Guy Saint-Jacques served as Canada’s ambassador to China from 2012 to 2016.
A turning point for multinational businesses took place just before the Beijing Olympics’ opening ceremony. On Feb. 4, the world’s most powerful autocrat, China’s Xi Jinping, offered his unreserved support to the world’s second-most powerful autocrat, Russian President Vladimir Putin. “Friendship between the two states has no limits,” the two leaders said in a joint statement. “There are no forbidden areas of co-operation.”
When Mr. Putin launched his invasion of Ukraine 20 days later, hundreds of multinational companies abruptly realized their ties to Russia were untenable.
China is not as dangerous a jurisdiction for multinational business investment. But it has become much riskier – and the signals had been clear for those willing to look, even in the years before the summit.
Beijing’s continuing unapologetic application of arbitrary arrest and detainment, for instance, should be a red flag. One such case involves the Canadian entrepreneur James (Jianhua) Xiao. Mainland China agents kidnapped him in 2017 from a hotel in Hong Kong. Before his disappearance and the confiscation of his business, Mr. Xiao was the chair of Tomorrow Group Holdings, a conglomerate with billions of dollars in assets.
No charges have been laid, though China’s Criminal Procedure Law specifies no person can be detained more than six months without charges. It has been 62 months since he was detained.
It is clear that nobody is safe in an autocracy where there is no commitment to the rule of law. In such a place, no credibility can be attached to any prosecution, given the precedent of other Chinese show trials. Indeed, the most recent data available shows that 99.9 per cent of accused people in China have been found guilty by the courts.
The arrest and trial of Canadian hostages Michael Kovrig and Michael Spavor provide stark examples. To Mr. Xi, the two Michaels – who were detained for interrogation in secret, questioned for hours under intense psychological pressure, and had no access to a lawyer – were merely bargaining chips to secure the release of Huawei’s chief financial officer, Meng Wanzhou.
We can expect Mr. Xiao will receive similar treatment, not for a prisoner exchange, but for the benefit of showcasing Mr. Xi’s much-trumpeted anti-corruption campaign, which is in reality a blunt tool aimed at weakening opposition factions, real or imagined, within the Communist Party of China.
This should not be surprising. Mr. Xi has recently initiated a flurry of regulations aimed at private firms, tycoons and celebrities. Technology and finance firms, data platforms, the entertainment industry, a tennis star and private tutoring companies have been targeted, and more than US$1-trillion of market value has been wiped from Chinese companies’ shares. A number of wealthy Chinese individuals, including Alibaba’s Jack Ma, have been targeted because the regime felt that they were not following the diktats of the party, or because they were worried that they were gaining too much power.
In 2020, the Communist Party issued the Xi Jinping Thought on the Rule of Law, a doctrinal reminder for all that the party is above the law and that judges should take their cue from the party. Mr. Putin provided similar lessons with the attempted killing and then imprisonment of his political opponent, Alexey Navalny.
There was a time when multinational businesses were blasé about risk in the lands of the world’s two most powerful autocrats, notwithstanding occasional arbitrary detainments and show trials. However, that was before Mr. Putin began a war to eliminate the democratically elected government of Ukraine, just after Mr. Xi’s display of support. The shunning of Russia by multinational business is now well under way.
As for China, we still have the usual list of dangers: reports of forced labour in Xinjiang within multinational supply chains, Chinese partners who also sell to China’s military, China’s track record of weaponizing trade, the country’s lack of rule of law.
On top of all that, we must now prepare for the possibility of consequences for multinationals in Russia. In February, Mr. Putin and Mr. Xi opened our eyes to this vast new risk.
After 30 years of globalization and deep reliance on Chinese supply chains, it would be painful for multinationals to withdraw from China; for now, that would be a step too far. But neither should they act as if this is business as usual. We must be more concerned about China, and at the very least, plan for more diversification.
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