Reviews | Businesses must do their part to preserve democracy
To avoid being further penalized, foreign companies that expand in China tend not to speak out against the unfair regulatory treatment they face. This benefits China, as it is difficult for companies to prevent their technology and trade secrets from being hijacked or extracted through soft coercion if they do not publicly discuss the regulatory challenges they face. Short-term profits are the bribe that China pays to convince foreign companies to transfer their technology and capabilities.
But it’s not just the Chinese Communist Party that is at fault. The managers and board members of some American, British and European companies have a short-term vision and authorize the transfer (by subsidy, sale or theft) of technology. Business leaders also cut funding for research and development when activist shareholders show up at their doors. These companies could also spend so much on large share buybacks that they find it difficult to invest for the future.
Such financial decisions undermine leadership and stewardship, as well as social and political responsibility. This behavior needs to be addressed by corporate leadership, not just governments.
Boards and leaders must speak out and act with a higher purpose, even as Chinese authorities impose short-term costs and implicit sanctions. Many problems are existential because they impact not only on international affairs, but on democracy itself.
Weak economies and job losses resulting from the lapse of technological leadership have serious political and social implications. The diminishing economic prowess of business in liberal democracies has ramifications that extend from national and international security, to the survival of the global economic good itself.
But it is important to note that the Chinese people are not the enemy. It is the Chinese Communist Party that has become the enemy of democracy by aggressively positioning China as a strategic rival of the United States, Europe and Japan.
Yet multinational corporations cannot, and must not, completely decouple from China; there is simply too much to be gained, for both parties. Multinationals are expected to continue to trade with China in many categories, including some high-tech products, but they need to engage with their eyes wide open. Unilateral efforts to deny China access to advanced products will rarely work in the long term, hence the need for international collaboration in research and technological development.