GM Learns the Hard Way About Communism

The collapse of General Motors’ fortunes in Communist China is coming into focus as a marker of America’s dysfunctional relationship with the People’s Republic. GM is learning the hard way about the perils of doing business with the comrades at Beijing. What were American lawmakers and corporations thinking, though, when they set out to strengthen trade ties with the communists, even granting them “most favored nation” status? GM’s auto sales in the Middle Kingdom “have entered a death spiral,” the Times reports. It points to a “dizzying collapse of its China business,” with sales down 42.5 percent this year alone. The scale of GM’s debacle is evidenced by a $5 billion write-down this month, prompted by “weakness in its China business that will force the automaker to close plants and offer fewer models,” the Wall Street Journal reports. It’s a remarkable reversal of fortune for GM, which was, in the Times’ telling, a “pioneer in China,” where it had for nearly 30 years generated “enormous profits” and contended with Volkswagen as the largest seller of cars. The “drastic comedown,” as the Times puts it, “tracks the experience of all foreign automakers” in the People’s Republic, which now stands as the largest market in the world for automobiles.GM isn’t the only American corporation getting burned by “the end of the great China gold rush,” as Business Insider puts it. “US companies are losing market share to China-based rivals. Beset by political and economic forces, American brands can no longer count on China for growth.” Sales of Apple iPhones and Nike sneakers are down. Chinese consumers are getting their coffee from a local chain, Luckin, and eschewing Starbucks.Multinational companies such as, say, Marriott, are taking a “hard look” at their Chinese operations and tempering their outlooks, while sales in China of Otis elevators, as it were, are only going down, Barron’s reports. Even Tesla is losing market share to domestic rivals. This is “no accident,” Business Insider says, but a result of President Xi’s “plan to rid China of foreign dependence and influence.”Yet the writing was on the wall for American companies as far back as the 1990s when the mandarins at Beijing were negotiating the terms of China’s entry into the global trade system. “China allowed foreign carmakers like G.M. into the country only as part of a publicly stated, long-term policy to gain technology and build its own globally competitive industry,” the Times reports. That wasn’t only true of the auto industry.In many industries, Beijing allowed foreign firms to enter the Chinese market only if they partnered with local companies. That led to the transfer of Western technology and intellectual property to the regime. “Foreign companies have long complained that they are simply training future rivals,” the Times reported in 2018. Beijing, President Trump has warned, also “used bureaucratic licensing and approvals to gain control over sensitive data.”In GM’s case, Beijing’s policies meant that the American automaker “ended up teaching much of what it knew about car manufacturing to local rivals that now outsell it.” No wonder that one leading China critic, Congressman Mike Gallagher, lamented that “everyone made the same basic bet on China.” That was back when Presidents Clinton and George W. Bush thought it made sense to allow the People’s Republic into the global trade system.At the time, though, human rights advocates and labor unions were among the loudest critics of forging closer bonds with Beijing. The unions were “certain that cheaper labor in China would cost jobs in the United States,” the Council on Foreign Relations reported of China’s entry into the World Trade Organization. “And they were right: between 1999 and 2011, almost 6 million U.S. manufacturing jobs were lost.”Cozying up to China “failed,” Mr. Gallagher said, and “we’re trying to extricate ourselves.” Yet he has left Congress, and his China committee has failed to make progress on efforts to decouple from China, or alter Beijing’s “most favored nation” status, which Congress in 2000 granted permanently. The question is ripe for review in Trump’s second term as those, like GM, who thought close China ties would prove a boon to America, face a reckoning.Correction: The House Committee on the Chinese Communist Party has failed to make progress toward decoupling from China. An earlier version misstated the status of the committee.

GM Learns the Hard Way About Communism

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