China Hints at Retaliation Over U.S. Taiwan Policy : Trade: Boeing executives are warned that relationships with U.S. firms could suffer because of Administration action.
The Chinese government has warned top Boeing Co. executives that U.S. business will be punished if the United States fails to address concerns that it is straying from its longstanding policy of recognizing Beijing as the only legitimate government of China.
The warning is the strongest evidence to date that China may be retaliating against U.S. companies because of anger over the Clinton Administration’s recent decision to allow Taiwan President Lee Teng-hui to visit the United States.
China’s Communist leaders consider Taiwan a renegade province and oppose any U.S. contact with that country’s top officials.
The warnings to Boeing, reported by sources at the Seattle aerospace giant and in Washington, D.C., appear to contradict denials from high-level Chinese officials that politics played any role in its recent commercial dealings, including Wednesday’s announcement of the award of a $1-billion auto manufacturing contract to Mercedes-Benz of Germany instead of U.S. partners Chrysler Corp. and Ford Motor Co.
Chinese Foreign Ministry spokesman Shen Guofang insisted to reporters that the award to Mercedes-Benz was based on commercial reasons and not on U.S.-China feuds, according to the New China News Agency. Relations between the two superpowers have taken a turn for the worse since the Lee visit and China’s arrest of American human rights activist Harry Wu.
“This accords with the interests and aspirations of both the Chinese people and the people of other countries,” Shen said.
With dozens of blue-chip U.S. firms scrambling to establish themselves in China, such hardball tactics raise the stakes in the fast-deteriorating U.S.-China relationship and could complicate China’s effort to win admission to the World Trade Organization, the global trading body.
David Rothkopf, a U.S. Commerce Department deputy undersecretary, said Wednesday that it would be a “big mistake” for the Chinese government to punish U.S. companies over the mistaken belief that the Clinton Administration had strayed from its longstanding one-China policy.
“We obviously would not look favorably on the decision by the Chinese government to link trade and politics,” he said.
The latest news fueled fears among U.S. companies that they would be caught in the political cross-fire. In meetings Wednesday of the U.S.-China Business Council and the Business Coalition for U.S.-China Trade, the two major Washington, D.C.-based China business groups, there was a general feeling that the “business and diplomatic environment is deteriorating rapidly,” according to one participant.
Boeing has a lot at stake. China’s booming aerospace market is already a leading customer and is expected to purchase $100 billion worth of airplanes by the year 2015. Boeing’s biggest concern is a fierce competition between U.S. aerospace companies and Europe’s Airbus consortium to join a Chinese government effort to build a 100-seat airplane. A key member of the Airbus group is the aerospace arm of Daimler-Benz, which also owns Mercedes-Benz.
“We’re concerned that some of these relationships could be called into question [as a result of the U.S.-China tensions],” explained a Boeing executive in Seattle.
Ron Woodard, president of Boeing Commercial Airplane Co., is in China on a scheduled visit with subcontractors, airlines and government agencies. Sources at Boeing and in the U.S.-China trade community report that he and other Boeing executives have received warnings from the Chinese that U.S. commercial interests are threatened by the Lee visit and by recent comments from U.S. House Speaker Newt Gingrich and other Republican leaders that it is time to upgrade the U.S. relationship with Taiwan.
Robert Kapp, president of the U.S.-China Business Council, said the U.S.-China tensions have created an “unmistakable deterioration” in the climate for U.S. businesses in China. But he cautioned against assuming that political retaliation was behind the Chinese government’s decision to award the $1-billion auto contract to Mercedes-Benz, given the many factors that can affect such a huge project.
“In the Chrysler case, you can’t leap to the conclusion that politics and the Taiwan imbroglio are the specific cause,” he said.
Neither Chrysler nor Ford is publicly blaming politics for their business misfortune.
Erica Huyck, a Chrysler spokeswoman, said Wednesday that the company not been formally notified by the Chinese government of its decision on the hotly contested contract. She said the Detroit auto maker would be “disappointed” if the media reports were true, but had no intentions of giving up on China. Chrysler is pursuing several auto manufacturing ventures and has produced Jeeps there for 11 years.
Ford spokesman David Caplan said his company also intends to keep pushing hard for a piece of the lucrative Chinese market. Ford is competing with General Motors and Toyota for a major program to build passenger vehicles in Shanghai as well as a smaller program to manufacture “family cars” in northern China.
He said the company had no indication that the U.S.-China tensions were influencing any of the company’s business dealings in China.
“We have to be realistic and anticipate that there will be bumps in the road in the relations between these two countries but hopefully the commercial relations will be ongoing and will continue in the right direction,” he said.
