6 ms·

Western firms kowtow to China's increasing economic clout

118 points by everybodyknows 7y ago

htfu 7y ago
"Forced to", "had to" doesn't strike me as appropriate language. These are choices - some in reaction to threats or bans but many entirely speculative/pre-emptive.
- blueboo 7y ago
  Publicly shared companies have a legal obligation to make money for their shareholders. If a stakeholder in a major market can influence whether or not these companies can make their revenue forecast (and therefore making institutional investors' pensions solvent and individuals' mortgage payments payable) then yes, they can force such companies to capitulate to them. The third forcing function to reckon with -- the moral duty to uphold Western countries' increasingly nebulous, compromised values -- has barely any leverage in this equation. What is a responsible, law-abiding executive supposed to do?...
  - axaxs 7y ago
    This is often repeated, in part because of some dubious behavior between Ford and the Dodge brothers, but not precisely true. "modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not do so." See: https://www.lawschool.cornell.edu/academics/clarke_business_law_institute/corporations-and-society/Common-Misunderstandings-About-Corporations.cfm https://www.lawschool.cornell.edu/academics/clarke_business_... and the linked Hobby Lobby case opinion.
    - blueboo 7y ago
      Hair-splitting. The obligation is enshrined in law. Shareholders invoke it. The consequences are a change in leadership, not jail. To quote the linked opinion: > In nearly all legal jurisdictions, disinterested and informed directors have the discretion to act in what they believe to be the interest of the business corporate entity, even if this differs from maximizing profits for present shareholders. This is a perfect example. Western companies are antagonizing their US market in favor of developing a future Chinese one.
      - axaxs 7y ago
        It's not, though. To counter your original point, a corporation could decide to not appease China, even if it means a loss in profits. They could justify it any number of ways, saying the US market may be more valuable to their company, or that trade tensions with China make things unstable. There is no legal basis forcing companies to appease China.
        jjeaff 7y ago
        Exactly. And even if there was a legal obligation to make money at all costs, it could easily be argued that kowtowing to China is a short term strategy with severe long term consequences. You might make more money now, but that will be negated when they steal your IP and the government siezes your property.
  - ineedasername 7y ago
    No, companies are not legally required to maximize profits, and certainly not through every available method. Shareholders might disagree with a less profitable decision, and shareholders may band together to force different actions, but this is a matter of corporate governance, not legal mandate. There are in fact for-profit "benefit corporations" whose explicit goal is something other than shareholder profitability. Even if your claims was correct, it wouldn't mean companies had to give in to China's demands. They might reasonably argue that it benefited short term profitability at the cost of long term profitability or even the viability of the business itself. In short, companies have plenty of legal leeway in determining their actions without profit being the sole motivator.
  - jrd259 7y ago
    Downvoters: blueboo's post violates no rules. If you disagree with him, refute him, don't simply downvote.
    - jjeaff 7y ago
      That's not how down voting is supposed to work on hn. The rules explicitly permit downvoting if you disagree. They do, however prohibit complaining about downvotes.
  - htfu 7y ago
    You're misreading me. Folding in the face of an ultimatum is disappointing but hardly unexpected, and "force" mostly makes sense as a description for it. Pressured or compelled (although almost the same) would seem a bit more apt maybe, but I'm not that picky. My actual point was that angry noise in People's Daily isn't a concrete demand and cannot be said to have "forced" a company the size of Apple. China's end goal (and the real danger here) being implicit threats and vaguely defined often shifting red lines, with an unpredictable severity of response, scaring most to not just reign in everything possibly controversial before anything's even happened, but do it twice as hard just to be safe.
AndyMcConachie 7y ago
Alternative title. People who want to make money kowtow to the opinions of people with money to give them.
- mac01021 7y ago
  Sort of, but in this case circumstances are somewhat complicated by the PRC's authoritarian government which is prepared to deny market access for political reasons. So it's not the opinions if the people with money to give that are at issue here but the opinions of the gatekeeper, which actually is a remarkable phenomenon.
  - PeterStuer 7y ago
    "prepared to deny market access for political reasons" sounds like some other Western superpower I regularly read about in the news.
  - 627467 7y ago
    Was China less authoritarian in the 80s and 90s when mass manufacturing migration between West and East started? The West gave China the capital they are now using. Soft and hard capital and power. It seems cheaper to fight media-propaganda proxy wars than actually do anything about it - as in, promote reversals on this manufacturing divestment.
    - CharlesColeman 7y ago
