SHANGHAI: Judged by recent standards, Marriott International Inc.’s corporate apology in China was particularly abject.
The hotel chain had implied in a marketing survey that Taiwan is a separate country, along with Hong Kong, Macau and Tibet. Though not altogether inaccurate—Taiwan has most attributes of statehood, including fixed borders, an army to defend those borders and a smoothly functioning democracy—it is heresy to say so. Beijing was incensed. Marriott kowtowed.
What else could it do?
A prickly nationalism has long been a hazard for foreign investors in China, and Marriott has aggressive expansion plans in the country. Beijing is adding demands for political correctness; the Communist Party is on a drive to set up cells in foreign businesses.
ore to the point, Chinese authorities take the view that when you own the world’s fastest growing markets—as China does in travel, as well as autos, smartphones and IT software—you set the terms of economic engagement. Marriott has joined a growing list of multinationals that have accommodated themselves not just to China’s increasingly onerous market regulation but its political sensitivities, too.
A number of Western academic publishers and internet companies have started censoring in China. Apple Inc. pulled apps from its store that enable Chinese users to circumvent the Great Firewall.
Many in the West thought it would be the other way around.
As China grew, they reckoned, its commercial standards and political values would gradually converge with their own. Wasn’t that the unspoken deal when China joined the World Trade Organization in 2001?
If it was, the bargain is dead. Savvier foreign companies in China have understood this for a while. More recently, Western governments have had a similar epiphany.
Last week’s report from the U.S. Trade Representative’s office decrying the U.S. decision to welcome China into the WTO as a mistake reflects a pessimistic view taking hold more broadly in Western capitals that China has no intention of integrating with a free market global trading system.
The report errs in one important respect: The hope that WTO membership would propel China faster along a liberal track was supported by powerful trends at the time. “This was not deluded,” argues Daniel Rosen, an economist who worked on China’s WTO entry in Bill Clinton’s White House. “China was converging, to an extraordinary degree,” he writes, listing the withdrawal of the state from the economy, the rise of a private sector and a welcome mat that Beijing was rolling out for foreign investors.
Here’s what actually happened: China changed course.
The state made an about-face; government enterprises are marching again to the drumbeat of industrial policy. Private enterprise is on the defensive. Foreign investors are treated with growing intolerance.
The transformation has gathered pace under President Xi Jinping. From the vantage point of the Chinese leadership in Beijing, U.S. capitalism and democracy are digging their own graves, while Donald Trump is trashing America’s global reputation. A recent Gallup poll shows U.S. leadership approval ratings around the world plunging to about the same level as China’s.
Mr. Xi sees a historic opportunity to ditch the U.S. template and advance the Chinese development model as a credible alternative. His signature Belt and Road initiative to join East Asia and Europe with transport and energy infrastructure is a sign of confidence that China has the ability to reshape the global trade and investment environment.
The capitalist system “is rife with abuse,” a People’s Daily editorial opined. “A new international order is waiting to spring forth.”
The world’s second largest economy, soon to be the biggest, is moving along on a different track entirely.
The dream of convergence is over; Robert Lighthizer, the hawkish U.S. trade representative, no longer bothers to try to negotiate market-opening concessions from China. His report reflects a conviction that the two economies are now fundamentally divergent—essentially playing by a different set of rules, one open, the other neo-mercantilist.
This week’s announcement of tariffs and quotas on U.S. imports of solar panels and washing machines marks the start of an effort by Mr. Lighthizer to focus on trade enforcement rather than compromise. This isn’t bluster, as some still think; it represents a profound shift. China and the U.S. are on a collision course.
Marriott and other multinationals in China will be caught in the middle. A similar Taiwan gaffe also caught out Delta Air Lines Inc., Medtronic PLC and Zara. All had to grovel.
Shanghai authorities forced the Marriott to take down its Chinese website for a week. “This is a huge mistake, probably the biggest of my career,” Craig S. Smith, the group’s Asia-Pacific president, told the China Daily.
Borrowing language directly from the Maoist lexicon, Marriott announced an eight-point “rectification plan” to avoid similar mistakes in the future, including an expansion of employee education globally. Thus Beijing’s political preferences have been internalized by the world’s largest hotel group, and in the spheres of airline travel and high-street fashion. The new Chinese-led order is already well under way. - WSJ
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