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"I believe that to meet the challenges of our times, human beings will have to develop a greater sense of universal responsibility. It is the foundation for world peace."

Is China's Tibet policy bad for business?

June 15, 2008

By Adam Strangfeld
The Daily Times (Pakistan)
June 13, 2008

When a Chinese government security official recently accused
followers of the Dalai Lama of organizing suicide attacks - merely
the most extreme of a barrage of allegations against the "Dalai
clique" - it was as though the Cultural Revolution were still raging.
Indeed, particularly where Tibet is concerned, the increasingly
sophisticated and pragmatic Chinese leadership seems more like a
throwback to the Mao era, with its haranguing propaganda and coercive
policies. Do foreign investors have reason to be worried by all this?

While there is arguably a genuine possibility that the recent
protests in Tibet will prompt the authorities to change course, early
signs are not promising. So far, the regime has merely applied the
same blunt measures that fueled Tibetans' grievances in the first
place. International pressure alone will not change this. Domestic
pressure could, but any such opportunity has perished on the
battlefield of a public-relations war.

On one hand, some international media painted a black-and-white (and
not always entirely objective) portrait of the March violence as a
brutal Chinese crackdown on peaceful Tibetan monks. On the other
hand, official Chinese media have stoked domestic anger at perceived
Western anti-Chinese bias. With nationalist sentiment aroused, few
Chinese are asking why the violence occurred.

Of course, the Tibet issue has been around for decades, generally
without posing serious problems for foreign investors. But the
combination of the first serious unrest in Tibet in almost 20 years
and the wider groundswell of criticism being directed at China ahead
of the Beijing Olympics has sent businesses and investors scrambling
to assess what it means for them, particularly in terms of
reputational and ethical concerns.

The Tibet-related protests at several Chinese embassies around the
world and during the Olympic torch relay merely provide a glimpse of
what is likely to follow. Investors in China must consider their
vulnerability to negative publicity, and be confident that they can
explain their position. Some have already been forced to do so, and
many could conceivably be targeted in connection with ongoing
campaigns to draw international attention to various human-rights
issues ahead of the Olympics.

The most vulnerable firms are generally those with the highest public
profile, those making the largest or most visible investments, those
that are major sponsors of the Games, and those with some specific
connection to Chinese government policies in Tibet. The latter group
includes extractive- and construction-related companies operating in
partnership with the government of the Tibet Autonomous Region (TAR)
itself. They face the greatest difficulties, both in terms of
distancing themselves from government policies and in countering
negative investor perceptions about the viability of operations there
in the current climate.

Of course, foreign investment in the TAR is a drop in the ocean
relative to that in China as a whole. Activists cannot possibly take
aim at all foreign businesses in China, so most firms are unlikely to
be specifically targeted or suffer reputational damage. It seems
highly doubtful that the tide of international opinion will turn
against China to the extent that investors in general are seriously
expected to shun the market.

Nonetheless, where firms or industries are particularly vulnerable to
reputational issues, image and ethics could be a significant factor
in more marginal business decisions (particularly with rising costs
and tougher labor regulations already causing some firms to look
elsewhere). Meanwhile, the most recent twist in the Tibet fallout
serves as a striking reminder of how China's newfound assertiveness
and clout on the international scene is creating an increasingly
complex challenge for foreign companies.

While Western firms investing in China must face the prospect of
protest and criticism back home from pro-Tibet campaigners, some
companies are coming under pressure in China itself. The big French
retailer Carrefour has seen protests at its stores all over China by
nationalist activists incensed by the protests that took place in
Paris when the Olympic torch passed through the city. In the current
climate, many businesses will find it difficult to avoid becoming
stuck between a rock and a hard place.

Adam Strangfeld is Research Director at Control Risks, an
international business risk consultancy
CTC National Office 1425 René-Lévesque Blvd West, 3rd Floor, Montréal, Québec, Canada, H3G 1T7
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