      > Was China less authoritarian in the 80s and 90s when mass manufacturing migration between West and East started? No, but back then many people assumed trade would liberalize China. Turns out they were wrong, at least for the foreseeable future.
- goatinaboat 7y ago
  People who want to make money kowtow to the opinions of people with money to give them It is always the same story with China, that billion-consumer market is dangled like a carrot, if only you hand over all your IP to a local partner was the first demand, and now, if you act as a mouthpiece for the CCP in your home country is the second, I don't know if there will be a third, but the end result is the same, you will never get direct access to those billion consumers. Never. There is one positive outcome however which is that American companies are very quick to latch onto the flag when it suits their marketing purposes, this will shake that out of the market for sure.
faitswulff 7y ago
While the post goes over a few instances of companies that have acquiesced to China's political views, this reddit post has a much larger list: https://www.reddit.com/r/HongKong/comments/dfg1ce/list_of_companies_under_chinas_censorship_orders/ https://www.reddit.com/r/HongKong/comments/dfg1ce/list_of_co...
- jammygit 7y ago
  I found this [1] list also, although this reddit post seems to have more information. I especially like how this reddit post includes updates and companies who made good choices like red bull [1] https://github.com/caffeine-overload/bandinchina/blob/master/README.md https://github.com/caffeine-overload/bandinchina/blob/master...
- yegle 7y ago
  It's like an improved Soviet joke: American: in our country we have the freedom of criticizing our president Chinese: we sure have the freedom to criticize your president American: no no I mean you need to have the freedom to criticize your president Chinese: we can't, but can you? American: well...
devoply 7y ago
Looks like though this is the future. It's Capitalism where you love a product, say freedom of speech or democracy, but the company that supplies it gets bought out. And now you can't get that product anymore because it's not a part of the new company's corporate strategy. It's the same thing really. All these companies get bought out by the Chinese. Same thing goes for natural resources and the environment. They are just being bought out. Get things you need while supplies last. It would be interesting to see Trump pass a law prohibiting any US company from doing this... from stiffing freedom of speech to support China.
- el_cujo 7y ago
  I'm not a huge fan of capitalism, but it's a bit of a stretch to call this situation a failure of capitalism when the whole debacle exists because the Chinese government is making demands of Apple, which is not very capitalist. It doesn't really make sense to attack the ideology using an example where the ideology isn't really in practice, unless your point is that capitalism fails because it isn't flexible enough to work in a world where it does not reach 100% adoption. If so, fair enough, but I think that same criticism applies to every other economic system.
  - devoply 7y ago
    What if on the other hand this is the fundamental aspect of Capitalism... Where the people with capital are always telling other people who might want access to whatever they are holding, money, markets, production, whatever, that if they don't kowtow they won't do business with them. And no one talks about it, just like no one talked about all the Chinese hacking so as not to ruin their reputation and anger China.
    - luckylion 7y ago
      First of all, it's not a capitalism-issue. Pre-capitalism, any smith could've told you to take your horse elsewhere if they didn't like you. > just like no one talked about all the Chinese hacking so as not to ruin their reputation and anger China. I feel like that's a bubble issue. I'm not particularly interested in the latest "China hacks XYZ" stories and I see them all the time. If you have the impression that nobody talks about them, I think you might need to read more main stream news, they do get a lot of play.
mensetmanusman 7y ago
I wonder if this will stop western firms from taking any political stances in the west, because right now the optics are... interesting to say the least.
- nine_k 7y ago
  Only taking the already prevailing political stance is safe, and has always been. Free speech being seen increasingly less valuable than other things (fairness, care for the unprivileged, social peace, etc, depending on your country), and the ease of raising massive furor in social media, I suppose firms will firmly stay away from taking any political stance, except pleading allegiance to the currently prevailing view.
chank 7y ago
Economic clout or greed? "We've pretty much saturated western markets and China is the only market left to make more money even though we're doing just fine"? Pretty much all of the companies bending the knee don't need the money.
WomanCanCode 7y ago
I understand that companies need to do everything in their power to maximize profits. However, we as concerned citizens should also not 'enrich' these companies by continuously supporting them. We are simply lucky that we are living in a relatively free world when so many are not.
braindongle 7y ago
The Great and Wise Randy Marsh has said all that needs to be said about this. https://www.facebook.com/southpark/photos/a.412559132004/10156698439247005/?type=3&theater https://www.facebook.com/southpark/photos/a.412559132004/101...

