For you, my friend, a special price

Rob Schmitz Oct 7, 2010

For you, my friend, a special price

Rob Schmitz Oct 7, 2010


Kai Ryssdal: The president’s press secretary Robert Gibbs took up where Tim Geithner left off yesterday. Gibbs said at a press briefing this morning the White House is watching what Beijing does with its currency, much as the Secretary of the Treasury said yesterday. For American companies, though, currency’s only one part of the China puzzle they have to solve.

There’s plenty of cheap labor, it’s a growing consumer market. But access to it comes at a price, literally. Foreigners in China not only get charged more, but companies from other countries have to negotiate Chinese policies that can make doing business over there a bit risky.

Our new Shanghai bureau chief Rob Schmitz is on the line to explain. Hey Rob.

Rob Schmitz:Hey Kai.

RYSSDAL: So we’ll get to the official business part of this interview in a second, but you are a foreigner in China, tell me your story.

SCHMITZ: Yeah, I am, and thank you for letting me vent a little. One of the first things we had to tackle in China was getting my son into a preschool. Now, my wife and I originally had plans to put our son in a local, public preschool, and we had help from a Chinese friend. He called up one school and was quoted the price of 1,000 Renminbi, about $150 for the fall semester.

RYSSDAL: Which is good, right — a whole semester.

SCHMITZ: Yeah, but when I called to seal the deal, they asked me where I was from. I told them, and all of sudden, the price shot up from $150 to more than $1000.

RYSSDAL: Which is known in the vernacular as the “foreigner price.”

SCHMITZ: Yeah, it’s a little here, a little there. You get used to it after a while, because it doesn’t add up to a lot of money usually. But for big American companies, this type of special treatment can cost a lot of money.

RYSSDAL: Well Rob, lay it out a little bit for me, would you? Because other than actually paying higher prices, which certainly private Americans do and some companies as well, there are ways that the Chinese put pressure on American and foreign companies.

SCHMITZ: The government has a goal of China becoming the global tech leader by 2050. Now, in order to achieve this, they’ve passed what are called “indigenous innovation policies.” All of this sounds like a great idea, but many foreign companies think these policies are less about China’s innovation and more about China finding ways to steal foreign technology.

RYSSDAL: How so? Give me an example.

SCHMITZ: One of these policies says if a company wants to sell high-tech products to any state-owned enterprise or government office in China, which is a huge market, the company has to register the trademark for the product in China. That doesn’t fly with a lot of foreign companies, because it means they basically have to hand over the blueprints of their high-tech doodads to China. That’s not a good idea unless you want to see your product copied and sold to the world’s biggest consumer market. So foreign companies complained, and earlier this year, China backed down and changed part of that policy.

But one policy China didn’t change is this CCC mark. Now, this is a sticker that you’ll find on electric appliances in China. It proves that a certain product was inspected by a Chinese government standards agency and deemed to be safe. Now if you’re a company importing anything, you plug into a wall, you need one of these stickers on it. But in order to get it, one of the things you gotta do is you got to pay for Chinese government inspectors to visit your factory and see how you make the product.

RYSSDAL: And let me guess, they’re taking very careful notes, and they’re taking it back to, you know, whatever the Chinese company is.

SCHMITZ: Well, that’s what a lot of foreign companies think. They’re worried it’s another way to steal their technology. But foreign executives rarely criticize China’s government, you know — the China market’s too important for them to rock the boat. So they usually hide behind trade associations and let them do the dirty work. But in the last six months, we’ve seen leaders from Microsoft, GE, Siemens and BASF come through China and speak very publicly about their criticism of these policies. The issue’s been big enough for them to step out and say something.

RYSSDAL: What are the Chinese saying, though? They’re not sitting down and taking this.

SCHMITZ: No, they’re not. The Chinese government has strongly defended these policies. Chinese Premier Wen Jiabao recently said he thought China’s investment environment for foreign companies was as healthy as ever. It’s a valid argument in some ways, all you have to do is look at foreign direct investment in China: It’s gone up for 13 straight months. So while foreign companies may be starting to grumble about doing business in China, they’re not packing their bags yet.

RYSSDAL: Our man in Shanghai, Rob Schmitz, with the ever-increasing and ever more complicated Chinese market. Rob, thanks a lot.

SCHMITZ: Thanks Kai.

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