LENS Business, Law, and Policy

Slow Change in China

But American Businesses Can't Ignore the Economic Powerhouse

Steven Feldman can offer little comfort to U.S. companies looking to do business in China, where he said tight government control makes foreign investment a challenge.

"A lot of the sweeping changes we were hoping for from a Western perspective didn't happen," said Feldman, PhD, a professor of design and innovation at the Weatherhead School of Management at Case Western Reserve. "The opportunities have actually gotten worse for foreign business."

Feldman knows the territory. He moved to China for a year in 2015, doing field research and collecting data for his upcoming book on Chinese political and economic systems. Feldman also spent seven months there in 2007 and a month in 2010 as part of the groundwork for his 2013 book Trouble in the Middle: American-Chinese Business Relations, Culture, Conflict, and Ethics.

So, what's changed in the Chinese business climate between Feldman's two longer stays?

To be sure, China has engineered some reforms in its quest for economic dominance, but with so much tightly controlled by government, change has come slowly.

President Xi Jinping's anti-corruption campaign has had a chilling impact on the economy, Feldman said. Officials in government and across the landscape of government-run enterprises from universities to business endeavors are afraid to start new ventures or handle a budget, he said, for fear money will go missing and they'll land in prison.

Separately, a strategy to gain access to Western know-how—partly by requiring foreign technology companies to turn over intellectual-property blueprints to the government in exchange for access to the China market—creates significant challenges for American companies, Feldman said.

In August, President Donald Trump authorized the U.S. trade representative to determine whether to launch an investigation into China's trade practices, including those involving American intellectual property.

Executives are in a predicament, Feldman said. They can't turn their backs on China; that would be handing an opportunity to somebody else. "It's the second- biggest economy in the world and it's still growing," Feldman said. "There's a lot of potential to sell products and make products. Almost all the big companies are over there to some degree trying to make the best of it."

—Jennifer Kuhel