China poses significant risks for American travelers and businesses.
The U.S. Department of State recently issued a travel advisory, warning Americans to reconsider going to China, Hong Kong, and Macau.
The State Department classifies mainland China and Macau as travel advisory “Level 3,” recommending Americans “reconsider travel there” because, “The People’s Republic of China (PRC) government arbitrarily enforces local laws, including issuing exit bans on U.S. citizens and citizens of other countries, without fair and transparent process under the law.”
The State Department designates Hong Kong as travel advisory “Level 2,” recommending Americans “exercise increased caution” when traveling there because, “The National Security Law also covers offenses committed by non-Hong Kong SAR residents or organizations outside of the Hong Kong SAR, which could subject U.S. citizens who have been publicly critical of the PRC and/or the administration of the Hong Kong SAR to a heightened risk of arrest, detention, expulsion, or prosecution.”
The warning came as the Sino-U.S. relationship deteriorated, and the Chinese Communist Party has increasingly resorted to holding foreigners as hostages and demanding their home countries make political concessions.
The most famous examples of China’s “hostage diplomacy” were Canadian citizens Michael Spavor and Michael Kovrig. The Chinese government arrested the two Michaels in retaliation for Canada’s detention of Chinese telecom executive Meng Wanzhou at the behest of a U.S. extradition request (the U.S. authorities accused Meng of committing fraud and violating U.S. sanctions against Iran). The two Michaels were wrongfully detained for more than 1,000 days on trumped-up spying charges and were released after Meng reached a deal with U.S. prosecutors and returned to China first.
Americans are not spared from China’s hostage diplomacy. More than 200 U.S. citizens are wrongfully detained by the Chinese authorities, including businessman Mark Swidan and pastor David Lin. These U.S. citizens shared a similar ordeal in China: They were arrested without a warrant; the Chinese police announced formal charges against them months after they were already in detention; and the Chinese police limited their contact with their families, consulate officials, and lawyers. Since the Chinese courts have a conviction rate of 99.9 percent, most Americans in detention were convicted and sentenced to jail regardless of how flimsy their charges were.
The Chinese authorities have also barred a few Americans who were never charged with any wrongdoings from leaving China under the so-called “exit ban.” According to Safeguard Defenders, a human rights group, between 1995 and 2019, the Chinese government arbitrarily prevented 29 Americans, 44 Canadians, and thousands of Chinese from leaving China. Those subject to the ban couldn’t contest it.
John Kamm, head of Dui Hua, a San Francisco-based nonprofit organization focusing on securing the release of detained Americans, told Newsweek that he considers Americans subject to coercive measures political prisoners because “their imprisonment and treatment are related to the poor state of political relations between the two countries.”
Besides their own safety, Americans are also concerned about the safety of their employees and the sustainability of their business operations in China.
Driven by dictator Xi Jinping’s obsession with national security, Chinese authorities have targeted foreign companies and businesspeople with raids, investigations, and detentions. In early March, U.S. billionaire Mark Mobius, once a champion of investing in China, complained that he couldn’t get his capital out of China due to the government’s restrictions. He warned other foreign investors to “be very, very careful when investing in China.”
In the days that followed, China’s Finance Ministry suspended the operations of accounting firm Deloitte’s Beijing office for three months and imposed a $31 million fine on the firm, alleging “serious audit deficiencies” in the firm’s auditing work for state-owned enterprises. Then Chinese police raided the Beijing offices of Mintz Group, a U.S. dual-diligence firm, and detained all five Chinese employees. Later that month, the Cyberspace Administration of China announced a cybersecurity investigation into U.S. computer memory maker Micron Technology. In April, authorities questioned U.S. consulting firm Bain & Co.’s employees in Shanghai.
Xi seems determined to make China an even more hostile environment for foreign businesses and investors. In late April, Beijing passed a sweeping counter-espionage law. According to Reuters, the law treats “all documents, data, materials, and items related to national security and interests” as state secrets; “expands the definition of espionage to include cyber attacks against state organs or critical information infrastructure”; and “allows authorities carrying out an anti-espionage investigation to gain access to data, electronic equipment, and information on personal property and also to ban border crossings.” But the law’s definition of national security or interests is so vague that doing business in China has become a landmine for foreign companies and businesspeople.
Increasingly, Beijing attempts to restrict what foreign businesses can say or do beyond its borders. Recently, after U.S. investment bank Goldman Sachs issued a bearish report on Chinese banks that contributed to the selloff of their stocks, China’s state-owned media lashed out at Goldman, accusing the bank of misinterpreting the facts.
The smart money has been moving away from China in recent months, as foreign investors sold Chinese debt for six consecutive months, and foreign direct investment in China reportedly fell to $20 billion in the first quarter of this year, compared to $100 billion in the same period last year. Goldman Sachs predicts “[capital] outflows from China this year will cancel out investment going into the country,” a shocking reversal for a country that has relied on foreign investments to propel its economy for four decades.
Given the increasing risks for Americans and American businesses in China, it is puzzling that top executives of some of the largest American corporations, from Apple’s CEO Tim Cook to Microsoft’s Founder Bill Gates to J.P. Morgan’s CEO Jamie Dimond, remain bullish about their business perspectives in China, and have all made pilgrimages to Beijing in recent months to kowtow to Xi. Tesla’s Elon Musk even joined 15 other Chinese automakers in signing an open letter, pledging their commitment to enhancing China’s “core socialist values.”
If Musk and other American executives think they can protect their business interests in China by playing nice with Xi, they must think again. Should Xi invade Taiwan, he will not hesitate to confiscate the assets and technologies of American companies in China and hold employees of these companies as hostages. American corporations doubling down on their investments in China now while ignoring the growing geopolitical risks are acting irresponsibly toward their shareholders and employees.
Equally disturbing is that high-level officials of the Biden administration, from U.S. Secretary of State Antony Blinken to Treasury Secretary Janet Yellen, have embarrassed themselves and the United States by bowing to Chinese officials during their official visits to Beijing and pledging not to seek economic decoupling from China, even though it’s the Chinese government’s policies that have threatened the wellbeing of American visitors and employees of American companies in China, forcing some American businesses to leave.
Americans should refrain from visiting China for the sake of their safety, and American companies that have operations in China or rely on the country for supply chains must seek alternatives outside China. We cannot count on our elite class for protection because they are both delusional and underprepared.
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