What should Western companies do when threatened by the People’s Republic of China (PRC)? Should businesses promote appeasement of the PRC, or pushback? More broadly, is there a conflict between economic interest and the national interest regarding the PRC?
These are just a few of the questions indirectly highlighted in New York Times executive editor Jill Abramson’s new book, “Merchants of Truth.” She reveals the Times’ sensitivity to upsetting the Chinese over a story Beijing deemed damaging.
The offending Times article detailed how leaders in the ruling Chinese Communist Party (CCP) and their family members amassed vast fortunes through their control over strategically important and highly lucrative sectors of the economy via a spoils system rife with bribery and other forms of corruption.
By Abramson’s account, facing pressure from Chinese officials outraged when asked for comment in advance of the story’s publication, the Times rightly published it. China pulled the story, blocked the Times’ China website, stopped issuing visas to Times reporters, and detained several staffers.
Times executives contemplated shutting the China site altogether, and later unsuccessfully pleaded with Chinese officials to reopen their site. Per a review of Abramson’s book:
[New York Times publisher Arthur] Sulzberger…traveled to China to urge government officials to reopen the site, but to no avail. And Abramson claims that Times vice chairman Michael Golden ‘wanted to close the Chinese site altogether.” When she objected, arguing that it would look like “we were bowing to the censors,’ she was ordered to cut in half the losses incurred by keeping the Chinese journalists employed while the sites were blocked…she claims she…decided to find the savings elsewhere.
Then Abramson claims that, ‘without her knowledge,’ the publisher drafted a letter with input from the Chinese embassy ‘all but apologizing’ for the original story. She brought the draft to a tense meeting with Sulzberger…When she showed him the letter, he ‘seemed startled that I had it and he kept saying, ‘I didn’t do anything wrong.’ He tried to slip the letter into his folder, but I snatched it back,’ she writes.
Of the letter, Abramson further claims Sulzberger “eventually agreed to reword it with input from her and then managing editor Dean Baquet. But for Abramson, the letter was ‘still objectionable,’ since it included language about being sorry for the ‘perception’ the story created…” According to Abramson, Sulzberger was eager to appease the Chinese government because its operation in China was at stake.
China’s efforts to stifle Western reportage are extensive, so such appeasement would not be surprising. Propagating the CCP message while suppressing anything or anyone that contradicts it and pulls the veil back on the ruling regime’s repression is a clear national effort.
This Is a Common Reaction from China
The Times disputes Abramson’s version of events, although only generally. But her account rings familiar. The Times’ alleged China browbeating is consistent with not only what its peers have experienced, but what Western companies in other industries have faced. China appears to have made a concerted effort to threaten corporations to get them to tow the CCP line, at least on matters that challenge the Chinese government narrative. Recall just a few examples from the last year.
In January 2018, Marriott International, the world’s largest hotel company, cowered at verbal attacks by Chinese government officials for having set a survey listing Taiwan, Hong Kong, Tibet, and Macau as distinct from China, and for an employee’s “like” of a tweet endorsing Tibetan independence using a corporate Twitter account.
Later, in November 2018, Marriott disclosed it was the victim of a massive hack of its Starwood reservation database, compromising the sensitive information of up to 383 million guests, including passport numbers, email addresses, and credit card data. According to reports, U.S. investigators believe the hackers were affiliated with the Chinese Ministry of State Security, its sprawling intelligence apparatus. This is not to suggest there is necessarily linkage between these events. The breach allegedly began in 2014. Marriott acquired Starwood in 2016.
Like Marriott, automaker Audi, fashion retailer Zara, and more than two-dozen other corporations faced a backlash from the Chinese government for individually listing sovereign territories that China considers its own in website dropdown menus or public presentations.
Also in 2018, Mercedes-Benz posted an anodyne quote from the Dalai Lama on Instagram: “Look at the situations from all angles, and you will become more open.” The Dalai Lama is a Tibetan leader. So, facing strong criticism from Chinese state media, Mercedes apologized, promising: “no support, assistance, aid or help to anyone who intentionally subverts or attempts to subvert China’s sovereignty and territorial integrity.”
China Is Not Just Censoring, It’s Controlling
To its credit, the Times acted in a more principled fashion, at least in running its story, than can be said for many of these other firms. Regardless, what is clear is that when Chinese President Xi Jinping’s autocracy asks Western companies to jump, the response is usually “How high?”
