Politics of Business in China

In a statement carried by the People’s Daily on May 31, a Chinese spokesman criticized a Taiwan businessman by name, saying Beijing does not welcome Taiwan businesses that use profits made in mainland China to support independence movements for the island. The statement came as no surprise to me. The outcome of Taiwan’s presidential election in March shows that there is virtually no possibility that the island republic will develop a policy aspiring to, or approving of, unification with China.

For China, the right thing to do is to recognize this reality and rethink its Taiwan policy. This is asking for the moon, though, given Beijing’s current rigid stance. The question is: How will China behave in the future?

One thing it will do, in my view, is get tougher with Hong Kong. China had tried to set the “one country, two systems” example for Taiwan by respecting Hong Kong’s democracy. That motivation, however, has been lost as indicated by recent events in the former British colony.

With regard to Taiwan, China is following a two-pronged strategy: One is to continue to ratchet up military pressure, as evident in the latest military budget. The other is to apply economic pressure.

Chinese leaders keep saying Taiwan eventually will be united with China as Taiwan’s increased investment in the mainland makes the two sides economically more interdependent. Although no responsible economists and political scientists have made such an argument, many people apparently still believe it.

History shows that a nation’s economic dependence is irrelevant to its concerns for security or independence. There is the classic example of Norman Angel: Before World War I, he predicted that nations belonging to the family of European languages would never fight each other because they had become so interdependent economically. But they did go to war; the notion of economic interdependence had never entered the minds of their leaders, such as the czar or the kaiser, when they started a war.

Nations where the same language is spoken — such as Germany and Austria, and America and Canada — often have close economic ties, but this in itself has nothing to do with their national independence. Still, at the micro level of relations, such as those involving unfair trade practices not to mention criminal activities, economics and politics get intertwined.

The message here is that foreign companies doing business in China will likely be harassed or unfairly treated unless they accept its political demands. Case in point: Japan wants to sell Shinkansen bullet-train technology to China, but Beijing does not fail to allude to the political position that Prime Minister Junichiro Koizumi stop making visits to Yasukuni Shrine, the memorial for Japan’s war dead.

In Taiwan’s case, the situation is more serious. Proindependence businesses continue to suffer various forms of harassment. In the March election, Taiwanese companies reportedly came under pressure to make huge donations to the Nationalist Party.

Thus, economic activities with China likely will continue to involve, serious problems. I welcome expanding economic exchanges between Japan and China, or between Taiwan and China. What worries me is that economic transactions are often used for illegitimate political purposes.

According to a survey, 80 percent of Japanese companies in China believe that politics and economics are interrelated. They are complaining not about correlations between the national economy and politics, but about the possible threat of politically motivated harassment. Perhaps the remaining 20 percent feel safe by virtue of their unique technological innovations and knowhow.

This kind of situation does not exist in the relation with other countries. So how should we deal with it? My view is that, in each harassment case, the government should make a formal request that China exercise self-restraint.

Harassment, of course, represents an unfair interference in the freedom of economic activity. If China is openly and repeatedly criticized, it will have to change its attitude.

The Wall Street Journal reported critically on the May 31 People’s Daily article, stressing that China, at the very least, should be able to understand capitalism, if not democracy. I do wish that the government of Taiwan would criticize this example of Chinese harassment because it is clearly an unfair practice.

While saying this, however, I cannot help but feel somewhat presumptuous, as I am not at all confident that the Japanese government would have the guts to do the same in a similar situation.