Transnational China Project Sponsored Commentary:
American Corporate Values and Chinese Values

Dr. Robert Kapp, President,
US-China Business Council

Bob Kapp Speaking at Baker Institute (1)Bob Kapp Speaking at Baker Institute (2)

Talk Given at the James A. Baker III Institute for Public Policy
Rice University

October 15, 1998
(Text based on copy provided by Robert Kapp)

Text of introduction by Ambassador Edward Djerejian, Director of the Baker Institute:

Ladies and gentlemen, thank you very much for coming this evening to the Baker Institute, to this special event that we are having this evening, to hear Robert Kapp, the President of the U.S.-China Business Council, speak on American corporate values and Chinese society. Bob has very nicely agreed to take questions and get into a dialogue with you following his presentation.

Bob has an outstanding curriculum vitae, and I'm not going to go through all of it because it is in your program. But his talk is the first of the East Asian Lecture Series this fall at the Baker Institute. The three talks in this series all focus on the important role that culture plays in economic social change. Bob will talk about the ways that foreign corporations influence Chinese society through their values and culture. Wei-Ming Tu , Professor of Chinese History and Philosophy at Harvard and Director of the Harvard-Yenching Institute will talk this Saturday about the relationship between Asian values and the economic crisis in Asia. And Senior Minister Lee Kuan Yew of Singapore, one of the great leaders of Southeast Asia, will also talk about cultural values and the Asian economic meltdown. He will speak in the Rice Grand Hall on October 23. We welcome you to attend all of these events that are coming up in the next week.

These talks are just part of the major initiative by the Baker Institute's Transnational China Project to open up research and discussion on the way that radical changes, economic changes in Asia, are changing Chinese culture and values. Next March we will be hosting a path-breaking, major research conference bringing together scholars from Mainland China, Singapore, Hong Kong, Taiwan, and the United States, to find new ways to study the cultural foundations of property rights in Chinese societies. In future years, the Transnational China Project will continue to form new networks of scholars and practitioners studying these issues. We look forward to bringing them here to Houston to share their expertise with you. We also invite you to explore the multilingual website which has been created for the Transnational China Project. It is rapidly becoming a highly-visible archive of resources on these issues. We've had over 11,000 visitors, or hits, in the first five months, and there's more than 18 megabytes of text and images.

Bob Kapp is, as I stated, President of the U.S.-China Business Council, the principal organization of American businesses engaged with the People's Republic of China. You will note in his biography that he served as president of the Washington Council of International Trade and as executive director of the Washington State China Relations Council. He graduated from Swarthmore and received his Master's and Doctoral degrees from Yale. His advanced training was in East Asian studies and history. And, of course, most importantly in all of this is that from 1970 to 1980 he taught modern Chinese history here at Rice University. And you could say that's the only thing that counts in your bio, Bob. He has published a number of scholarly studies in modern Chinese history. I will not go through all his accomplishments in his field. He played a leading role in carrying out non-governmental supporting activities in conjunction with the APEC ministerial meetings which convened in Seattle in November, 1993.

Bob is a superb example of a man of ideas, a scholar, who has entered into the field of public policy. He is a member of the Council on Foreign Relations, the National Committee on U.S.-China Relations, and the Contemporary Affairs Committee on International Economic Policy. Please join me in welcoming Bob Kapp to our forum. Thank you.

Text of talk by Robert Kapp, President of the US-China Business Council:

Ed, thanks very much. I am very glad to be here at the Baker Institute this evening. In many ways I wish it had been 1970 to 1980 that I was on the faculty at Rice, as you suggested in introducing me. But as my friends who remember me from then know, I spent only three very short years on the Rice campus. I arrived in 1970, fresh out of graduate school, and began my transition into a life of relative adulthood. By 1973 my wife and I had decided to move on to Seattle, where I then spent 20 years, first of all at the University of Washington.

I am a lapsed academic. It is certainly true that in my work at the U.S.-China Business Council I find it very helpful to have had a background in the study of Chinese history, particularly modern Chinese affairs. In my work on behalf of the nearly 300 member companies in our Council, I find many, many opportunities -- particularly in Congressional testimony, and sometimes in the media -- to try to help Americans, who in some cases have very strong feelings about China, to get a little bit better sense of the Chinese context in which Americans must also operate if we are going to have a decent relationship with China.

