Many U.S. business standouts on today's newly released Forbes 400 list such as Bill Gates’
Q. Some standout members of our new Forbes 400 list of the richest Americans have been facing a tough year in China. What’s behind that?
A. A lot of them are still successful. For a majority, I would say being successful is harder. The degree to which you can be successful in profits and growth is coming down from the stratosphere in the past to much more of a normal level.
There are two reasons for that. One, you have a slowdown in the Chinese economy. It hasn’t really picked up as in did in 2009 after the financial crisis then. You also have a lot more stronger players in China as well as foreign competition. So the landscape is much tougher than before. The landscape also varies industry by industry.
Q. We have founders of Google and other top U.S. Internet companies such as Facebook on our list whose business has been limited by China barriers. That’s of course an ongoing area of trouble for U.S. companies looking to get in. Is there any sign of easing by China?
A. I don’t think so. The Internet and IT in general is shaped by national security concerns. iPhone6 (sales restrictions are) one example of hypersensitivity about security. Cisco is also having troubles these days in China also. This reflects that China, for national security reasons and in order to capture more of that market internationally, is going to be slow to give up space to foreigners.
Q. Microsoft –led by our No. 1 Bill Gates -- has also faced an anti-monopoly an investigation in China. How much of that involves monopolist practices by global standards, and how much of it is just harassment of foreign companies?
A. In my own discussions with lawyers and others, the consensus view seems to be that China isn’t applying the law the way it is applied internationally. So they’re not following best practices in terms of what monopolistic price setting would look like.
The most common explanation is that it is another tool of industrial policy, where they use the anti-monopoly law to push particular industrial policy objectives. Or that they are trying to appease domestic consumers. As
Ken Jarrett, president of the American Chamber of Commerce in Shanghai, says U.S. businesses "are... [+]
the middle class travels more internationally, they have a better sense of what that same product costs overseas versus what they have to pay here in China. They’re upset when it’s higher. They government doesn’t want to explain that some of the reasons why that product might cost more, such as taxes, embedded in the price. It is easier for them to put press on foreign suppliers to bring prices down. There is also the possibility that the NDRC (National Development and Reform Commission), in order to justify its existence, has latched on to anti-trust as an issue. They feel that will give them an extension of their shelf-life. They have expanded the NDRC a lot of the last couple of years. It seems like this came out of the blue but the NDRC has been working toward this for a period of time.
Q. In the news industry, we have prominent figures on our list such as Mike Bloomberg, whose business has also faced restrictions here. Any hope for improvement on restrictions in the news industry affecting foreign companies?
A. I don’t think in a meaningful way. The senior leadership in Beijing has anxiety about maintaining control and stability. This runs as strong as even. There is nothing actually in the first two years of Xi Jinping’s tenure that suggest this is an area where he’s going to be more liberal.
Q. How about restrictions on U.S. entertainment industry content? Movie industry successes like Steven Spielberg made this year’s list. What’s ahead for restrictions on distribution of U.S. movies?
A. It seems that for American film makers, the strategy of choice is just to partner and produce here in China to get around the quota on imported films. The fact that Kung Fu Panda 3 (from DreamWorks) is being largely done in China an example of that.
There has been a tightening up of movies that can be shown on web services. That wasn’t driven by intellectual property type of concerns. It was more driven by anxiety about culture wars and the perceived pernicious influence of Western culture, which has been true in China since ’49.
Q. What types of U.S. companies are doing well?
A. The auto sector is doing well. Healthcare companies – both pharma and devices – are going well. And healthcare services are expanding. They have eased on restrictions on foreign investors. Those are two quick examples.
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