htfu 7y ago

"Forced to", "had to" doesn't strike me as appropriate language. These are choices - some in reaction to threats or bans but many entirely speculative/pre-emptive.

blueboo 7y ago
Publicly shared companies have a legal obligation to make money for their shareholders. If a stakeholder in a major market can influence whether or not these companies can make their revenue forecast (and therefore making institutional investors' pensions solvent and individuals' mortgage payments payable) then yes, they can force such companies to capitulate to them. The third forcing function to reckon with -- the moral duty to uphold Western countries' increasingly nebulous, compromised values -- has barely any leverage in this equation. What is a responsible, law-abiding executive supposed to do?...
- axaxs 7y ago
  This is often repeated, in part because of some dubious behavior between Ford and the Dodge brothers, but not precisely true. "modern corporate law does not require for-profit corporations to pursue profit at the expense of everything else, and many do not do so." See: https://www.lawschool.cornell.edu/academics/clarke_business_law_institute/corporations-and-society/Common-Misunderstandings-About-Corporations.cfm https://www.lawschool.cornell.edu/academics/clarke_business_... and the linked Hobby Lobby case opinion.
  - blueboo 7y ago
    Hair-splitting. The obligation is enshrined in law. Shareholders invoke it. The consequences are a change in leadership, not jail. To quote the linked opinion: > In nearly all legal jurisdictions, disinterested and informed directors have the discretion to act in what they believe to be the interest of the business corporate entity, even if this differs from maximizing profits for present shareholders. This is a perfect example. Western companies are antagonizing their US market in favor of developing a future Chinese one.
    - axaxs 7y ago
      It's not, though. To counter your original point, a corporation could decide to not appease China, even if it means a loss in profits. They could justify it any number of ways, saying the US market may be more valuable to their company, or that trade tensions with China make things unstable. There is no legal basis forcing companies to appease China.
      - jjeaff 7y ago
        Exactly. And even if there was a legal obligation to make money at all costs, it could easily be argued that kowtowing to China is a short term strategy with severe long term consequences. You might make more money now, but that will be negated when they steal your IP and the government siezes your property.
- ineedasername 7y ago
  No, companies are not legally required to maximize profits, and certainly not through every available method. Shareholders might disagree with a less profitable decision, and shareholders may band together to force different actions, but this is a matter of corporate governance, not legal mandate. There are in fact for-profit "benefit corporations" whose explicit goal is something other than shareholder profitability. Even if your claims was correct, it wouldn't mean companies had to give in to China's demands. They might reasonably argue that it benefited short term profitability at the cost of long term profitability or even the viability of the business itself. In short, companies have plenty of legal leeway in determining their actions without profit being the sole motivator.
- jrd259 7y ago
  Downvoters: blueboo's post violates no rules. If you disagree with him, refute him, don't simply downvote.
  - jjeaff 7y ago
    That's not how down voting is supposed to work on hn. The rules explicitly permit downvoting if you disagree. They do, however prohibit complaining about downvotes.
- htfu 7y ago
  You're misreading me. Folding in the face of an ultimatum is disappointing but hardly unexpected, and "force" mostly makes sense as a description for it. Pressured or compelled (although almost the same) would seem a bit more apt maybe, but I'm not that picky. My actual point was that angry noise in People's Daily isn't a concrete demand and cannot be said to have "forced" a company the size of Apple. China's end goal (and the real danger here) being implicit threats and vaguely defined often shifting red lines, with an unpredictable severity of response, scaring most to not just reign in everything possibly controversial before anything's even happened, but do it twice as hard just to be safe.

AndyMcConachie 7y ago

Alternative title. People who want to make money kowtow to the opinions of people with money to give them.

mac01021 7y ago
Sort of, but in this case circumstances are somewhat complicated by the PRC's authoritarian government which is prepared to deny market access for political reasons. So it's not the opinions if the people with money to give that are at issue here but the opinions of the gatekeeper, which actually is a remarkable phenomenon.
- PeterStuer 7y ago
  "prepared to deny market access for political reasons" sounds like some other Western superpower I regularly read about in the news.
- 627467 7y ago
  Was China less authoritarian in the 80s and 90s when mass manufacturing migration between West and East started? The West gave China the capital they are now using. Soft and hard capital and power. It seems cheaper to fight media-propaganda proxy wars than actually do anything about it - as in, promote reversals on this manufacturing divestment.
  - CharlesColeman 7y ago
    > Was China less authoritarian in the 80s and 90s when mass manufacturing migration between West and East started? No, but back then many people assumed trade would liberalize China. Turns out they were wrong, at least for the foreseeable future.
goatinaboat 7y ago
People who want to make money kowtow to the opinions of people with money to give them It is always the same story with China, that billion-consumer market is dangled like a carrot, if only you hand over all your IP to a local partner was the first demand, and now, if you act as a mouthpiece for the CCP in your home country is the second, I don't know if there will be a third, but the end result is the same, you will never get direct access to those billion consumers. Never. There is one positive outcome however which is that American companies are very quick to latch onto the flag when it suits their marketing purposes, this will shake that out of the market for sure.

