Didn’t Adam Smith teach us that the other side will pursue their own self interest? For centuries, we designed complicated incentives based on this teaching. The highest form of governance, or business, is to use the invisible hand to direct wealth to the right places. People, or countries, should be selfish. That’s how it works, at least for western civilizations and MNCs (Multi-National Corporations).
James Mann, from The New Republic blog, has been surprised at how surprised western corporations were when they found out that China seems less open than 15 years ago.
The logic seems painfully obvious. China wants exactly what western countries and corporations want and had: prosperity and influence. They will make their own short- and long-term trade-offs as they see most optimal for themselves. Being open worked very well for the past 30 years, for China. It works less well now, therefore they are less open now.
China has a plan for itself. If western countries and corporations fit that plan, they will be welcome with open arms. Otherwise, not. Their policies and rules are unpredictable only to those blind to this simple logic.
For MNCs, there are only two viable China strategies. The short-term strategy is to exploit whatever natural resources and profit from them. The natural resources of interest are mainly the cheap labor, cheap land, and the lenient environmental laws. MNCs should exit whenever those natural resources become expensive, or inconvenient. (It is curious for me to observe that people will protest that China is polluting the world while shopping at WalMart, Target, or Sears.)
The long-term strategy is to treat China as a market and try to sell into it. Since the fundamental concept is trading, the transactions must have sufficient incentives to both sides. Clearly western corporations want profits. If China wants the same, then we have a built-in zero-sum conflict. China side will tolerate an in-balance for the short-term, but will eventually reverse it.
So the secret to the success is really quite simple. Answer the question, “What’s in for China?”