Alibaba’s IPO and the hypocrisy in U.S.-China economic relations
The highly anticipated IPO of e-commerce giant Alibaba on September 19 is expected to raise more than $20 billion, a record in U.S. history. It is startling that the company that will set this record is based in China, a country that is challenging American global dominance.
While we should all celebrate the impressive achievements of entrepreneurs like Jack Ma, Alibaba’s founder, we must not lose sight of another startling reality: for all the worries in the U.S. about the geopolitical and economic threat posed by China, American financial and consumer markets remain widely open to China while the opposite is hardly true.
Just think about one fact. One hundred six Chinese companies are listed on the New York Stock Exchange and the Nasdaq. They include state-owned giants such as PetroChina and ChinaMobile, and private firms like Baidu (the search giant) and JD.com (Alibaba’s competitor). The number of American companies listed in China? Zero.
Of course, this may not be a fair comparison. Because China maintains capital controls and has a nonconvertible currency, it makes little sense for foreign companies to list in China. However, even if there were no capital controls, it is doubtful that an American company could have listed in China with the same kind of ease and welcome experienced by Alibaba. Chinese listing requirements are notorious for their arbitrariness and complexity.
This unequal relationship is also reflected in U.S.-China trade. The openness of the U.S. has allowed Chinese-made goods unimpeded access to its vast consumer markets. Between 2000 and the end of July 2014, China’s cumulative trade surplus with the U.S. was $3.13 trillion.
Meanwhile, American companies doing business in China have periodically encountered harassment and protectionism. Most tellingly, while Alibaba is readying its IPO on the NYSE, Chinese authorities are carrying out tough anti-monopoly enforcement actions against well-known U.S. companies. Microsoft is facing an ultimatum. Qualcomm is being threatened with a $1 billion fine. Chrysler was just slapped with a $5 million fine for “operating a price monopoly”—even though Chrysler’s market share in China is less than half a percentage point.
Behind this glaringly imbalanced relationship is an even more worrisome political asymmetry. The openness of the U.S. markets to Chinese companies and goods is ensured by the enormous political support from the American business community, which has worked relentlessly to prevent the U.S.-China geopolitical rivalry from spoiling their commercial ties. Since normalization of diplomatic relations between Washington and Beijing in 1979, leading American companies, such as Boeing, GE, Goldman Sachs, and many others have given generously to causes dedicated to improving U.S.-China relations. When China was trying to enter the World Trade Organization, Corporate America launched an all-out campaign on Capitol Hill to ensure that Congress would not block Beijing’s entry. Even in China, American businesses have funded scholarships and cultural programs aimed at advancing Chinese understanding of the United States.
Of course, one could argue that Corporate America has engaged in these activities out of self-interest. This is undeniably true. But American business leaders also have a more forward-looking mindset. They understand—more deeply than most cynics—that a stable commercial relationship between a democracy and a dictatorship cannot be taken for granted. They must do everything possible to prevent politics from poisoning business. Luckily, America’s democratic institutions provide them with the means and access to be China’s most powerful lobby in Washington.
Sadly, Chinese businesses with huge stakes in a healthy Sino-U.S. relationship have been doing absolutely nothing to champion America’s image in China. Even if we exclude state-owned companies because they are essentially owned by the Communist Party, private Chinese firms, including those with listings in the U.S. and those that sell most of their products to the U.S., have been disengaged from political, intellectual, or cultural activities in China that may serve to advance Sino-American ties or act as a voice of moderation and reason. For example, not a single Chinese firm has publicly expressed disagreement with Beijing’s harassment of American firms in the ongoing anti-monopoly crackdown. No well-known business leaders have been on record in repudiating the anti-American hysteria in the Chinese media.
We can blame this political asymmetry on China’s one-party rule, which denies Chinese private entrepreneurs a political space or voice.
But Chinese entrepreneurs should not wait for a greenlight from the Communist Party, which sees the U.S. as a threat to its survival. They must do their part to help stabilize the Sino-U.S. relationship because it is in their long-term self-interest.
So, when Jack Ma returns to China in triumph, with billions of dollars in the bank, he might want to devote a portion of his entrepreneurial talent to another worthy cause: selling America to China.
Minxin Pei is the Tom and Margot Pritzker ’72 Professor of Government and a non-resident senior fellow of the German Marshall Fund of the United States