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Olympic security deters businesses

Scott Tong Jul 4, 2008

Olympic security deters businesses

Scott Tong Jul 4, 2008


Bob Moon: There shouldn’t be any trouble making travel arrangements for President Bush next month when he heads for the Beijing Olympics. The White House announced today that he’ll attend opening ceremonies.

China is racing to the wire with final preparations and new security rules that it’s put in place for the Games are causing some big headaches for companies trying to do business there.

Our China bureau chief Scott Tong joins us now.

Hey Scott.

Scott Tong: Hi Bob. How are you?

Moon: I’m good. So what security restrictions are we talking about here?

Tong: There are a lot of new rules that are affecting foreigners here in China. In Beijing, I hear a lot about police knocking on peoples’ doors and checking their passports. And for foreigners who are trying to get in to China, it’s getting really hard to get a visa to come in and do your business. So say I’m a businessman and I live in Hong Kong or in North America and before, to get into China, it was pretty much a formality, it was pretty easy. Not a sure thing anymore. If you believe the tales that are out there, you have to go to the visa office and submit your college diploma, you need to show a letter of the company you’re going to be visiting in China, you have to share your hotel reservation and maybe you’ll get the answer “yes.” So what it means is a lot of people can’t get into China, it’s getting a lot harder, and these people are basically the human lubricants of the China economy.

Moon: Yeah, what kind of people are we talking about here?

Tong: There are a host of different kinds of middlemen in China, but a lot of them are basically factory checkers, people who come in on behalf of Western companies and check for labor standards in factories, they check for quality control and very often, they’re kind of SWAT-teamed in and out of China from overseas. Well, it’s not that easy anymore and believe it or not, we’re kind of getting toward holiday season as far as the supply chain: orders need to be signed and sewing machines need to get going, so something’s going to give. Now, I spoke to Shanghai consultant Paul Frech who watches this kind of thing and he says more and more Western buyers are saying, “You know what, forget China. I’m going to start to take my business elsewhere.”

Paul Frech: So people are tending to think, “OK, now’s the time that I really need to move the production to somewhere else,” because if you don’t, you’re going to miss Christmas and whatever the Chinese government may think about the Olympics, the West is not going to move Christmas.

Moon: OK, Scott, so if I’m a clothing brand label or a toy or shoe maker and I leave China, where do I go?

Tong: Well, you follow the cheaper labor and that is places like Bangladesh or Vietnam, Cambodia, India… I mean, we’re not talking about a wholesale exodus out of China, but in certain industries where the game is all about cheap labor — shoes, textiles, clothes — it’s getting harder to compete as far as China’s concerned, so in a way, China has its own China threat, if you will.

Moon: Well, I can see an even darker scenario: If I’m an American company and I can’t get folks in to check quality, what if I just skip it?

Tong: Well, there is some skipping. I spoke to an exporter in Hong Kong today and he said the quality assurance stuff is either getting too expensive or it’s impossible that it’s not happening with certain kinds of exporters and you know, it only takes one more of these bad toy cases to show up on the front pages of the newspapers to taint once again the Brand China image and the whole point of the Olympics for Beijing is to polish up that image.

Moon: Well, you mention the Olympics. Any indication that these visa restrictions are affecting tourism in Beijing?

Tong: Well, foreign visitors to China are down 14 percent and hotels which promised that they were going to be jacking up prices three or four times their normal price, well, those prices are starting to come back down to normal levels right now. There’s a great headline in one of the newspaper articles writing about this; they said, “Beijing is once again the Forbidden City for foreigners.”

Moon: Marketplace’s China bureau chief Scott Tong. Thanks for joining us.

Tong: Alright, Bob. You’re welcome.

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