China shows pragmatic face to U.S. business
China shows pragmatic face to U.S. business
By Tiffany Wu
SHANGHAI (Reuters): After NATO planes bombed the Chinese embassy in Belgrade in 1999, mobs in China hurled stones at U.S. diplomatic missions, firms canceled meetings with U.S. executives and WTO talks ground to a halt.
But since a U.S. spy plane and Chinese fighter collided over Hainan on April 1, sending Sino-U.S. relations into a fresh tailspin, major deals with American firms continue to be signed, appointments kept and corporate lunches eaten.
Why the contrast?
China watchers say tensions could escalate, especially on the particularly thorny Taiwan issue, but so far, the starkly different response is a sign Beijing recognizes business ties have become a linchpin of Sino-U.S. relations.
China is more pragmatic and commercially driven -- it has "grown up" in an economic sense, business executives say.
"I have not seen any hard evidence of a negative backlash towards American companies either by the government or the general public," said the Beijing American Chamber of Commerce's chairman and General Motors executive Timothy Stratford.
But Stratford did note: "It's always possible that if things deteriorate very seriously (in a political sense), there could be some negative implications (for business)."
To a certain extent, the 1999 embassy bombing, which killed three Chinese journalists, was a more severe crisis -- the United States admitted it was wrong and Beijing was the clear victim.
Former U.S. President Bill Clinton was still apologizing for that incident on a trip to Shanghai last week.
But there is more of a gray area surrounding the mid-air plane incident last month, allowing each side to blame the other for the collision which left the Chinese pilot dead and the U.S. plane still stranded on Hainan Island.
Beijing's response has been measured. After the Belgrade bombing, Chinese authorities allowed furious anti-U.S. protests. This year they swiftly quelled public reaction.
China is irked by the U.S. refusal to stop spy flights off its coast, Washington's pledge to supply Taiwan with arms and its appointment of a special coordinator for Tibet.
A U.S. Congressional debate and vote on China's trade status in coming weeks could add fuel to the diplomatic fire.
Analysts say the first commercial casualty from the recent disputes, perhaps the only one so far, appears to be a setback in China's 15-year quest to join the World Trade Organization.
"A series of political disputes between Washington and Beijing have put the WTO talks on hold and there seems to be little chance China -- or Taiwan -- will enter the World Trade Organization this year," said a May research report by China strategist Andy Rothman from Credit Lyonnais Securities Asia.
In the corporate realm, business is proceeding. Ford sealed a Chinese joint venture soon after the April 1 collision, Motorola and Lucent Technologies won CDMA gear deals this week and Boeing expects no impact on jet sales.
"We did have concerns, but approval was granted by the central government in a timely manner, so we didn't really feel much difficulty because of the political issues," said Ford's China spokesman Kenneth Hsu.
Business leaders said it was important diplomatic ties did not worsen, or they could see China penalizing U.S. firms to make a political statement, as in 1996 when it handed a billion dollar contract to Europe's Airbus instead of Boeing.
China might pick a high profile business deal, for example in the aircraft or energy sectors, to send a message that trying to isolate China would be a dangerous strategy, they said.
"One can never separate politics from commerce," said Gong Li, China managing partner of consultancy Accenture in Shanghai.
While the spy plane incident alone would not have jeopardized Sino-U.S. business ties, the other strains ratchet up the risk.
The most sensitive issue is Taiwan, which China regards as a breakaway province that must be reunited, by force if necessary. Beijing is worried Washington will some day revoke its support of "one China", analysts said.
CLSA's Rothman said China was reluctant to return to the bargaining table of the World Trade Organization because of fears U.S. President George W. Bush had "changed U.S. policy on the one issue that was more important to Beijing than economic reform and social stability: Taiwan."
Nevertheless, Beijing realizes strengthening commercial bridges to the United States might be the politically savvier move. Corporate America is one of China's best allies.
"There's no intention to use the current troubled political aspects of the relationship to hijack the commercial, economic ties," said Goldmans Sachs economist Fred Hu in Hong Kong.
Said Accenture's Li: "People realized that despite a terrible incident like the bombing of the Chinese embassy in Belgrade, Sino-U.S. business relationships went back to normal eventually."