I must say that I am abashed to be linked with figures of the distinctino of Senior Minister Lee Kuan Yew and Professor Wei-Ming Tu in this Baker Institute series of addresses. But the themes and the subjects to be explored in this marvelous Baker Institute project are very close to my heart. I find that over the now long span of my involvement with China, which began almost 35 years ago, the question of how the realities of one society are translated, not only linguistically but in a more non-verbal way, to the people in the other society, has been the most stimulating part of my work. Professor Rich Smith, and you, Ed, and the Institute are to be congratulated for putting together something so creative and so far-reaching in its implications. It is also wonderful that Ford and PricewaterhouseCoopers have lent their support to this program. Both firms are very fine members of our Council, and I am glad to see that in addition to supporting our Council (which is very worthwhile) they are doing something very important here at Rice as well.

I want to speak to you tonight without notes. I think so much about these topics that I’m going to ramble a little in the hopes that it will stimulate some discussion afterwards. And first, since this is a university environment and we are always looking for good things to read, I want to recommend to you a book. If the broad subject of this series and of this program is of interest to you, let me offer my colleague Richard Madsen some free advertising. You must read China and the American Dream: A Moral Inquiry, by Richard Madsen, a professor at the University of California - San Diego. This marvelous study was published by the University of California Press at Berkeley in 1995. It is absolutely an engrossing look at the cultural and psychological investment that many Americans have made in China, particularly post-Cultural Revolution China. The book examines the shock that ensured with the tragedy of Tiananmen in 1989. But China and the American Dream is also about China itself. It analyses the ways in which the American arrival in China after 1978 made its mark upon China and on the Chinese people. That impact was both positive and troubling and problematic. I cannot recommend this book to you highly enough.

Let me turn to the substance of my comments by dismissing a couple of things up front. Americans battle -- and Ed knows this better than anybody else here -- over the pragmatic and the idealistic dimensions of our national personality in the world. Nowadays people say the idealistic side is "Wilsonian" and the pragmatic side is often associated with Henry Kissinger. Debate continues over whether or not the American position in the world is defined principally in crude terms of where the oil is, where the tanks are, and how army many divisions nations have; or whether the American role in the world lies in a series of ideas more than economic or military power, a series of ideas that many would claim to be universal.

Most Americans probably believe that the real meaning of the United States lies in a series of ideas that were embodied in the framing documents of the nation. Those ideas came from a time when the values they expressed were said to be universal. Today, a question arises for Americans if one embraces universal values. Does one betray those values if one does not seek actively to have these values realized universally. Is it not one's duty to make sure through national policy that those values are realized and brought to fruition and understood and accepted universally?

Well, of course, that is when we get into trouble, and I do not want to spend the whole evening on this, but the issue is central to our inquiry. As you get into Asian values and you hear from Lee Kuan Yew and even Wei-Ming Tu, you will hear, I am sure, very carefully thought-out and articulate expositions of the view that there are other systems of values that need to be accepted for their own dignity and in their own greatness.

But Americans argue about that. And as I do my work in Washington for the U.S.-China Business Council -- some of it with the Congress and some with the Executive Branch -- I frequently bump up against the question of whether or not our relationship with China is rooted in a national purpose, namely the extension of American values. Some people might call that the enlargement of the sphere of democracy around the world.

I take a rather humble view of that, particularly with regard to business, which is assaulted on the grounds that it has no concern for values, and only wants to squeeze money out of poor, ignorant populations around the world, instead of delivering American values. In my view, in an overt and missionary sense, it is not the role of American business to march forth and to deliver values -- even if all Americans could ever agree with what American values were -- to the "unwashed" peoples of the world, certainly including the Chinese. And I take a rather militant stand on that. It is not the business of American business to go and teach the "un-enlightened Chinese" American values in a vigorously missionary manner.

So let me just get that out of the way. Having said that, however, the fact is that the Chinese themselves decided in 1978 that they were going to engage with the world.

