Wed, Aug 19, 2009 page9

• China’s economic boom meets global rules

  When politics and business collide, business often wins, but Beijing has shown it will bend to foreign pressure

  • By Michael Wines / NY TIMES NEWS SERVICE
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  Last week the WTO rebuffed China in an important case involving Chinese restrictions on imported books and movies.

  The Chinese government also dropped explosive espionage charges against executives of a foreign mining giant, the Anglo-Australian Rio Tinto, after a global corporate outcry. And on Thursday, the government said it had backed off another contentious plan to install censorship software on all new computers sold here.

  Throughout its long economic boom, China has usually managed to separate its aggressive push into the global business arena from domestic politics, which remained tightly controlled by the Chinese Communist Party. But events last week raised the question of just how long it will be before the two meet.

  In each of those matters, politics and business collided, and business won. Business does not always win, and when it does, as in these cases, the reasons are as often as not a matter of guesswork.

  But in at least some high-profile matters, China appears to be facing the reality that the outside business world can be freewheeling and defiant when its profits are threatened. China’s authoritarian system may have to evolve in ways its top leaders may not readily endorse.

  Beijing has a global footprint now, said Kenneth Lieberthal, a veteran China analyst now at the Brookings Institution.

  “They’ve always looked in the past to what’s good for China, and they still do. But for the first time, added to that is the consideration that they’re in the position of being rule-takers, not just rule-makers,” he said.

  China’s leaders, he said, “are just beginning to learn how to handle that.”

  Consider the following: Since late May, Beijing’s Industry and Information Technology Ministry had more or less insisted that so-called anti-pornography software, dubbed Green Dam-Youth Escort, would eventually be packaged with every newly purchased computer.

  On Thursday, the ministry backed down, calling the requirement a “misunderstanding” spawned by badly written rules. Officials offered no other explanation, but the retreat followed weeks of protests by outsiders — from foreign computer makers to foreign governments to foreign corporate branch offices — who said that the software stifled free speech, compromised corporate security and threatened computers’ stability.

  Computers are not the only example. Last week, the WTO told Beijing that it could no longer force providers of US books, music and films to distribute their goods through a local partner. Foreign companies saw that rule as an impediment to reaching a broad Chinese audience with their products.

  The Chinese market is flooded with pirated CDs and DVDs whose contents’ creators receive no money.

  The Chinese legally may appeal the decision, but Foreign Minister Yang Jiechi (楊潔箎) indicated in a Geneva speech that simply ignoring it is not an option. China worked for years to join the global trading system and is bound, as much as other nations are, by its rules.

  “China will never seek to advance its interests at the expense of others,” Yang said, according to Reuters.

  Similarly, Chinese prosecutors appeared to retreat last week from earlier statements that they would prosecute employees of Rio Tinto as spies for stealing state secrets. While the espionage allegations were not spelled out, they were apparently related to delicate commercial negotiations over the price of China’s imports of iron ore for its steel mills. Rio Tinto executives have strongly denied the accusations, and both the US and Australia said China’s actions could have both business and diplomatic repercussions.

  While the Rio Tinto employees still face lesser charges of bribery and theft of trade secrets, the espionage threats stirred broad unease among foreign companies operating in China, who feared that they could face persecution and closed-door trials for engaging in what much of the world would regard as bare-knuckle business tactics.

  Yet whether such instances represent trends or exceptions — or neither — remains a matter of some debate.

  Increasingly, many experts say, Chinese officials appear to be aware that their actions have far broader ramifications than they might have had even a few years ago.

  “Fifteen years ago, the mantra in China was, ‘We’re the victims of a system that’s stacked against us,’” said James Feinerman, an expert on Chinese law and policy at Georgetown University in Washington.

  China’s entry into the world trading system, he said, is slowly helping to change the nation’s view of itself from that of an outsider to an insider with a stake in the global system’s success.

  Other experts note, however, that what outsiders see as carefully calculated policy changes may in fact be nothing of the sort. The government’s decision to install censorship software on computers — and its subsequent reversal — is but one example, they say; the original proposal was probably pushed by a government clique that found itself outflanked once Internet users and foreign corporations began objecting to the plan.

  “Is China susceptible to international pressure? Of course it is,” said Charles Freeman, a leading China scholar at the Center for Strategic and International Studies in Washington. “China does have international interests, and they are impacted by what it does domestically. There’s a constant battle between agencies over how much political capital to expend on international issues against domestic interests.”

  In any case, few experts are willing to stake their reputations on a prediction that Beijing’s recent softening of some positions signifies a strong trend. To the contrary, Feinerman said, China had undergone “a real pushback” in the last five years on some fronts, reasserting political dogma in some areas where commercial norms and the rule of law had begun to have more sway.

  Jonathan Hecht, an expert on Chinese law at Yale University’s China Law Center, said that developments in China should be viewed against a history of great leaps forward on such matters, followed by equally great retreats.

  “I’ve given up predicting long-term trends,” he said.
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