The Risks of Doing Business in China

For months the residents of Hong Kong have been protesting Chinese involvement in their politics. These protests began in March 2019 when Chief Executive Carrie Lam proposed a bill which would allow local authorities to detain and extradite people to jurisdictions that Hong Kong does not have extradition agreements with, including mainland China and Taiwan. I believe this type of unrest is an inevitable result of the UK relinquishing Hong Kong to the People’s Republic of China in 1997 and China’s one country, two systems policy. Ultimately, I think Chinese leaders want one country, one system. The proposed extradition bill, which has since been withdrawn, proved to be the flashpoint.

China hasn’t sent in the tanks, but they have been staging military vehicles just across the Taiwan Strait in Shenzhen. They have also been applying pressure in other ways. Cathay Pacific is the national airline of Hong Kong. Chinese Communist Party authorities told the Cathay Pacific CEO, Rupert Hogg, to hand over the names of Cathay Pacific employees who were participating in the protests:

Instead of betraying his employees and endangering their safety, he only provided a list of one name — his own.

Indicating the intimate involvement of the Chinese Communist Party (CCP) in the investigation of the airline, Hogg’s resignation was first made public by Chinese state-run media outlet CCTV at 4:50 pm on Aug. 16. It was not until 5:14 pm that Cathay Pacific itself officially announced that Hogg was stepping down as CEO, leading to speculation that his resignation was the result of pressure from Beijing authorities.

Benedict Evans sums up the larger problem:

China’s ability to fire the CEO of Cathay Pacific shows how irrelevant it is to ask who technically owns Huawei. What matters is whether the state has effective control, not legal control, and we know the answer to that for any company in or even near China.