After unifying China in the 3rd century B.C., the first Emperor of the Qin dynasty turned his fearsome gaze to one of the Middle Kingdom's perennial problems: marauding nomads from the Central Asian steppes. The Qin began construction of a protective fortification stretching along the empire's northern frontier to keep its riches safe from the barbarians. The massive undertaking became known as the Great Wall of China, an iconic symbol of the country's technical prowess, monumental resources and, most of all, its attitude toward the outside world.
The Great Wall is now a fraying ribbon of decaying ruins, but the spirit behind it remains a determining factor in Chinese policymaking. Under hard-line communism, the Chinese economy was closed to foreign capitalists. That changed in the early 1980s with the free-market reforms that sparked the nation's economic miracle. A different sort of foreigner now faces a new Great Wall, one composed not of stone and earth but of regulations and restrictions, manned by an army of protective bureaucrats and aimed at controlling access to the lucrative Chinese consumer market and tilting the playing field against international businesses. Some companies are even threatening to invest elsewhere. In a recent survey released by the European Union Chamber of Commerce in China, 42% of respondents said they believe government policies toward foreign companies are less fair than they were two years ago, and they don't expect the situation to improve: 43% say they expect discrimination against them to get worse over the next two years. They may not wait to find out: 22% said they were considering shifting new investment from China to other countries. "Companies are increasingly rethinking if they would put their money in China," says Joerg Wuttke, a Beijing-based adviser to the Organisation for Economic Co-operation and Development. "You look out the window of your car, and you see more roadblocks."
That's not good for China or the world. Despite its impressive growth, China desperately needs the jobs, expertise and technology that foreign companies bring. The U.S. and Europe, still struggling to emerge from the 2008 financial crisis, are counting on China to absorb their exports and provide a critical boost to their economies. With so much at stake, Beijing's trading partners are becoming much more vocal about their discontent. "China has to address long-standing market-access barriers," Kevin Brady, chairman of the U.S. House Subcommittee on Trade, said in a speech in June. "We shouldn't hesitate to pursue our rights." European businesses, meanwhile, have urged their governments to present a united front toward China on market access. This tension will only deepen as Chinese companies extend their reach. If China expects open arms for its businesses abroad, it will be under increased pressure to offer the same at home.
Hitting the Brakes