Last month I wrote about the Year of the Tiger, with its characteristics of bravery, competitiveness and npredictability. It seems to me that a lot of global and Chinese political leaders are sitting on the backs of tigers now, looking brave, but not sure how they can dismount from that precarious position. China takes one global media hit after another, and OECD country leaders are puzzled about the "New China". Most observers would describe it as assertive, robust and even arrogant. These are attributes that most old China hands like me find hard to reconcile with what we know about China. However, times are changing and the resulting global tensions are palpable, as evidenced by recent events.
In late 2009, summits between the US and China, and the EU and China, were not concluded on good terms. Likewise, the Copenhagen Climate Change Conference disaster saw the US and China as winners in the race to the bottom while the EU was sidelined. In the end, China saw itself as a victim of global conspiracy. Furthermore, a "Notice on Accreditation of Indigenous Innovation Product for 2009 (Notice No. 618)", was recently promulgated, stipulating that only products containing Chinese proprietary intellectual property would be eligible for government procurement. The EUCCC wrote a letter to all three ministers asking for clarification in response.
EU companies are additionally concerned by the approaching May deadline of the Office of Security Commercial Code Administration Regulation on Encryption (Directive No. 273) which defines import, export, production and use of encryption in China. If the law is enforced, commercial products containing encryption will have to be certified through Chinese laboratories rather than by independent test labs. And of course, we cannot overlook Google's allegations that it was the victim of cyber espionage by Chinese hackers.
All in all, these recent concerns do not paint a rosy picture. The coming year does not look very promising, either. Against the backdrop of a recovering global economy and increasing unemployment in OECD countries, mid-term elections in the US could easily turn into a China-bashing exercise.
Still, it seems unlikely that China will change its tune. With unparalleled 8.7 percent GDP growth in 2009, the country's self-esteem is sky-high. Certainly Chinese leaders are nervous about inflation, an increase of NPLs and more protectionism targeting their exports. But overall, the opinion is that the "Beijing Consensus" beat the "Washington Consensus".
I agree with Jonathan Fenby that the Chinese leadership's priority of sustaining growth at 8 percent to pull the country out of the downturn means postponing difficult decisions on structural reforms as Hu Jintao and his colleagues try to muddle through to the end of their current terms in 2012. I understand EU leaders' uncertainty in dealing with a China that has been catapulted into the global arena. Western economies and self-confidence collapsed while China celebrated the 2008 Olympics and held a 60th-anniversary party with major military hardware driving down Chang'an Jie in perfect weather. Beijing prevented its economy from sinking and secured tens of millions of jobs within months.
Deng's doctrine to "lay low in international affairs" is impossible to follow while the world sinks and envies China's economic data. I am sure Beijing is full of conspiracy theories on how the West is trying to reverse that trend.
However, I was delighted to read a letter from the Ministry of Science and Technology in February 2010 in which Minister Wan Gang says: "Indigenous innovation product accreditation is not directly connected to government procurement. Products that are not 'subject to foreign restriction and restraint' in Notice 618 refer to those that indeed possess intellectual property rights and trademarks; and the term is not a discriminatory condition against foreign-capital enterprises."
That statement gives us hope. The EUCCC will continue to monitor the development in Notice 618 and engage in constructive discussions with the Chinese leadership. We will try to bring only facts and figures to the table in these testing times.
