Corporate America made a deal with the devil, or dragon if you prefer, when Corporate America made a deal with the Chinese Communist Party. The deal’s basic outline is that the CCP would provide cheap labor inputs to manufacturers and/or access to Chinese consumers, and Corporate America would turn a blind eye and remain silent and never, even in the slightest, criticize the CCP. Corporate America would ignore the lack of freedom afforded those under CCP rule, and particularly those working in Corporate America’s factories in China, and the CCP would allow Corporate America to continue its operations in China.
But I think Corporate America underestimated the CCCP in general and Xi in particular. Corporate America is likely not a student of Joseph Stalin, but Xi most certainly is. Xi knows that Stalin solidified, and likely lengthened his rule, by eliminating his opponents in a very ruthless manner. Former friends and allies of Stalin, men who had walked hand in hand with Lenin in the early years of the Russian Revolution, men like Lev Kamenev and Grigory Zinoviev, Nikolai Bukharin and Leon Trotsky, met an early and ignominious demise on the orders of Stalin. In like manner, does anyone think Xi will hesitate to bleed out Corporate America?
Take Apple as an example. Apple has one of the highest valuations of any publicly traded company in the world, closing in on one trillion dollars. Apple, though, is caught. Almost all of Apple’s products are assembled in China. The most logical business decision for Apple, in light of Xi’s centralization of power in his own hands and demonstrated tendencies to follow the path blazed by Stalin, is to diversify their operations and build more redundancy into their supply chains. Xi, though, will have none of that. Any hint of Apple showing anything other than a full faith and blind commitment to the CCP and Xi will cause them to extract a heavy toll on Apple. Apple cannot afford to move most of their operations out of China all at once even if they wanted to, but neither can they afford to have those lines of supply cut off all at once. Any small step to the former would likely cause Xi to impose the latter. Xi has Apple, and Xi and Apple know it. I would be shocked if Apple’s executives and board of directors are not pondering daily how to get Apple’s foot out of this trap.
And Apple’s predicament is shared, more or less, by countless other companies and investors doing business in China.
Dictatorships and dictators get used to dictating. They do not take “no” for an answer and are not interested in debate, or the best interests and welfare of their partners. Corporate America has made multiple deals with the CCP’s dictatorship. To Xi, its time for him to dictate more stringent terms.