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China counts the cost of secrecy

Lachlan Maddock
— 1 minute read

While China is now getting back on its feet, the country has suffered a reputational hit that will see companies think twice before coming to the table.

China is now widely accused of fudging the numbers and misleading the world on the severity of the disease. Whether that’s actually the case or not, the coronavirus has seen a resumption of tensions between the world’s superpowers as the US questions China’s official facts – something that China’s state-owned media outlet Xinhua calls “Cold War thinking”. 

“In the past weeks, some US politicians, for their selfish political interests, have been busy with smearing and stigmatising China,” Xinhua wrote. “Their groundless and irresponsible accusations to deflect blame for Washington’s botched handling of the public health crisis at home will achieve nothing other than damaging global solidarity during this difficult time.”

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But global solidarity – such as it includes China – is already damaged. Australia has signaled that it will approach its relationships with China differently and has already made moves to counter the country’s influence by reducing the threshold for scrutiny of foreign investment to zero. The European Commission has also introduced more stringent screening for foreign direct investment, while leaders in both France and the UK have said that they will take a more hardline stance on China’s influence. 

And while (unlike in China) companies are not their governments, they will also have to make tough decisions on the sort of relationship they want to have with the state. 

It’s now clear that doing business with China comes with a host of reputational and country risks. Chinese state-owned enterprises (including the much-maligned Huawei) are required to share information with their government while also maintaining Communist Party cells within their ranks, and it’s becoming untenable to do business with a country that’s often in the headlines for industrial espionage and persecuting ethnic minorities.

2019 saw China’s reputation savaged by revelations of human rights abuses and undiplomatic temper tantrums amidst a global trade war that it had no small part in starting. Those outbursts were tempered by the fact that China was the global economic powerhouse – putting up with them was just one of the costs of doing business. 

But with a potential acceleration of deglobalisation – and a move to bring jobs and investment home in order to accelerate the recovery – now could be the moment that everything changes for China.

 

China counts the cost of secrecy
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