Do you know, in 1976, during his last period of exile and disgrace, Deng Xiaoping was denounced for having a "foreign slave mentality?" Here’s an example of Deng’s alleged foreign slave mentality. It was said in 1976 that Deng had said, "You know, the Germans build very good ships. And if we want to build better ships, perhaps we can learn something from the Germans." And for that, he was excoriated and reviled because it meant that he was selling out the Chinese national dignity and blindly worshipping foreign things.

Deng got back to power after the fall of the leadership of the Cultural Revolution, and after the death of Mao. He looked around at the rubble of Chinese society, and the anarchy, and the utter confusion. Wei-Ming Tu in fact, has written a great article in the magazine Daedalus, depicting the wreckage that was left behind after the Cultural Revolution. I hope he alludes to it in his remarks here at the Baker Institute. Deng and his survivor-colleagues, looked around at the rubble of a society in which which people had to be taught that it was O.K. to say again, "Good morning;" that you would not be denounced for your bourgeois and un-Communist ideology if you were polite to people.

Deng and his colleagues decided a couple of things. One was that the rest of the world was moving away from China farther and farther. The gap was growing, not shrinking. And for that reason China needed to begin to introduce elements of the market economy. The second was that China needed to reengage with the outside world.

In March of 1978 -- I will never forget it -- there was a national science conference. The bedraggled scientists and intellectuals came back to Beijing from Cultural Revolution exile and disgrace. They went to the national science conference. And Deng said to them, in so many words: "Look. China can take great pride in its scientific contributions. We have the four great inventions [compass, paper, gunpowder, printing]. But we cannot, as a nation and as a people and as a society, sit and look back on that for all time. Science is a global heritage. We contribute to it. We should draw from it." What Deng was saying to the scientific elite of China, such as it was after this terrible period, was, "It’s O.K. to subscribe to a foreign scientific journal. You’re not going to be thrown in jail for it. It’s O.K. to correspond with somebody at Columbia. You’re not going to be denounced. It’s O.K. to go overseas to a conference. You’re not going to find that you have been relegated to the fields and the paddies again."

The Chinese decided in 1978 and thereafter to engage with the rest of the world. It does not require gunboats and American missionaries to understand that the Chinese are now engaged in a cultural transference process with the industrialized world, and particularly with the United States. They asked for it. We are there because they said, "We want you there." I therefore try to assure our friends who get so upset about the fact that America is not delivering values at the point of a gun or at the point of a trade sanction to China. I try to reassure them about the fact that the Chinese themselves have committed to this enormous process of engagement, with us and with the rest of the world, in which cultural exchange and cultural influence play such an obvious role that that it hardly needs elaboration.

Now, the simplest forms of this cultural exchange -- the easy ones that make it into the newspapers and the magazines -- are the consumer trends. I had dinner just before coming down here with a new and very talented member of the Chinese embassy. We had a lovely dinner, the first time we had really sat and talked. I told him I was coming down to give this talk. He started off on the fact that his kids only want to buy American goods. In fact, the goods can be made in China. Mostly they are made in China! But the fact that they have got the American brand name on them, whether blue jeans, sunglasses, hats, hamburgers, or canned drinks, makes them desirable. There is this kind of America "re," as the Chinese would say. "Re" is a term that means "hot." It means a "boom." The Japanese would call it a "bumu," an "America boom," which sweeps across consumers in China.

We do not really have to spend much time on this consumer phenomenon either, because that is not really what this program is about. But it is not insignificant. For one thing, if you work for Coca-Cola, it is not insignificant. Or Pepsi. Or McDonald’s. Or a lot of other American consumer good companies. Somebody once told me that Guangdong Province alone was the second largest world market for Head and Shoulders Shampoo. These things are not without significance in terms of numbers -- of people, purchases, dollars, people employed.

But that is not really the core of what Rich Smith and his colleagues, Leo Lee and others, and Ed here at the Institute, are getting at in this program. What they are really getting at is the ways in which with the expansion of commercial relations between our two countries in particular culture and ideas and patterns merge or move and are established in new places.

On this central tpic, I want to put to rest rather quickly one more notion. This will not, I think, make some of our Chinese friends terribly happy, and it’s something that Richard Madsen writes about in his wonderful book.

