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Google's Decision Highlights the Dangers of Doing Business in China

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Message James Stafford

The ramifications of Google's decision to leave China are deep: China's leadership, be careful what you wish for.

I have been a student of China for 40 years. Alas, no, I did not learn Mandarin. When I started reading about China in 1969, and taking university courses on its culture and history in 1972, the Cultural Revolution was in full swing. The People's Republic was locked down; other than a trickle of black-market trading with Hong Kong, nobody was allowed in or out. No young person today, Chinese or American, can even imagine conditions in that distant, bleak time.

In essence, China's leadership sacrificed two generations in the Cultural Revolution. It imprisoned, tortured, killed, banished, placed under house arrest, etc., the most experienced leaders of its society below the secretive high reaches of the CCP (Chinese Communist Party) and Mao's inner circle.

Due to our large number of Chinese friends, we know several utterly harmless, apolitical men who were imprisoned during the Cultural Revolution. One was actually an officer in the People's Liberation Army. Yes, even the military was purged.

By destroying its educational system, China also sacrificed the upcoming generation. Though few ever voice it, there remains a deep bitterness amongst those who were denied an education and thus a foothold in a better life. After the madness of the Cultural Revolution finally ended with the death of Mao and the coup deposing The Gang of Four (circa 1976-77), then the generation of youth who came of age in Deng's era of reform starting in 1978 were awarded opportunities lost to their older peers.

I preface my entry with this brief history to show how far China has come in the past 30 years. The young people we know (teens and 20-somethings) show little to no awareness (or interest) in the Cultural Revolution. This is understandable; that era might as well be ancient history to youth concerned with getting their place at the exciting banquet of opportunities now available.

China remains a velvet-gloved dictatorship. If you work within the boundaries set for acceptable behavior and thinking, you will be left alone or perhaps followed/tracked but not openly harassed. But if you step over that boundary by embarrassing the Central State, by questioning its authority or its prosecution of policy and laws, then you will disappear or be driven into exile.

Chinese Dissident Lawyer Convicted of Subversion The whereabouts of Gao Zhisheng, who had carved out an international reputation for taking on controversial legal cases, such as government land seizures, has been the subject of intense speculation since he disappeared last year.

In essence, Google questioned the status quo too directly, and so it has been silenced by being driven into exile. To do anything other than exile Google would have caused the Central Government to lose face, which is a humiliation which must not be allowed.

There are two keys to understanding the nuances and apparent contradictions in Chinese policy and actions. One is the absolute importance of "face." Face must be saved; any perceived slight or humiliation will be countered forcefully lest face be lost. This is a pan-Asian cultural trait which Westerners often fail to understand in full measure. If you don't understand "face" then you will fail to understand Asia.

General Douglas MacArthur's nuanced arrangements for the unconditional surrender of Japan in World War II provide a good example. Many felt that Japan's Emperor should be hung as a war criminal, and indeed it seems Emperor Hirohito expected this himself. But MacArthur felt that might unleash an unwelcome turmoil in Japan, right when the U.S. was fending off Soviet demands for the northern half of Japan (due to their extraordinary efforts in the the last week of the war, when they formally declared war on Japan).

So instead he had the Emperor address the Japanese people in a radio broadcast. The citizenry had never heard their Emperor's voice before, and so this simple act was a revelation of vast consequence. Next, MacArthur released one photo of himself standing next to the diminutive, formally attired Emperor. MacArthur was a tall man, and he wore his U.S. Army uniform (not dress uniform) and a grave expression.

The message was clear to the Japanese people: MacArthur was in charge but had avoided humiliating their Emperor. The occupation of Japan, a fanatical enemy which had fully embraced mass-suicide attacks on U.S. ships and troops, went smoothly.

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I have an interest in the financial markets, commodities and Geopolitics.
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