Global brand names have been enticed into a China trap

Doing business in China can at times resemble being handcuffed or gagged.

On occasions, appeasement takes over or global brand names succumb to the “Stockholm syndrome.” 

So-called after a hostage-taking bank raid in the Swedish capital back in 1973, it is a rare psychological disorder. The symptoms involve the “victims,” or companies, developing “affectionate feelings” for the captors. In this case, the ruling Communist Party of China.

But before we delve deeper into that issue, major American groups are still finding it tough to operate in the country. Many feel they are being mired in red tape.  

“AmCham’s members face longstanding structural challenges in the China market that conspire to tilt the playing field against (foreign-invested enterprises) and foreign investors,” a report released this week by the American Chamber of Commerce highlighted.

The facts:

• Key sectors of concern are health care, cloud computing and the movie industry.
• Foreign investment in China’s medical sector is capped at 70% compared to the open market in the US.
• Foreign investment in China’s cloud services industry is just 50% compared to zero restrictions in the US.
• The dates of American film releases are dictated by the Chinese government.
• Up to 75% of revenue has to remain with Chinese production companies.
• There are no financial restrictions or release dates on Chinese foreign moviemakers in the US.

What was said: “Two-thirds of members say they would consider increasing their investments in China if markets were open on a par with those in the US, a slight increase on last year,” the American Chamber of Commerce report stated.

Legal eagles: “China’s courts have improved in terms of disputes in intellectual property rights [and] have become somewhat fairer,” Lester Ross, a lawyer and the head of the AmCham Policy Committee, told a media briefing.

Corporate conundrum: Jamil Anderlini, the Financial Times Asia Editor and former Beijing bureau chief, believes much of the corporate world is being “afflicted” with “Stockholm syndrome” when it comes to “dealing with the Chinese Communist Party.”

Taken hostage: “Because Beijing has punished so many companies and countries for a range of perceived political slights – from quoting the Dalai Lama in marketing campaigns to shunning cotton allegedly harvested by slave labor – many international companies in China do feel like hostages,” Anderlini wrote on the opinion pages of the FT last week. 

Psychological twist: “But [companies] tend to blame politicians, media or human rights groups in their home countries for antagonizing their captors,” he said.

Silence is not golden: “Unfortunately for companies heavily reliant on China, it is no longer enough to stay quiet about human rights abuses, unfair business practices, or political interference,” Anderlini added.

Money-go-round: “If you want to make money in modern China you have to toe the Communist Party’s line, engage in ostentatious displays of fealty and assist in its propaganda efforts globally,” he said.

The payoff: Multinational companies, such as Volkswagen, Apple and H&M, have become addicted to raking in cash from China’s growing middle-class. Last year, the world’s second-largest economy was the number one sales market for German auto giant BMW, accounting for roughly 33% of its revenue.

Smear campaign: “The [FT] article is nothing more than another baseless smear against China, full of political bias while void of facts and evidence,” Huo Jianguo, of the China Society for World Trade Organization Studies in Beijing, wrote in a commentary last week.

Bizarre beneficiaries: “It does sound bizarre to portray successful, moneymaking companies in China as hostages. Instead, these successful companies should be seen as beneficiaries,” Huo said in the nationalistic Global Times.

China Factor comment: It appears that staff at Global Times and certain contributors also appear to have a severe dose of “Stockholm syndrome.” And there is no cure for that in China.