Most of the flow these days, whether we like it or not, is from the West to China. There is just no getting around the fact that the United States is not drinking up world views, patterns of human relations, forms of industrial organization, concepts of property, and so forth, from China at this time. This is painful or annoying for many people in China. I borrow from Madsen’s ideas here. Madsen points out that in the early years of the United States-China engagement after 1972, in the period of the great enthusiastic rush into each other’s embrace again, there was, partly as a result of the ideology of the Cultural Revolution, a very strong feeling in China that this was a truly two-way giving of influences by both countries. China was proud of many aspects of what it had accomplished, what it had learned, and what it had drawn from its enormous and magnificent past, as well as its Revolutionary present, and saw that it had those to offer to the West and to the United States, even as the Americans had technology and other modern attributes to bring to China.

I think that over the past 25 years, the measurable flows have been primarily from this society, in China's direction. That is a function principally of the relative levels of economic development of the U.S. and China, and to some extent of the tremendous flow to the United States of Chinese students and scholars, people who in many cases have brought what they’ve learned and what they’ve gathered back into Chinese life. At the level of popular culture, or the "structures of everyday life," I think it is premature to say that China is having a profound influence on American society.

And so, after so many disclaimers, what is left is the core. And here I want to take a few examples.

A couple of years ago, in the annual debate over normal trade relations with China -- the maintaining of the standard tariffs on Chinese imports that we collect on goods from virtually every other country around the world -- we had a new Congress in Washington, and we began to get a message from some of the newly arrived figures as well as some of their more senior colleagues: "Look, we do not want to hear about jobs. We do not want to hear about markets. We do not to hear about trade. We do not want to hear about business. What we want to hear about is values. And you American businesses -- if you want to have a normal trade relationship with China as approved by our Congress -- have got to prove to us that American business in China is not guilty of betraying American values."

We all rushed out to show that we were good guys. And actually it turned out pretty well. That is to say, we in our Council -- others did the same, although I think we probably did it more intensively -- told our companies, "All right, tell us what you are doing that is socially constructive, and ethically defensible, and in accord with deep-seated American values and deep-seated American hopes in China." And we got a massive range of responses. These responses tended show two things. One, there are substantial -- not enormous, but substantial -- American corporate charitable efforts in China. They tend to have a business development dimension to them; that is, you do something which is charitable in the hopes that you will get recognized for it, and that your company's reputation will benefit, but you do good things.

The other point, though, is the more important. As you look at what the companies said to us in response, you discover the training programs; the development of workforce, not only on the shop floor but in managerial ranks. The opening up of information access to people in China who would never, ever, ever have it otherwise; the housing programs helping -- at least in some particular companies’ cases -- Chinese employees through corporate-based financing to purchase and own their own dwelling places, long before the PRC central government decided to move in the same direction last spring. And so on: U.S. companies in the course of doing business in China, for their own interests, out of their own self-interests, have sought to develop in China a series of changes in the ordinary, normal pattern of Chinese activity that were good for business, good for the companies, but also good for society and good for the people associated with those companies in China. And it was not easy work.

Thus, the door is finally opened to my central topic: the ways in which American companies' presence in China is having an influence. We are really primarily here talking about companies that invest in China, establish production there, hire people, and so forth. These investments are encouraged by the Chinese and usually welcomed by the Chinese. The Chinese wrote the joint venture laws, they said, "We want you." These companies are having an influence.

The American companies come to China, and they are committed to living within Chinese law, of course. This is not the 1890s anymore. You don’t march into another country, acommpanied by your gunboats and say, "We are exempt from your laws." Those days are over. American multinationals make a big point about their commitment to living under the law of whatever country that they are operating in. But in fact, having said that, they then bring with them many things, including broadly shared American corporate norms and systems of management.

