Beijing holds all the cards

GOOGLE'S threat to withdraw from China, on grounds that it has been the object of cyber attacks and censorship, is not the opening salvo in a battle between the future and the past. Rather, it is a battle between two equally plausible visions of the future with initial advantage on the side of China.

In attacking Google, China comes across to many Americans and Europeans as King Canute, trying to hold back the tides of progress. From Beijing, things look much different.

To China's officials, the future may be about continuing to lift hundreds of millions of people out of poverty, facilitating the rise of a rapidly growing middle class, and providing a major boost to world trade. In their eyes, an uncontrolled Internet is a threat to national stability.

Indeed, it seems imperative to ensure the survival of the government that rescued a nation from the devastation and misery of Mao Zedong's failed Communist Revolution. Chinese officials no doubt look at the way America's financial system imploded, its deteriorating physical infrastructure, and its problem-plagued system of secondary education, and conclude that the West no longer has the standing to define where civilisation ought to be heading.

Globalisation could be slowing down now. The internationalisation of banking may experience some obstacles in the wake of the world-wide credit crisis, as many international financial institutions are compelled to stay closer to home. The recent fiasco in Copenhagen has set back prospects for serious cross-border cooperation on climate change. Global trade negotiations have been moribund for several years, and after a half-century of leading the charge for freer trade, Washington is virtually silent on the subject.

It has been an article of faith among most American leaders in government, finance and business that economic engagement with China will slowly, but inexorably, bend China's society towards Western values such as the rule of law and free expression. For almost three decades, the essence of that involvement has been penetration into China by international companies such as Google. Multinationals have brought Western-style change in other parts of Asia - think about Japan, South Korea, Taiwan - so why not the Middle Kingdom? Surely, so the reasoning also goes, all those Chinese employees of Western firms and all those Chinese students returning from US schools will exert a powerful Western influence, too.

However, for centuries, the West has always failed to make the kind of inroads it expected. It's not that the Middle Kingdom doesn't incorporate foreign ideas, but that it does so in ways that suit its own needs, its own timing, and within the framework of its own culture and national priorities. What Yale historian Jonathan Spence once wrote some 40 years ago about the efforts of Western advisers in China between 1625 and 1960 is still true: 'China, which once surpassed the West, then almost succumbed, now offers to the world her own solutions.'

The two visions of the future - openness, globalisation, Westernisation on the one hand, versus controls, nationalism and far less Anglo-American influence on the other - must be seen in the context of certain political realities that make China's perspective far more viable than most Westerners like to admit.

First, Washington's soaring debts and increasing reliance on loans and investments from China, plus its need for Beijing's help when it comes to preventing nuclear proliferation in Iran and North Korea, tie its hands in providing sustained and high-profile support for one of its great companies.

It is also a good bet that many governments who are beholden to Beijing will hold their tongues, and that a number of them - such as Russia, Saudi Arabia, Iran, Venezuela and Vietnam, plus many dozens of authoritarian governments throughout the former Soviet Union and Africa that fear the power of the Internet to be a subversive force - are rooting for Beijing.

Not only does Beijing hold all the cards, but also it could actually reinforce its authority and enhance its standing among many countries of the world by humbling Google.

Nor can Google expect very much support from other Western companies, almost none of which would risk their prospects in China's rapidly growing market by offending Beijing.

Finally, compared to the 1980s and 1990s, the lustre and clout of Western multinationals have been vastly reduced, their reputations soiled by the Enrons and AIGs. Beyond that, emerging markets are producing their own corporate champions which are providing ferocious competition to their developed nation counterparts, and in many cases being savvier about serving their own populations.

Long term, I'd say we'll end up with less openness and globalisation because, in addition to China's having the political winds in its sails, other issues such as concerns over privacy and the need to combat terrorist threats against critical cyber networks will slow down the expansion of an open, unregulated Internet.

Nevertheless, we will see more freedom than China is currently willing to allow, because China's domestic Internet system is expanding so quickly and becoming so vibrant.

Ultimately, its tens of millions of tech-savvy inquisitive minds will have the ability and the compulsion to scale any firewalls the Chinese authorities erect.

Many already do.

Jeffrey Garten is the Juan Trippe professor of international trade and finance at the Yale School of Management. He was Undersecretary of Commerce for International Trade in the first Clinton administration and a managing director of The Blackstone Group.

YALEGLOBAL ONLINE

Source: Straits Times, 28 Jan 2010.