Many dismiss any threat from this relationship because "the Chinese don't know how to innovate"... what beautiful narcisstic dogma. Give it 2 generations... already we can see on the horizon Chinese cars coming to the US market (3-5 years). Just as Hyundai was laughed at 20 years ago, so will this first wave. But check to see what auto company fared best in the past 3 years. Rinse, wash, repeat across industry after industry... as more and more manufacturing and now research & development centers sprout up across China.
These are long term trends, and on Wall Street if the tree is not directly ahead of us, we could care less. But the greater issues for economies, countries, and our dear multinationals are going to be multi faceted. In the meantime, our pathetic political class - in a move to find a fall guy to distract Americans from their inability to do a darn thing - are now creating a new villian... the Chinese.
- Five senators including Charles Schumer of New York and Lindsey Graham of South Carolina introduced legislation yesterday to make it easier for the U.S. to declare currency misalignments and take corrective action. Even if the bill stalls, it may have “ripple effects” that lead the Treasury Department to declare China a currency manipulator, William Reinsch, president of the National Foreign Trade Council, said.
- “The only way we will change them is by forcing them to change,” Schumer said. The yuan is undervalued by as much as 40 percent, which is “blatant protectionism,” Bergsten said.
- China's relationship with foreign companies is starting to sour, as tougher government policies and intensifying domestic competition combine to make one of the world's most important markets less friendly to multinationals. Interviews with executives, lawyers, and consultants with long experience in China point to developments they say are making it much harder for many foreign companies to succeed. They say the changes suggest Beijing is reassessing China's long-standing emphasis on opening its economy to foreign business—epitomized by the changes it made to join the World Trade Organization in 2001—and tilting toward promoting dominant state companies.
- Technology executives say they are highly concerned about government procurement rules issued late last year that would favor local suppliers who have "indigenous innovation." The rules, if implemented, could limit foreign access to tens of billions of dollars in contracts for computers, telecommunications gear, office equipment and other goods.
- Patent rules imposed Feb. 1 threaten to increase costs in China for foreign innovators in industries such as pharmaceuticals, and let authorities force foreign drug companies to license production to local companies at state-set prices.
- Executives in several industries say the liberalization spurred by China's WTO entry is stalling. Foreign makers of wind turbines and solar panels say they are being shut out of big renewable-energy projects. (even as much of Americ'a stimulus money - i.e. taxpayer money - for renewables is going to China) Regulatory barriers effectively cap participation in insurance: Foreign companies had just 4.7% of China's life-insurance market as of June, and 1% of its property and casualty market, according to PricewaterhouseCoopers.
- Some sectors haven't been significantly hindered. Car makers like Volkswagen AG and General Motors Co. benefited hugely from China's booming market last year. But state-run media have reported government plans to increase domestic brands' share to over 50% of passenger vehicles by 2015, from 44% last year.
- Many foreign executives say they see an upsurge in economic nationalism, accelerated by China's world-beating performance during the recession and a new disdain for Western economic management.
- Signs of nationalism are evident in the grooming of state-owned companies to dominate their industries as "national champions," often at the expense of private Chinese companies as well as foreign firms. From airlines to coal mining to dairy products, government policies are expanding the state's role.
- For many multinationals in China, today's profits follow years of investment, much of it encouraged by government policies designed to lure capital. Now, at the point when their dream of access to a giant market is becoming reality, China is so prosperous that it has less need for foreign funds. (bingo)
- Beijing has long harbored suspicions the West wants to hobble its economic rise. Analysts say that lately, such insecurities have strengthened the hand of leaders who want to limit foreign presence in the economy. While there are still proponents of openness, says Mr. Ross of WilmerHale, "there are louder voices pushing China to be more protectionist and to be more nationalist."