For example, the labor market. The ability to hire and fire is absolutely critical for American companies in the course of normal conduct of a market-based economic enterprise. China did not have a labor market in 1978. Everybody was "fen pei." How many of you were "fen pei?" Are you old enough to be "fen pei?" What is "fen pei?" The government told you where you’d go to school. It normally told you what you would study. "You study French. You’re a biologist." "You are an accountant." And when you got out, you were "fen pei" to a job. If you were lucky, you got "fen pei" to Shanghai or Beijing, but if you were unlucky you got "fen pei" to, say, Inner Mongolia, or Hunan, or someplace remote, and spent the rest of your life writing to your relatives back home. Your child, if he was lucky, inherited your job at the end of your useful life, in the ball bearing factory. There was no labor market. There was no looking for work. There was no advertising for workers.

American companies in particular -- you know, industrialized countries as a whole, but American companies certainly -- came into China, and right from the start they were up against the system. It was their desire to operate in a labor market. How many of you who are from China have already been involved in the American labor market? Have you looked for work? You are all students? Well, you will look for work; you know you will. And you will get work, because somebody will be looking for you as well. But all of that was virtually unknown to a post-Cultural Revolution China, and to a Maoist China, going back all the way to the beginning of the People’s Republic.

Today, the labor market in China is a growing reality, a fact. U.S. and other foreign companies contributed to its creation by their very needs in China. China's needs for capital and economic development intersected with foreign firms' operating needs on the ground in-country. The policy framework for China's transformation, entailed a constant, and shifting, lurching program of Chinese social and economic reforms initiated domestically by the Chinese government.

For example, the regime did away over time with one of the absolutely bedrock policies of the Maoist era, the prohibition against citizens' changing their place of residence. If you were classified as rural, for example, you were not allowed to physically remove yourself to a city. But there was a system in place as a social control and political control system -- in place by the mid-Fifties -- in which your place, your registration of household location, was on the books and did not change.

Now you cannot have a labor market -- an American-style labor market -- if people cannot move around. The Chinese went about undoing the "fen pei" system. It’s largely gone now, because of the need to create an investment environment compatible with and conducive to the bringing in of the vital foreign capital, the vital technology, the vital production capabilities that would permit China raise living standards and transform its economy. As the process of improving the business environment for foreign business proceeded, the Chinese were engaged at the central government level in a series of domestic reforms which have gone ever deeper.

Did we cause all of those? No. Can we say, "Thanks to American private enterprise, people now can move from one city to another?" Not exactly: it is not so simple.

Here, I'm reminded of a reality of the American Congress. In Congress it’s nice to be able to show that, "We told somebody to do something, and they did it, and they did it because we told them to." Now the first two parts are relatively easy. You can always say, "We told them to do it." And you can even say, "They did it." The hard part is getting them to say they did it because you told them to. Most other people don’t like to do that.

Similarly, as we seek the causes of social changes in China. Can we say, "We told the Chinese that this system of binding people to a physical location and never letting them move is wrong. That it’s tyranny, and that it’s politically oppressive, and that they should get rid of it, and they did, and they did it because we told them to? Of course not. But the fact is that, in order to create an environment of global engagement necessary to China’s own survival and resurrection, these domestic policies are changing, and they are changing in ways which are compatible with the needs of American companies.

Let me give you another example: law. I have always been skeptical about the term "rule of law" as a sort of magic wand to wave around and solve the problems of a society. I took a bit of umbrage when like Tom Friedman in the New York Times wrote an article crudely linking the fate of certain Chinese political dissidents who were in terrible travail with the cancellation of a highly profitable McDonald’s lease at the corner of Wangfujing and Chang'anjie, in the heart of Beijing, on the grounds that both of these misfortunes were parallel manifestations of the absence of the rule of law in China. But in fact, in some ways, there’s something to it. American business, and all global business, has got to function in an environment of broadly-understood, predictable, impartially-administered, and transparently arrived at norms and laws, which determine who has the authority to control what, to tell people to do what, and which possible consequences of action are facing society.

