That’s not a headline we would expect to see is it?  Particularly during a heated campaign season where the only thing both sides appear to agree on is a negative portrayal of China.  The fact is, most of us who do substantial business in or with China keep our heads down when China bashing hits a fevered pitch. I suppose the fear is that anyone who speaks out may incur the wrath of both sides.  Fair enough.

But standing by silently has a predictable downside.  There is plenty of room for legitimate disagreement about China policy, but allowing unfair attacks on China-focused business to go uncontested gives them credibility.  Slamming imports from China without acknowledging how their reduced price and high quality have benefitted the average US consumer is irresponsible.  Criticizing a pegged Chinese currency without acknowledging the benefits of those rates to US companies operating from China is disingenuous. 

The fact is, US exports to China are increasing and often in ways that defy statistics.  Freeborders and other western companies operating in China as Wholly Owned Foreign Entities (WOFE’s) appear in statistics as Chinese companies even though we create substantial numbers of jobs in the US and send our profits back to the US.  We also increase exports to China by putting our knowledge of the Chinese market to work for other western companies entering China. 

Yes, we are American. Yes, we operate in China.  And yes, we are benefitting the American economy through exports and job creation. Just don’t expect us to boast about it until mid-November.

First, the fact that 65% of the “exports” are IT related speaks volumes about the changing demographic of IT professionals globally.  While there are certainly pockets of unemployment among tech workers in the US and Europe, it is increasingly difficult to find qualified local tech talent in many if not most thriving tech markets.  Like India a decade ago, China is capitalizing on this dearth of available talent by graduating staggering numbers of capable technologists and making them available to the global community.

I spent much of the last two weeks in China, and it’s pretty remarkable how similar Chinese and US newspaper headlines can be.  I was particularly interested in a front-page making dispute between Taobao, China’s largest online retail website (think Amazon.com), and a large subset of its users over the amount of fees the Taobao site charges its sellers.  The dispute itself is not surprising: Taobao attempted to increase fees nearly ten-fold on many of the small businesses, mostly mom and pop operations, that sell through its site, and the affected users combatted the move with protests and bogus transactions that forced a temporarly closing of the popular exchange.  Taobao ultimately backtracked by reversing many increases, offering a nine month grace period for others and promising to invest ¥1.8 billion ($US282 million) to assist in the creation of small and medium size businesses.

What is surprising is that the actions of an online Chinese business and its angry consumers so precisely mimic their US counterparts, and in this global economy we are not even surprised by it!  Could anyone imagine even 15 years ago that the Chinese government would allow faceless sellers and consumers to transact business with scarcely any regulation.  15 years ago, consumer choice in China was extremely limited when compared to the rest of the world, and today Chinese consumers are so demanding of their ability to transact business online that they protest (and win!) when it is threatened. 

Moreover, the tactics used to push back on the heavy-handed retailer are identical to what we use in the west: public protests, boycots, and minor civil disobedience (overwhelming the website to bring it down).  We could be reading about the popular backlash after Facebook’s changes to its privacy policy or Wikileaks attacks on American banks that refuse to allow donor traffic.    Before giving in to customer demands, Taobao summoned its own agressive strategy by going on the attack, claiming that its increase in fees was an effort to honor the governments request to clamp down on fake products.  Nice move! curry favor with the government while mollifying foreign partners like Yahoo!

As with most public disputes, it’s difficult to tell where the truth lies in the Taobao situation, but the open exchange of accusations and the ultimate resolution of the issues sounds about as free market at you can get.  No government intervention; no bureacratic red tape.  We are used to the clout of market forces in the US, and it looks like capitalism with Chinese characteristics is getting used to it as well.  I hope those who claim change in China is slow and incremental are watching.  The globalization ship has sailed and it runs both east and west.

Welcome to my blog that discusses ongoing relations between the US and China.  Over the next week I will be discussing 3 different stereotypes that seem to come up when China is mentioned.

While the relationship between US and Chinese businesses is in many ways stronger than ever, the changing leverage in the relationship between the US and China (manifest in a stronger, more assertive China) guarantees that US companies investing and operating in China will face many political and public relations hurdles. 

Working in any foreign country has its challenges and China is no exception.  As the US economy struggles with a double dip recession, stubborn unemployment numbers and a rising national debt, pundits tend to make assumptions about China that are at best polarizing and at worst inaccurate or just plain wrong. As the political climate in the US threatens to turn protectionist, the future of US/China relations may well hinge on our ability to keep the US-China relationship in proper perspective.

Those of us who have worked and invested in China for years recognize that the Chinese business culture is unique.  Over the years we have seen three principle myths perpetuated informally through stereotypes:

• China unfairly manipulates its currency
• China is stealing US jobs
• China doesn’t care about intellectual property protection

It’s important that those of us doing business inside China address these stereotypes and replace them with the accurate picture to guide others interested in investing.