Increasingly, China’s demands on foreign businesses are going beyond conforming to CCP political narratives, to demanding the CCP be empowered within businesses, through mandating CCP cells be embedded within foreign businesses, and potentially granting them control over operational decisions. None of this is to mention other “costs of doing business” with the ChiComs, such as forced technology transfer and intellectual property theft to the tune of hundreds of billions of dollars per year.
When the Trump administration highlighted in its National Security Strategy that China’s story over the past half-century disproved the theory that economic liberalization would lead to political liberalization, it was right. Ironically, it appears that firms from liberal nations are acting less liberally under threat from illiberal China.
Stated differently: The Chinese are changing us more than we changed them. Meanwhile, in return for the United States giving China entrée to the global trade and financial architecture largely built and defended by us, we have turned China into a hostile, expansionist, muscular world military and economic power—one that seeks to advance its interests and exert influence while acting with wide impunity, including on our own shores.
Don’t Just Act Scared, Act Smart
Firms understand that the risk to business is acute in angering Chinese authorities. At its most benign, China might fire off a tersely worded letter from a government official, or float a critical story in the media. But given that China has been willing to orchestrate catastrophic cyberattacks, and turn foreign citizens traveling in mainland China into effective hostages through so-called “exit bans”—with the potential for even more serious threats to life and limb—one can understand the fear.
Businesses want stability. It is natural that they would support a status quo that has seen the opening of massive Chinese markets to American enterprise, with all the attendant economic benefits. Fear and greed both dictate a desire not to upset the apple cart.
This view might explain both the unwillingness of non-media companies to stand against Chinese aggression, and the intense lobbying across a variety of industries against the Trump administration’s China tariffs. It is likely not just the immediate economic impact of the limited tariffs that businesses disapprove of, but their belief that escalation could hurt their bottom lines in the medium-term.
But what of the long-term? And what of the national interest?
China Is a Grave Threat to America’s Interests
Through any of a number of core policy documents—see the National Security Strategy and National Defense Strategy), reports (see the U.S. Trade Representative’s 301 report on China and the Defense Departments Manufacturing and Industrial Base report) and public proclamations (see Vice President Mike Pence’s Hudson Institute address, Director of the White House Office of Trade and Manufacturing Policy Peter Navarro’s CSIS address on “Economic Security as National Security,” former Attorney General Jeff Sessions on the Department of Justice’s “China Economic Espionage Initiative,” National Security Advisor John Bolton’s Heritage address on the Trump administration’s “New Africa Policy,” and Secretary of State Mike Pompeo’s address on “Restoring the Role of the Nation-State in the Liberal International Order” and elsewhere)—the Trump administration has made it clear that America’s main competitor in the world is China, and that China increasingly poses a grave threat to America’s national interest requiring a comprehensive response.
This has been perhaps the most far-reaching and revolutionary policy shift under the Trump administration, although often overshadowed by the media’s narrower focus on “trade wars,” or the clash of personalities between Trump and Xi. That even the political establishment has started to come around to the Trump view that the U.S. must reorient its posture and policy towards China tells us something major has changed. But with few exceptions, the business establishment remains recalcitrant.
Businesses are often more focused on the next quarter than the next decade, and most executives likely concern themselves with the rise and fall of nations only insofar as it immediately impacts their fortunes. They should read the tea leaves and recognize that the China status quo is already starting to prove untenable.
It provides a false sense of security. Continue on this path, and Western firms may one day wake up to a world in which China has disproportionate sway over the rules of international trade, controls global ports and waterways, dominates in telecommunications, and backs these strengths with a large military equipped with nuclear and asymmetric weapons, robust information warfare capabilities, and a pervasive intelligence apparatus. Have American executives really gamed out the consequences of inaction and appeasement towards China? What evidence do they have that dovishness will bear fruit, given its history on both trade and beyond?
Businesses’ interests need not conflict with the national interest. Strong, dynamic, innovative businesses are in the national interest. The Trump administration’s policies have been geared towards juicing the U.S. economy while using tariffs as a form of leverage towards free, fair, and reciprocal trade, which would be vastly better for American businesses. But tariffs are merely one tactic in one dimension of what appears to be a multi-dimensional Trump administration effort to compete with the PRC.
The response to Chinese hostility should not be to cower, but to upend the Chinese status quo. In the face of a hostile, ascendant China that increasingly threatens America’s position in the world, businesses should get on board, or propose superior solutions. Ultimately, their interests—and the national interest—will demand it.