Chinese regime’s aggressive stance suffocates Western businesses

For any company doing business in China, the choice is now clearer than ever: Avoid commenting on a controversial topic or risk losing access to the world’s second-largest economy.

In recent weeks, the presidential government Xi Jinping has backed a boycott of retailers such as H&M and has imposed sanctions on a number of organizations – including a group of British lawyers – for their statements about forced labor in Xinjiang. In addition, he on Tuesday approved sweeping changes to Hong Kong’s electoral system to give Beijing a veto over any candidate.

China’s more aggressive stance, triggered in part by collective action by the United States and its allies to sanction Chinese officials, is forcing companies to quickly weigh what they will do to maintain access to $ 1.4 billion. of consumers with older purchasing power. So far, with anemic growth in the rest of the world, most companies are staying on the sidelines or increasing their investments.

While it was previously easier for companies to operate in China and manage corporate social responsibility, it is now difficult to show that outside influence has an impact on the evolution of the actions of the Communist Party, according to Margaret Lewis, law professor and specialist in China. from Seton Hall University.

“You find yourself in this dilemma of staying and being a prop or going,” he said. “The balance between the two is increasingly difficult to find. Now it’s a rougher decision ”.

The best strategy for brands like H&M in the face of a boycott in China is to go unnoticed and wait for the backlash to “calm down,” Joerg Wuttke, director of the Union Chamber of Commerce, told Bloomberg on Tuesday. European in China. In fact, several companies have removed their Xinjiang statements from their websites.

“It’s a complicated picture,” Wuttke said. “On the one hand, China saved the skin of many companies last year,” he said. “At the same time, of course, you have that kind of political pressure, and again a problem like Xinjiang is a dead end.”

Many well-connected foreign companies are expanding their presence, especially as Hong Kong’s financial sector is exploding this year due to an influx of IPOs and IPOs. Initial public offerings in the city have already reached nearly $ 11 billion in mid-March, an increase of almost 500% from the previous year, with video streaming platform Bilibili and the giant of Baidu research. Among the companies that have carried out multi-million dollar operations.

New York-based Citigroup plans to hire up to 1,700 employees in Hong Kong to take advantage of the growing ties between the financial hub and the growing wealth of southern Chinese cities such as Guangzhou and Shenzhen. The appetite for tech stocks and the threat of delisting in the United States boosted the financial center, leading to an increase in initial and secondary sales of stocks.

However, for some international law firms that advise companies, the working environment in Hong Kong has become much more complicated. China’s retaliatory sanctions against the UK included Chambers of the Essex Court, which a prominent lawyer said could have far greater consequences for investors.

After receiving the sanctions, the Financial Times reported that cameras had removed from its website a reference to a legal opinion by some of its lawyers implicating the Chinese government in the alleged Xinjiang genocide. The newspaper Global Times, supported by the Communist Party, said the action demonstrated that the Chinese sanction was “an effective deterrent against rumors.”

However, Guy Sandhurst, former chairman of the England and Wales Bar, said the measure would affect “all UK companies doing business with Chinese clients” as lawyers involved in resolving disputes for companies Hong Kong officials could be denied access to the territory. . He called on the “western world” to insist on conflict resolution mechanisms outside of China for all future contracts.

“Today it is the members of the Chambers of the Court of Essex who are being sanctioned,” Sandhurst wrote on the Society of Conservative Lawyers website. “But tomorrow it could be Clifford Chance, Freshfields or some other law firm in town or law chambers knowingly or unknowingly offending the Chinese state.”

Xi Jinping’s decision on Tuesday to formally overhaul Hong Kong’s electoral system could trigger another round of criticism and possible sanctions against Western nations, they have failed to change China’s behavior. The changes allow a small group of national security officials from mainland China and Hong Kong to scrutinize all election candidates, ensuring that only those loyal to Beijing can implement the policy.

Hong Kong leader Carrie Lam said the changes would help the investment climate, a position echoed by former chief executive Leung Chun-ying in an interview on Tuesday. “There are many opportunities,” he said, when asked about the economic future of Hong Kong. “It’s about opening our minds, eyes and ears to these opportunities and then sharing them with the international community.”

But even though Xi’s actions in Hong Kong and Xinjiang seem harsh, and Chinese officials talk to the world “as if they have nothing more to learn,” the measures actually reveal paranoia that could end up backfiring. against companies and countries. According to Jean-Pierre Cabestan, professor of political science at the Baptist University of Hong Kong and author of several books on Chinese foreign policy.

“It’s a little nervous, which is a sign of weakness and a sign that they don’t feel safe,” he said. “And this is worrying, because when you are not sure of yourself, you can engage in dangerous decisions and actions towards others.”

With information from Bloomberg

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