Randomly Noted

This summer we’ve learned quite a lot about the cost of doing business in China, thanks to the Rio Tinto case, and the Green Dam web-filtering software fracas. Today, we were reminded of something we already knew: that foreign firms which want to  do business in China usually, if not always, have to go through some sort of Chinese entity. What happened today is the World Trade Organization ruled against China for forcing U.S. media producers to route their business in China through Chinese state-owned firms. This echoes last year’s settlement in which China agreed that the state-run Xinhua news agency would no longer serve as sales agent and regulator of foreign providers of financial information even as it competed against them. (Full disclosure: this case affected Dow Jones and our competitors.) All this – Rio, Green Dam, WTO, Xinhua and more – adds up to a litany of business hazards to those venturing into China. As I’ve written before, however, none of this will stop the flow of foreign firms into China. It will just make Chinese commerce costlier. Surely, CFOs and corporate risk managers ’round the world are tapping fresh figures into their calculators as they assess what it takes to compete in China circa August 2009. Low labor costs, a fast-growing economy (at an 8% annual pace despite the economic crisis), a rising middle class, vast regions populated by increasingly modern factories – it still amounts to a compelling proposition despite China’s statist, anti-WTO and anti-competitive tendencies. We should prepare for many more years of WTO cases as China, which joined the organization in 2001, clings to its practices as Beijing’s leadership weans its business and political cadres off the goodies they’ve grown accustomed to while “partnering” with foreigners. It will take many years, and certainly an economic crisis isn’t the time for the central government to deprive too many influential colleagues of their livelihoods.