When the latest list of firms approved by Beijing to provide online mapping services in China was published last week, it was no great surprise that Google’s name was missing.
Google has an estimated 2 million users of its mobile mapping services in China, but now the state bureau of surveying and mapping services is reviewing the sector. Only those companies of “excellent quality” will be approved, the bureau says.
Google, apparently, has so far failed to demonstrate that “excellence” to Beijing’s satisfaction. Google is still in a messy stand-off with the government over its decision last year to stop censoring its search results in China.
What was less predictable and more disturbing for businesspeople convinced that the Chinese market is a potential Eldorado was that none of the 23 approved companies listed so far is foreign. There was no mention of Nokia or Microsoft, for instance, both in good standing with Beijing. The mapping market is small, but rapidly growing and at present dominated by Baidu, the compliant Chinese search giant that was the main beneficiary of Google’s defenestration.
If the lack of foreign names on the list had been an isolated case, it would have attracted less angst, but for months now foreign entrepreneurs have been unusually vocal about what many perceive as a growing policy of state-led discrimination in favor of Chinese firms.
Remarks made by Jeff Immelt, chief executive of US giant General Electric Co (GE), to dinner companions in Rome recently were among the more colorful recent complaints.
“I really worry about China,” he said. “I am not sure that in the end they want any of us to win, or any of us to be successful.”
GE earned US$5.3 billion in China last year, but Immelt complained that conditions have never been harder — so hard that they are beginning to look elsewhere.
It seems unthinkable that major players could give up on the Chinese market, but Immelt’s discontent was previewed earlier in the year by European and US business lobbies in China.
In April, Jorg Wuttke, then president of the EU Chamber of Commerce in Beijing, complained that most of his members felt they had run into an “unexpected and impregnable blockade,” and while Chinese companies could buy up foreign industrial groups — along with their intellectual property — non-Chinese firms enjoyed no reciprocity.
The resentment cuts across many sectors — from manufacturers of wind-turbines, excluded by rules on turbine size which fit only Chinese producers, to mobile phone makers who face demands for the testing of already thoroughly tested handsets.
The US Chamber of Commerce in Shanghai has been equally forthright in voicing its members’ frustrations and this open discontent is a noteworthy departure from the tradition of silence about the difficulties of doing business in China. Playing nice over the long term — demonstrating that they were “friends” of Beijing — would eventually be rewarded in access to a fast-growing market with huge potential.
So what has changed to make that friendship now seem unrequited?
One factor is the strategic decision China implemented last year to create national champions across a range of technologies. Keen to move up the value chain, Beijing set in place rules to foster “indigenous innovation” — which foreign firms clearly see as discriminatory.
The rules exclude foreign companies from parts of the market and demand technology transfer to China from others as the price of doing business. Given the scale of intellectual property theft in China, many Western firms have been left feeling abused. The slope of the playing field today seems steeper, even for the most robust multinationals.
When it comes to free-trade rules and local interests, no country’s record is pristine, but today’s potentially toxic combination of resurgent nationalism and the effects of economic crisis in the West have generated a sour mood in China that is amply reflected in the US and Europe. Since the financial crisis, China has been palpably more assertive across issues from economic policy to human rights.
The world, Beijing seems to believe, needs China more than China needs the world. To that degree, the tensions in trade policy reflect a profound change in global power that is reshaping assumptions about globalization.
Now even the biggest players wonder if Google’s experience was unique, or a harbinger of things to come.
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