Commentary Magazine


Economic Uncertainty in China

The almost universal assumption is that China is a rising dragon that someday — perhaps someday soon — will overtake the United States. But notwithstanding China’s impressive growth rates, there is trouble on the horizon — something that is suggested by this New York Times article — which reports on the growing unease among foreign companies trying to do business in China. As the article notes:

Foreign companies doing business in China are increasingly feeling as if the deck is stacked against them.

China has filed more than a dozen trade cases to limit imports, imposed a series of “buy Chinese” measures and limited exports of some minerals to force multinationals to move factories to China.

That echoes the concern of some American businessmen in Tokyo, to whom I talked last week. They complained about how unpredictable business conditions are in China- – subject to the whims of shortsighted, corrupt cadres, who are intent on lining the pockets of well-connected countrymen even at the expense of cheating major investors. Japan, by contrast, has its own barriers to business but, these executives report, is a much more welcoming, less worrisome place in which to grow a business. Another American investor with whom I talked recently mentioned that he had just invested in a major real-estate project in India — something he would not do in China, because he has no confidence in that country’s future.

None of this is meant to dismiss China’s prospects. Wherever I went in Asia there was talk about growing Chinese power especially as manifested in its ever-more-capable armed forces; its naval ships are acting in increasingly aggressive ways toward Japan, the United States, and other states. But the Chinese quest for economic growth — the underpinning of its military power — will be endangered unless it can develop a genuine rule of law that will assure foreign and domestic investors of its long-term prospects.