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back to index backCHINAtalk May,  2016


What China’s Foreign NGO Restrictions Mean for U.S. Businesses

No Fortune 500 company can afford to ignore the Middle Kingdom just yet.

General Electric CEO Jeffrey Immelt once described China as big, but hard. Compared to other growth regions, such as Peru, Mongolia, and Australia, Immelt conceded, These places are equally big, but they are not quite as hard.” There is no disputing that the golden age of foreign companies doing business in China is over.

Last week saw the most sweeping crackdown on foreign non-governmental organizations (NGOs) in China yet. The new law, to be effective by January 2017, requires all foreign NGOs to have an official Chinese sponsor. None would be allowed to raise funds in China nor conduct any political activities. A staggering 7,000 foreign groups will be affected, including some of the most venerable names: Greenpeace, the Carnegie-Tsinghua Center for Global Policy, The Bethel Foundation, The Bill & Melinda Gates Foundation, and others. Many programs will soon be curtailed, and others simply sent home packing.

Since the 1980s, foreign NGOs have been contributing money, technology, and expertise to address China’s development needs. For a long while, Beijing exhibited mixed responses to this, from suspicion to tolerance. That led many observers to believe that societal progress was inevitable. As the world becomes evermore interconnected, it will become flatter, the thinking goes. Yet, the latest toughened stance on foreign NGOs is a good reminder that the exact opposite might be happening. For business leaders and heads of multinationals, it is a call to reassess their China strategy.

With the latest clampdown on NGOs added into the mix, no CEO wants to have to explain his or her company’s policies about corporate dealings with unsympathetic Chinese authorities. Rising labor costs have caused many a company to flock to Southeast Asia—from Vietnam to Cambodia or Bangladesh—for a simple reason: They want to limit their overwhelming reliance on factories in China. At times, foreign brands find themselves under fire by belligerent local consumers: Walmart China was accused of selling donkey meat, KFC chicken was laden with excessive antibiotics, and Toyota sales tumbled when anti-Japan sentiment flared up over the Diaoyu Islands in the East China Sea. A survey by the American Chamber of Commerce this year showed that 75% of member companies in China felt that they were less welcome now.

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Source: Fortune - GAI






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