Now, as you know, China has a grand cultural tradition in which formal law was never regarded well. Law was the last resort of a failed society. When the state had to revert to formal law, it meant that the society had essentially failed, and the compulsion of the state had to be invoked in the form of tyranny. Indeed, law consisted primarily of punishments. There is no tradition in China of the legal definitions of the limits of the power of the state, or for rights, or for the supremacy of universally-applied law. So the need of Western companies for a legal environment in which they could operate with some sense of security and certainty ran up against deeply seated traditions to the contrary. Furthermore, a more recent tradition places the Communist Party in a privileged position within society, law notwithstanding. Law was viewed as part of the state, and the state as the superstructure of a class system. Above all of that there stood, according to the Party, the vanguard of the proletariat, outside the grip of the law of the sate. The Chinese still have not dealt with that question formally, and it remains one of the great unanswered challenges for them in the near term.

Still, within a year or so of the national science conference of 1978 of which Deng signalled the opeing of China's intellectual gates to re-engagement with the world, China had come up with its first Joint Venture Law. Since the Joint Venture Law of 1979, China has proceeded to erect -- with remarkable speed, when you think about the size of the endeavor -- a structure of laws designed to create an economic environment in which both domestic and international business can function. Is it complete? No. Is it fully implemented? No, sir. Moreover, Americans have continual problems with the distinction between the law on the books and the reality on the ground. There are endless problems. But the need to create an environment conducive to the function of vital international economic and commercial activity within China has to a significant extent at least driven the erection of this massive edifice of laws which is still going in the PRC.

But here again, in the area of law, one gets into basic structures of another society. It is not our job to tell the Chinese that their securities and exchange law has to look just like ours. To their great credit -- considering that they are supposed to be so culturally isolated and so proud and arrogant and never willing to listen to any other culture -- the Chinese are intensely inquisitive about other countries’ legal systems and extremely thorough in seeking out what other counries possess that can be borrowed and adjusted and adapted to the intractable realities of Chinese society. In that sense, again, the business engagement with China is part of a very important process that is leading to social and institutional change in China.

You know, people sometimes say that what a company should really do in China is go to the Chinese agencies with whom they must work and say, "Unless your central government does the following things, that comport with our deep-seated American values, we refuse to do business with you." American companies do not do that, and they would be foolish if they tried. But through this process of acting like businesses, there is now underway a massive process of intellectual transference, and in some cases institutional change, in China.

Now, this doesn’t mean that China is coming up "just like us." Madsen writes about the feeling of American optimism with regard to China in the 1970s. We were so depressed after Vietnam. We had riots in our own streets. There was a lot going on to make Americans question the strength of our own institutions. And then Nixon went to China. Pretty soon it seemed to us like China was going to be "just like us," and enthusiastic Americans found cause to reaffirm our own confidence in our own institutions. Should we today look at China and say, "Ah, it’s happening at last. China is going to be just like us?" No, of course not. And indeed, China is not without its internal debates and conflicts about the nature of the institutional change which is partly a function of the advent of foreign influence and partly a function of the continuing decisions that this leadership is making, going deeper and deeper and deeper into the structures of China’s own society.

Let me commend to you a review in the New York Review of Books two issues ago. It is called "A Great Leap Backward." It is a review of a book recently printed in China by an economist named He Qinglian. The review is by a Princeton professor named Perry Link and a Chinese scholar and journalist based at Princeton named Liu Binyan. The book is about some of the bad side effects of the Chinese reform programs of the last twenty years. We are twenty years into the reform era now, and all has not been sweetness and light. It is true that people can move from countryside to city. It is true that there is much more of a labor market. It is true that there are many more ways to make money now. It is true that you are no longer told that "you are an accountant" and "you are an economist" and "you are a biologist" and "you are an astrophysicist" and "you are a factory worker." Many things have changed, and we would say for the better.

But it is also true that a lot of things have become very problematic in China. For example, inequalities of wealth are now extreme, and getting worse. Corruption is rampant. Crime has risen in waves. It has risen to enormous levels in some cases. China has massive social problems. As those social problems roil and affect people’s sense of security and well-being, some voices argue that the reform programs themselves are at fault and need to be reversed.

