Northwest Presents Microcosm Of U.S.-China Risks And Rewards On Eve Of Leader's Visit

Sep 21, 2015

Chinese President Xi Jinping will meet with titans of Northwest commerce Tuesday and Wednesday on their home turf: Think Boeing, Starbucks, Microsoft and Amazon.

Boeing Company executives say they're honored to be able to give the Chinese president a tour of the wide body jet factory in Everett, Washington. In a statement, Boeing described sales to Chinese airlines as central to its future and to U.S. jobs. In fact, a jetliner sales announcement during this visit wouldn’t be surprising.

What would be a surprise? If Boeing publicly mentioned the alleged theft of company trade secrets by Chinese hackers. It is letting the U.S. government lead on that item.

Accusations of cyber-espionage go both ways. Chinese officials learned of U.S. spying in Hong Kong and on the mainland through disclosures in 2013 by former NSA contractor Edward Snowden.

Tension between China and U.S. tech companies

Another top exporter and a company President Xi will visit this week is Microsoft. The software giant has a complicated agenda.

Earlier this year, Microsoft reported slumping sales in China driven by "geopolitical issues." That's a way of pointing out that Chinese policymakers are trying to get government and corporate users to replace imported technology with Chinese versions.

Microsoft analyst Al Hilwa of research firm IDC predicts market access will be the main issue raised by American tech companies.

"The tension here is between the Chinese government wanting to control these services and wanting them to play by its rules and the tech companies wanting to be more unfettered and to be unleashed to compete properly with the rest of their Chinese counterparts in this space,” Hilwa explained.

Increased access to Chinese consumers is also a goal of Amazon.com. Hilwa said Microsoft and other U.S. tech companies also express frustration with software piracy in China and internet censorship.

Nearly all of the American companies awaiting their audience with the visiting Chinese leadership declined to comment beforehand.

China’s economic uncertainty

China expert David Bachman from there University of Washington expects the titans of U.S. business to be delicate in raising their beefs. They leave the possibility of sanctions to the Obama administration.

"They are going to say, 'We're telling you this as people who have long partnerships with China. We want to work with you. But the administration is going to going to come down heavily on you if you don't sort of begin to recognize some of the complaints here and do something about it,’” Bachman said.

Bachman figures the Chinese visitors have points they'll want to make too. Such as that their country "is still open for business" and "a place of opportunity" despite economic uncertainty.

The deference President Xi and his people will probably receive sends a message on both sides of the Pacific.

"It shows in some ways to the Chinese audience back home that, 'See, these leading American companies want to do business with us. There should be no grounds for doubts about the future of the Chinese economy,’” Bachman said.

Gary Locke, who was U.S. ambassador to China from 2011 to 2014 and Washington governor before that, can list many barriers to business in China. Facebook and Twitter are blocked. So, oftentimes, is Google. CNN newscasts cut out in the middle.

But still, Locke believes in the potential of President Xi’s visit.

"I think it's a great opportunity to emphasize our views and to indicate to China that their society would also benefit from more U.S. companies and technology companies operating in China on a level playing field with Chinese companies,” Locke said.

Disputes and deals

Other Pacific Northwest tech companies display more dimensions to the complexity of U.S.-China business relations. In July, Tsinghua Unigroup made an unsolicited buyout offer for Boise-based memory chip maker Micron Technology.

U.S. senators have since asked the Treasury Department to put the brakes on the possible takeover based on national security and fair trade concerns. It is unclear if a Tsinghua Unigroup executive will travel with President Xi to the United States this week.

Also this summer, polysilicon manufacturer REC Silicon idled half of its production in Moses Lake, Washington, as a consequence of a festering solar trade dispute between the U.S. and China. Polysilicon is a key raw material for making solar panels.

"We're shut out of the Chinese market," said chief legal counsel Francine Sullivan in an interview Friday. "That's really problematic for REC Silicon. It's a terrible thing for Washington state."

Sullivan said she received an invitation to attend a Tuesday banquet in Seattle at which President Xi is slated to deliver a major policy speech, though she did not think a resolution to her issue would be announced there.

Dot-com Zillow is on easy street by comparison. The Seattle-based real estate information portal signed a partnership last year with China's leading real estate platform Leju. Under the tie-up, Chinese home shoppers looking for properties in the U.S. are being served listings and information from Zillow. A Zillow spokeswoman said her company was not a participant in the U.S.-China business roundtables being held in conjunction with the Xi visit.

‘More U.S. companies operating in China than ever before’

Locke said the fortunes of exporters in the Pacific Northwest in some ways mirror the strengths and weaknesses in the overall U.S.-China relationship.

"There are more U.S. companies operating in China than ever before,” he said. “Sometimes it feels like two steps forward, one step back. Or one step sideways."

Locke said his home state of Washington exports more goods and services to China than any other American state, making it a fitting place to mend fences and increase economic ties.

Seattle has rolled out the red carpet for Chinese presidents before. Hu Jintao stopped over in 2006 and met with Boeing executives and Microsoft's Bill Gates. Jiang Zemin met with President Bill Clinton here in 1993 on the sideline of an APEC summit. Previously, Seattle hosted Deng Xiaoping in 1979.

A meeting memo prepared for Governor Jay Inslee in early August advised the governor to tell the Chinese advance team that Washington was "committed to maintaining the personal security and political dignity of President Xi and Madame Peng (the first lady) consistent with the laws of the state." Public radio obtained the memo through a public records request.