By Heidi N. Moore
July 2, 2010

Jeff Immelt is not alone in being frustrated about being kept on a tight leash when doing business in China. And that’s the problem.

by Heidi N. Moore, contributor

When speaking about China, many business executives have adopted a mantra: Use your inside voice.

But General Electric’s Jeff Immelt, apparently frustrated and confused by Chinese resistance, is speaking up out loud. It’s a brave move. It will remain to be seen whether it is a smart one for Immelt’s business. The Chinese government has traditionally not been warm to public criticism.

In a striking comment reported by the Financial Times at a private dinner with fellow businessmen, Immelt criticized China as being hostile to multinational companies and said “I really worry about China. In the end I am not sure they want any of us to win, or to be successful.”

This wasn’t an isolated incident. In Shanghai last month, Immelt told a group in Shangai: “I look at my American colleagues, the hardest thing to do in China is get a win-win relationship,”

Immelt’s frustration may have been fed by GE’s (GE) own missed goals in the country. While Immelt boldly predicted that GE would double its revenues in China between 2008 and 2010, they actually only grew by 12% through 2009. Unless they grow by 88% this year, Immelt looks overly optimistic.

More importantly, however, Immelt should not take it personally. China isn’t hostile to multinationals; it’s hostile to any non-Chinese company. This has less to do with GE than it does with the last decade of history between China and the U.S. when it comes to market protectionism.

It has been most visible in important capital markets and M&A deals, starting with the United State’s objection to CNOOC’s acquisition of U.S.-based Unocal.

Protectionist retaliation became a leitmotif from there on both sides. There was a heated war of words over Bain Capital’s failed deal with Huawei Technologies over 3Com in 2008. Bain and Huawei wanted to do business for years, but the Pentagon essentially called Huawei a security threat, implying that it might hack into U.S. defense systems if it owned part of 3Com; the embedded insult that the Chinese couldn’t be trusted with a U.S. technology company was not lost on Chinese officials.

Not soon after the Huawei dustup, China decided to refuse one of its own companies, Huiyan Beverage, the chance to sell itself to America’s Coca-Cola (KO).

Consider, too, the hand-wringing angst over the major owners of Treasury bonds. It was a cause of celebration to find recently that American households finally owned more Treasurys than our frenemies in China.

The tension between the U.S. and China is also clearly visible in Treasury Secretary Tim Geithner’s Yuan World Tour: his sustained, persistent efforts to get China to loosen the fixed exchange rate of China’s currency. Geithner contends that China’s control over currency is distorting the global chances at recovery. Geithner, however, is being polite about it; last month, Congress pilloried him for not calling it currency manipulation.

It is understandable that U.S. business executives (and Treasury Secretaries) may be frustrated with the problem of China: in a global economy, it’s one of the few growing markets. China seems intent, however, on keeping much of that growth for itself. Rather than trying to convince it to do otherwise, maybe it’s time to keep our eyes on our own paper.

Geithner and Immelt have taken two different approaches in their stance toward China – Geithner circumspect and Immelt outspoken – but the truth may be that the business history between the U.S. and China is too fraught. It may be too late for either honey or vinegar to lure flies in this case.

–Heidi Moore is Sweeping the Street for the two weeks that Colin Barr is on vacation.

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