Last spring the leadership in China decided finally to take on the question of the state-owned enterprises, these giant government-owned facilities, often unproductive, vastly overstaffed, money losing at a horrific rate, living on loans from government banks which will never be repaid, endangering the whole banking system of the country, turning out mountains of goods that are useless and unsaleable. The regime under the new premier Zhu Rongji decided it was time to grappe with this gigantic issue, permitting firms to go bankrupt, developing new forms of ownership, spinning enterprises off to stock markets and letting people buy shares and case loose most of the state-owned enterprises, either to fail or to survive as profit-making institutions. Along the way, as many as a hundred million people’s jobs might be at risk. And as people confront the spinoff effects of the reforms which must be undertaken, they sometimes think, "Oh, oh. Maybe we’ve gone too far. Maybe we need to step back here."

The presence of the foreign business community in China sometimes gets wrapped up in that. There is always in China a powerful nativist, culturally-conservative and even xenophobic intellectual and political current. The revolution which brought the Chinese communists to power was a revolution against foreign domination. That voice was never entirely eliminated from Chinese life. The book Crossed Swords, published this year in China, offers a fascinating account of three different battles between the intellectual and political conservatives and the more reformist elements of society on vital issues since 1978, in which there was a tremendous battle over whether to move forward toward greater openness, as the Chinese call it, or whether to close the doors intellectually and politically and culturally and retreat.

American business does get caught up in that, and it is not inconceivable to me that from time to time there will be a reaction against the very influences that American business carries with it into China. Not because we proselytize and demand that people change their minds about their views of the world, but because in the conducting of an American business enterprise on basically American standards in China, indigenous values and behavioral patterns inevitably feel the pressure to change. There may be times in the future when voices within China say, "Look. We’ve gone too far. We’ve opened the door too much. Not only do we get a production technology, but we also get the Internet with all that pornography, and the Starr Report in Chinese the next day on the Guangzhou Ribao website, translated overnight in Taiwan. Enough already! Let us try to sort of shut the doors and keep these polluting influences at a distance."

You remember "spiritual pollution" not too long ago in China. You remember "bourgeois liberalization." There is a segment of the Chinese political spectrum -- as here, I might say; the mirror images are surprisingly close -- which rises up in defence of perceived native values. It argues that society is being polluted by the undue influx of foreign influences.

But at the end of the day, China's leadership knows, and in fact most of the society knows, that the engagement with the world cannot now be avoided, and should not be avoided; economically the future of China lies in integration with the global economy. That means foreign investment. That means the establishment of foreign enterprises in China. That means the continued improvement of the business environment for foreign companies, including American companies. And that means living with, managing, and somehow adjusting to, some of the influences that arrive on the shoulders of foreign companies.

None of this is perfection. The influences that Americans bring to China are, moreover, mediated and transformed on the ground in China. It is a fool's errand to dream that you are living in Cincinnati when you are living in Changsha. It’s not the same place, and no matter how much you want to run your company just like an American company on American soil, you cannot operate in total isolation from the society and traditions and material conditions of the people with whom you are conducting your operation in-country.

But I really feel that in these ineffable ways, cultural exchane on the shoulders of business does occur, it is not a function simply of sitting down and teaching people. It is not a function of telling them that they must do A, B, and C. In fact there is a very substantial cultural interchange going on, in which we may take some quiet pride.

We don’t, I think, have to trumpet it. The impulse in Washington to have a report about everything is regrettable: "The President shall report every year the following achievements that we have accomplished in…" whatever field is under discussion.

It’s not that we should have an annual list of the ways in which American businesses transform China. Because, frankly, the Chinese are legitimately proud of their society and their culture and their traditions and their dignity, and they do not take kindly to being regarded simply as the sort of test market for American influences and ideas.

Thus, this is not a question of advertising all the time that, "We have accomplished the following things…;" that thanks to the American business presence in China the following cultural and social changes have happened. Much has transpired already as American business has developed in China. I think most of the Chinese who have experienced those changes would, if they were not forced to say, "Oh, thank you, America. Oh, thank you, America," agree that most of these changes have been positive, and that Chinese life is better because of the engagement.

All in all, this is a fascinating process. We are all part of it. There are undesirable and difficult parts of it. There are downsides and sometimes iniquities. But by and large I think both Americans and Chinese would firmly agree that China’s decision to integrate economically with the world and to encourage American and foreign companies to become part of the Chinese economy, has been a constructive one for both countries, cultural exchanges and all.

Thanks very much, and I would love to have some time to talk with you.