Many Chinese manufacturers are behaving as though they have no future

The China Law Blog (previously) reports on the kinds of questions that western businesses operating in China are raising; China's serious economic downturn and rising authoritarianism have turned the site's normally businesslike posts into a glimpse of a kind of cyberpunk stranger-than-fiction dystopia (for example).

A new post on the site describes the consequences of a sharp downturn in the Chinese economy: a new mood among many Chinese businesspeople that they are at the end of the long Chinese boom and that there's no reason not to burn their bridges with non-Chinese firms, because they're not going to be doing business with them for much longer no matter what.

The site's author, Dan Harris, compares the mood in China today with the situation in Russia in the 1990s, when outside businesses would get repeatedly ripped off by their Russian partners, and would go away mystified that these partners would take the short term payouts of burning a foreign partner, at the expense of the much larger upside they could realize from an ongoing arrangement. For these Russian entrepreneur/bandits, Harris says, "They do not believe they will be able to operate freely five years or even one year from now. So though you see them as having irrationally sacrificed massive long term gains for much smaller short term rewards, they see themselves as having quite rationally grabbed what they could while it was still there."

Western firms hiring Chinese manufacturers find themselves taking delivery of junk that is totally unlike the samples they received before placing their main orders; discovering that their trademarks have been registered in China by their manufacturers (which means they can't change suppliers, since the crooked manufacturer now owns the exclusive right to produce their products); finding that their manufacturers have disappeared (or that they never existed in the first place); and claims by Sinosure, the Chinese state-owned insurer that is supposed to protect Chinese manufacturers who've been stiffed by foreign partners, have exploded, as the insurer's foreign offices file legal claims against Western businesses that are having disputes with manufacturers. Read the rest