 20 years. Somehow or another, China has remained stable and the U.S. and China have managed to patch up any differences through it all.

No doubt, the Tiananmen Square protests of 1989, also known as the June Fourth Incident, is the most notable of the destabilizing events that have occurred, interrupting as it did over 10 years of economic progress in China. Afraid that China was reverting to pre-Deng days, scores of Western companies chose to pack up and leave the country as a result. The lure of the Chinese market proved too great, however, so in the end, all of the companies found their way back.

In the years since, there have been at least three smaller, but no less important, incidents that threatened political stability in China and were wrapped up in the Sino-American relationship. I was in Beijing for all three, and all of them seemed quite scary at the time.

The first was the 1995–1996 Taiwan Strait Crisis that came about as a result of a series of missile tests conducted by China in the waters surrounding Taiwan from July 21, 1995 to March 23, 1996. The missiles fired in mid-to-late 1995 were allegedly intended to send a strong signal to the Taiwan government under President Lee Teng-hui, who was seen as moving Taiwan away from the One-China policy. The second set of missiles fired in early 1996 was allegedly intended to intimidate the Taiwan electorate in the run-up to the 1996 presidential election. The crisis began when Lee accepted an invitation from Cornell University to deliver a speech on “Taiwan’s Democratization Experience” in June 1995. In May, resolutions overwhelmingly passed by both houses of the U.S. Congress asked the State Department to allow Lee to visit the United States. China was furious over the U.S. decision and the state press branded Lee a “traitor” who was attempting to “split China.”

NATO’s bombing of China’s embassy in Belgrade on May 7, 1999, was the second of such events and perhaps the scariest for Americans doing business in the country. The bombing killed three Chinese reporters and outraged the Chinese public. President Bill Clinton apologized for the bombing and said that it was accidental, while China insisted that it was deliberate. The days after the bombing were tense to say the least for those of us in country. Even my closest Chinese friends looked at me with disbelief when I tried to argue the U.S. side. With all of the U.S. technology in precision bombing, it was impossible for them to imagine how the bombing could have been accidental.

In early 2001, the collision of a U.S spy plane and a Chinese fighter jet in the South China Sea exacerbated political and military tensions between the two countries. The incident came on the eve of a decision by the Bush administration on whether to sell advanced U.S. anti-missile and air defense systems to Taiwan. Although the Chinese pilot was killed, with no casualties on the U.S. side, the initial U.S. reaction was strident and aggressive. The Chinese were miffed that the U.S. offered no apologies or regrets regarding the death of Chinese pilot. Again, it was tough to be an American in China, trying to explain how the U.S. could be so callous.

Each of the three events brought to the fore any divisions that may have existed between the doves and the hawks in China and the U.S. and threatened to rupture the Sino-American relationship. In each case, however, cooler heads prevailed after a few tense days and weeks. Whatever their differences, the various factions within the Communist Party came together in each case in a way that prevented events from getting out of hand. As a country, China just had too much to lose if they didn’t. Government leaders in both China and the U.S. realized that it was in neither country’s interest for the two most powerful countries in the world to be at serious odds with one another.

By week’s end, the Chen crisis seemed to have been resolved with China allowing Chen to accept a fellowship offer from NYU. With respect to Bo, there is serious concern that his plight is indicative of a serious rupture within the Communist Party. Everyone doing business in China should be concerned, of course, and watch events closely, but if the past is any guide, this too will pass. If China had too much to lose in 1995-1996, 1999 and 2001, the stakes are even higher today.

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One Response to “Bo, Chen and Doing Business in China”

  1. I think your analysis of political events’ impact on investment is certainly interesting. I take issue, however, with your argument that the Bo and Chen issues are even close in political magnitude to the Taiwan Strait crises, Tiananmen Square, or the bombing of the Chinese embassy in Belgrade. Those issues were actual crises – they were long, drawn-out affairs that couldn’t be resolved quickly or easily. Tiananmen Square was practically iconic. Thousands of people died, and the photos of students being killed by CCP police went viral instantly (even in the age before the internet). It was *so* remarkable that it even inspired Eastern European countries to revolt against Soviet dominance.

    The Chen issue, on the other hand, although it made headlines, was still resolved relatively quickly and diplomatically. Tensions no doubt still exist between Washington and Beijing, but the whole issue was dealt with rather well.

    Investment is already so high in China that I doubt the Chen and Bo crises will derail that too much. I’m curious to hear your thoughts.