THE DIPLOMATIC ROW between the United States and China over the fate of human-rights activist Chen Guangcheng shows how domestic political issues here can flare up into rows with global impact and has lessons for Irish businesses interested in investing in China.
China offers fantastic “win-win” opportunities, but the Chen case shows that the political risks need to be taken into account when looking at this market.
Chen’s request to be allowed leave the country forced a standoff between the world’s two biggest economies.
The fate of a man from small-town China, blind since infancy and who couldn’t read or write until he was in his 20s, reverberated on the global economy.
Instead of trying to contain the public-relations damage, Beijing came out with all guns blazing, saying this is a domestic issue and none of America’s business, and demanding that the US say sorry.
It may have been a domestic issue, but it has affected companies manufacturing or sinking private equity into China, and offered pause for thought in countries like Ireland seeking investment from the state.
US secretary of state Hillary Clinton and treasury secretary Timothy Geithner were in Beijing for the annual Strategic and Economic Dialogue between the two countries at the time of the dispute, talks supposed to foster better Sino-US relations but on this occasion largely overshadowed by the Chen case.
Instead of bringing the world’s two biggest economies closer, we saw fresh challenges to investment and exports. The financial markets had been looking for firm action by these two economic giants on ways for the world to convincingly get over the ravages of the Great Recession. They sought solid Chinese input into efforts to reform the global financial system.
Most investors separate China’s human rights record from the broader context. Beijing argues that it has made serious progress in getting millions of people out of poverty, one of the most basic human rights, and asks for understanding for its efforts to keep the world’s most populous nation intact in the face of deep social and economic change.
We have been here before – there were stresses and strains on relations, and a major drop in investment, after the crackdown on democracy activists in 1989, culminating in the Tiananmen Square massacre. China’s bid to rejoin the international community took years, and its reputation as a place to do business has never really recovered entirely.
However, this time the situation is different, because China matters as it never has before. It needs the US, and Europe, to buy its exports, to invest in its companies and to provide the know-how to help it keep growing. And the West needs China, as a trading partner and as an engine for growth, as a buyer of government debt.
Both sides will be keen to ensure that the Chen saga does not trigger a trade war, with both sides bickering over market access and trade barriers.
