The Canadian Press - ONLINE EDITION

Ties that bind: US-China business links too profitable to be broken by hacking controversy

  • Print

WASHINGTON - China may be trying to steal trade secrets from U.S. businesses, as federal prosecutors allege. Yet for many U.S. companies, China's vast market remains an irresistible source of business.

The Justice Department's indictment last week of five Chinese military officials accused them of trying to pilfer confidential information from American companies. But even some of the alleged U.S. corporate victims of the hackers have little incentive to cheer any trade rupture with China.

One, Westinghouse, is building four nuclear reactors in China.

Another, specialty steelmaker Allegheny Technologies, operates a joint venture in Shanghai.

A third, Alcoa, is the biggest foreign investor in China's aluminum market. Indeed, Alcoa went so far as to downplay Justice's charges: "No material information was compromised during this incident which occurred several years ago," the company said.

American companies are in a delicate position. They want to maintain good relations with China, the world's second-biggest economy and a market where U.S. firms' earnings grew nearly 50 per cent last year. But they're also increasingly fearful of Chinese hackers stealing their trade secrets.

Looked that way, the hacking case is "going to be positive in opening up the conversation," said Jamian Ronca Spadavecchia, founder of the Oxbow Advisory, which advises companies about risks in China and other emerging markets. "It's bringing into the open some of the issues U.S. companies are facing."

A U.S.-China Business Council survey has found that cybersecurity is a growing threat for U.S. companies in China: It jumped from to No. 14 last year from No. 23 in 2012 on a list of gripes about the Chinese market. American companies are also increasingly irritated by China's attempts to censor the Internet, according to a survey by the American Chamber of Commerce in China.

The confrontation over hacking — China rejects the charges as based on "fabricated facts" — highlights the often-awkward relationship between China and the United States. They're frenemies in a globalized world — rivals and partners in both politics and economics.

U.S. companies complain that China is becoming less hospitable to foreign companies. They cite policies that give Chinese firms an edge over foreign competitors, cumbersome licensing requirements and endless struggles to protect their intellectual property — from software to music to clothing design — from theft.

For all the complaints and tensions, U.S.-China business ties are tight and getting tighter.

Last week, even as the hacking controversy raged, former U.S. ambassadors to Beijing rang the closing bell at the New York Stock Exchange to mark the 35th anniversary of U.S.-China diplomatic relations. After all, 77 Chinese company stocks now trade on the NYSE. Another big one — e-commerce giant Alibaba — plans to list its stock in the United States, either on the NYSE or NASDAQ.

Trade in goods between the U.S. and China last year hit a record $562 billion. American companies earned nearly $10 billion last year in China, another record. American direct investment in China exceeds $50 billion.

General Motors sells more cars in China than in the United States. General Electric sells China clean power plants that run on methane. Wal-Mart has 390 stores across China. Starbucks runs hundreds of cafes in China.

In a big turnabout, Chinese companies have begun to invest in America, too. Chinese investment in the United States reached $14 billion last year, up from virtually nothing a decade ago.

About 70,000 Americans work for Chinese companies, according to the Rhodium Group consultancy. Chinese firms are being drawn to America by cheap energy and land and by U.S. wages that aren't as high compared with China's as they once were.

Sometimes frictions between two countries can encourage closer ties. U.S.-Japan trade battles, for example, led Japanese automakers to build plants in America in the 1980s and 1990s. China's Tianjin Pipe is building a $1 billion factory in Gregory, Texas — a decision it made after the U.S. imposed sanctions on pipes made in China.

"The investment will continue" unless the U.S.-China disputes get much worse, said Raymond Cheng, CEO of the Sozo Group, a Hong Kong firm that helps Chinese companies invest in America. "Energy costs are rapidly rising and are cheaper in the U.S.... Everybody realizes that manufacturing needs to be closer to the consumer. That's all the incentive and reason for Chinese manufacturers need" to invest in the United States.

Speaking by phone, Cheng noted that he had just left the grand opening of a Chinese shoe factory in Jefferson City, Tennessee.

It will eventually employ 109 Americans.

Fact Check

Fact Check

Have you found an error, or know of something we’ve missed in one of our stories?
Please use the form below and let us know.

* Required
  • Please post the headline of the story or the title of the video with the error.

  • Please post exactly what was wrong with the story.

  • Please indicate your source for the correct information.

  • Yes

    No

  • This will only be used to contact you if we have a question about your submission, it will not be used to identify you or be published.

  • Cancel

Having problems with the form?

Contact Us Directly
  • Print

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

You can comment on most stories on winnipegfreepress.com. You can also agree or disagree with other comments. All you need to do is be a Winnipeg Free Press print or e-edition subscriber to join the conversation and give your feedback.

Have Your Say

New to commenting? Check out our Frequently Asked Questions.

Have Your Say

Comments are open to Winnipeg Free Press print or e-edition subscribers only. why?

Have Your Say

Comments are open to Winnipeg Free Press Subscribers only. why?

The Winnipeg Free Press does not necessarily endorse any of the views posted. By submitting your comment, you agree to our Terms and Conditions. These terms were revised effective April 16, 2010.

letters

Make text: Larger | Smaller

LATEST VIDEO

Keri Latimer looks for beauty in the dark and the spaces between the notes

View more like this

Photo Store Gallery

  • A  young goose stuffed with bread from  St Vital park passers-by takes a nap in the shade Thursday near lunch  –see Bryksa’s 30 day goose challenge Day 29-June 28, 2012   (JOE BRYKSA / WINNIPEG FREE PRESS)
  • JOE BRYKSA/WINNIPEG FREE PRESS Local- A large osprey lands in it's nest in a hydro pole on Hyw 59  near the Hillside Beach turnoff turn off. Osprey a large narrow winged hawk which can have a wingspan of over 54 inches are making a incredible recovery since pesticide use of the 1950's and  1960's- For the last two decades these fish hawks have been reappearing in the Lake Winnipeg area- Aug 03, 2005

View More Gallery Photos

Poll

Should Manitoba support the transport of nuclear waste through the province?

View Results

Ads by Google