faitswulff 7y ago

While the post goes over a few instances of companies that have acquiesced to China's political views, this reddit post has a much larger list: https://www.reddit.com/r/HongKong/comments/dfg1ce/list_of_companies_under_chinas_censorship_orders/ https://www.reddit.com/r/HongKong/comments/dfg1ce/list_of_co...

jammygit 7y ago
I found this [1] list also, although this reddit post seems to have more information. I especially like how this reddit post includes updates and companies who made good choices like red bull [1] https://github.com/caffeine-overload/bandinchina/blob/master/README.md https://github.com/caffeine-overload/bandinchina/blob/master...
yegle 7y ago
It's like an improved Soviet joke: American: in our country we have the freedom of criticizing our president Chinese: we sure have the freedom to criticize your president American: no no I mean you need to have the freedom to criticize your president Chinese: we can't, but can you? American: well...

devoply 7y ago

Looks like though this is the future. It's Capitalism where you love a product, say freedom of speech or democracy, but the company that supplies it gets bought out. And now you can't get that product anymore because it's not a part of the new company's corporate strategy. It's the same thing really. All these companies get bought out by the Chinese. Same thing goes for natural resources and the environment. They are just being bought out. Get things you need while supplies last. It would be interesting to see Trump pass a law prohibiting any US company from doing this... from stiffing freedom of speech to support China.

el_cujo 7y ago
I'm not a huge fan of capitalism, but it's a bit of a stretch to call this situation a failure of capitalism when the whole debacle exists because the Chinese government is making demands of Apple, which is not very capitalist. It doesn't really make sense to attack the ideology using an example where the ideology isn't really in practice, unless your point is that capitalism fails because it isn't flexible enough to work in a world where it does not reach 100% adoption. If so, fair enough, but I think that same criticism applies to every other economic system.
- devoply 7y ago
  What if on the other hand this is the fundamental aspect of Capitalism... Where the people with capital are always telling other people who might want access to whatever they are holding, money, markets, production, whatever, that if they don't kowtow they won't do business with them. And no one talks about it, just like no one talked about all the Chinese hacking so as not to ruin their reputation and anger China.
  - luckylion 7y ago
    First of all, it's not a capitalism-issue. Pre-capitalism, any smith could've told you to take your horse elsewhere if they didn't like you. > just like no one talked about all the Chinese hacking so as not to ruin their reputation and anger China. I feel like that's a bubble issue. I'm not particularly interested in the latest "China hacks XYZ" stories and I see them all the time. If you have the impression that nobody talks about them, I think you might need to read more main stream news, they do get a lot of play.

mensetmanusman 7y ago

I wonder if this will stop western firms from taking any political stances in the west, because right now the optics are... interesting to say the least.

nine_k 7y ago
Only taking the already prevailing political stance is safe, and has always been. Free speech being seen increasingly less valuable than other things (fairness, care for the unprivileged, social peace, etc, depending on your country), and the ease of raising massive furor in social media, I suppose firms will firmly stay away from taking any political stance, except pleading allegiance to the currently prevailing view.

chank 7y ago

Economic clout or greed? "We've pretty much saturated western markets and China is the only market left to make more money even though we're doing just fine"? Pretty much all of the companies bending the knee don't need the money.

WomanCanCode 7y ago

I understand that companies need to do everything in their power to maximize profits. However, we as concerned citizens should also not 'enrich' these companies by continuously supporting them. We are simply lucky that we are living in a relatively free world when so many are not.

braindongle 7y ago

The Great and Wise Randy Marsh has said all that needs to be said about this. https://www.facebook.com/southpark/photos/a.412559132004/10156698439247005/?type=3&theater https://www.facebook.com/southpark/photos/a.412559132004/101...