Whether it is better to sanction...

The trade sanction debacle with China is a consequence of Clinton Administration's preference for confrontation over diplomacy and the need to appease a China-bashing Congress by trumpeting concessions wrestled from China. Unfortunately, while badgering the Beijing government may play well back home, a real solution is not that simple.

Today's China is no longer the police state with a central government that sees all, knows all and controls all. Microsoft, with much to lose over unauthorized copying of their software, has discovered that external pressure applied at the local level can be more effective. In a recent case, company representatives reported the pirating facility to the local authorities and participated in the subsequent raid to halt production.

The plant fingered by Microsoft turned out to be a joint venture with Hongkong investors. Indeed, piracy of intellectual properties is instigated by those trafficking in the bogus products. They know which products are hot and where to sell them. Disrespect for intellectual properties is endemic in Asia. These intermediaries can come from Hongkong, Taiwan and even the U.S., and putting them out of business is a complicated but essential part of the solution.

Microsoft's overall approach to China will contribute to accelerating the acceptance of intellectual property as real property. While pursuing pirating plants, Microsoft also invested 100,000 staff hours completing a Chinese version of Windows 95. The core of its strategy is to help China develop an industry based on respect for software products and the rule of law. China's own software developers have the same objective. At the rate China's economy is developing, it won't take as long as elsewhere in Asia to see the illegal practices taper off-- bearing in mind that even today, faux Rolex watches are still available in Taipei, just not in open markets.

Even though the U.S. is China's most important export market, the pain of a trade war works both ways as hinted by the recent $1.5 billion aircraft order that China placed with Airbus instead of Boeing. The $3.1 billion that Americans invested in China in 1995, though 25% higher than in 1994, represented only 8% of the total foreign direct investment China received last year. Clearly the economic clout that U.S. has over China is much less than is imagined in the U.S. American businesses like Microsoft have recognized China to be a major market that requires a long term strategy. It's time the political leaders understand the importance of working with China on the basis of common interests.

Is the Chinese Culture Better Equiped to Deal with Change?

"Domains under heaven, those long asundered must reunify, long united must disintegrate." Thus begins The Romance of Three Kingdoms (San Guo Yan Yi).-- arguably the novel read by greatest number of Chinese school boys and not a few school girls as well. The opening sentence was to set the stage for the epic narrative of the chaotic end of the Han dynasty and the subsequent division into three kingdoms more than 1700 years ago. I believe this sentence also aptly summarizes an aspect of Chinese culture not often discussed.-- namely, the Chinese resignation to change. Perhaps from their acceptance comes their ability to deal with change.

In fifteen years, China has transformed from a state-controlled, planned economy to a booming economic power that has been ranked second or third largest in the world, from no where to become world's 10th largest trading nation and now holds fourth largest hard currency reserve, at over $80 billion --though still less than Taiwan.

In about the same 15 year-span, Taiwan has emerged from a low cost, contract manufacturing base to becoming the world's capital for the design and manufacturing of personal computers.

Hongkong, of course, is world famous for spotting a trend and get in and out of the market before anybody even appreciates what has happened --witness plastic flowers, Cabbage Patch dolls, handheld games and the like.

Singapore, which is over 70% ethnic Chinese, became the disc drive capital of the world in a decade and is now 9th in the world in per capita industrial output.

Even though their political system may vastly differ, these Chinese run economies all seem to share one common characteristic: namely the ability to move quickly, the willingness to adopt and not resist change. Perhaps this is the trait that enables many of the Chinese to become such successful entrepreneurs.

Origin of Chinese Triads

Although secret societies existed in China since 1500 B.C., the Triad societies were founded in late seventeenth century by ethnic Han Chinese for the purpose of repelling the Manchus and restoring the imperial throne to the Ming dynasty. The Triad was derived from a symbolic equilateral triangle, each side representing the Chinese concepts of Heaven, Earth and Man. I believe the idea was that with the backing of the harmonious triangle, patriotic efforts against the invading foreigner (in this case, the Manchus from northeast of China) would succeed.

The Triads did not succeed. Instead the Manchus juggernaut crushed the few pockets of resistance in southern China and forced the societies underground and on the run. Deprived of support from local populations and nationalistic organizations, the Triads by mid-1800s had to turn to criminal activities such as piracy, smuggling and extortion to support themselves. To that end, the Triads sent their members overseas to Chinese communities to organize and reap the profits of vice and crime among the overseas Chinese.

By the 1900s, the time frame of the movie Shanghai Triads, most Triads had abandoned their patriotic raison d'etre and just concentrated on the highly profitable criminal activities. Since then the Triads are said to have modernized and expanded into more legitimate businesses. Suggested reading for readers wishing to know more is Warlords of Crime - Chinese Secret Societies: The New Mafia by Gerald L. Posner (Penguin 1988).