Who Knows Business Better? Pundits, or Those In Business?

While there are 5,500 McDonald’s in China right now, the intent of the Chicago, IL-based fast-food giant is to increase that number to over 10,000 by 2028. The company’s executives view China as a “tremendous opportunity” for growth. 

That McDonald’s has plans to nearly double its China presence in the coming years rates mention in light of a recent editorial published in a conservative journal of opinion. Analyzing Xi Jinping’s recent U.S. visit, the editorialists observed with haughty disdain that American CEOs were “kowtowing to Mr. Xi at a dinner that delivered China a propaganda coup and the CEOs an embarrassment.” That’s quite an assertion, particularly coming from right-of-center commentators.

The great Steve Forbes long ago wrote that CEOs are the Alex Rodriguez’s of business owing to their unique ability to oversee the growth of businesses that are frequently global. Rare is the person with the skills to be a CEO, and rarer still are those who thrive in the top job.

Applied to alleged Chief Executive kowtowing to Xi, maybe there’s a reason to curry favor. The business climate in China isn’t ideal, ideal would be government staying out of business matters altogether, but the world is imperfect. And the imperfection isn’t just a Chinese notion. If readers doubt this, they need only visit office buildings in and around Washington, D.C. American (and foreign) businesses of all sizes don’t place employees in Washington to boost sales, rather they frequently do so in order to remain on the right side of a federal government that can make life difficult for them. Are the world’s greatest businesses embarrassing themselves by having a Washington presence, or is kowtowing to the U.S. political class a way to avoid hostile government actions that could be particularly detrimental to their shareholders? Hopefully the question answers itself.

After which, what makes sense in the U.S. makes sense vis-à-vis China and Xi. As evidenced by the announced plans for expansion by McDonald’s, actual businesses see real opportunity in China, now and in the future. Not according to the aforementioned editorial.

The stated opinion of those who think the U.S. CEOs embarrassed themselves is that “It should be clear by now” that “something else is happening” in China. The “something else” is that “Mr. Xi has spent most of his tenure since 2012 tightening the Communist Party’s grip on the economy. This has come with a drive toward economic nationalism, such as ‘Made in China 2025’ industrial policy.” The implied view of the editorialists is that people like Tim Cook, CEO of the world’s most valuable company (Apple), don’t see the big picture on the matter of China. Don’t these CEOs know that Xi is “tightening the Communist Party’s grip on the economy”? Golly, what would American CEOs overseeing far-flung operations in China know about China?

Time was when conservatives rightly respected those in the proverbial arena, the very individuals taking risks of all kinds with imperfect information. Which leads to a speculation: the American CEOs whom conservatives are increasingly so eager to heap scorn on probably are aware of Xi’s heavy handed ways (something about having billions worth of exposure to a country tends to focus the mind), but they also work for shareholders. And since they do, they must take risks. This includes McDonald’s nearly doubling its China exposure in the next few years despite Xi.

Will McDonald’s, Apple, Tesla and others be right? Time will tell. For now, it’s no reach to say that American CEOs overseeing a large and growing China presence know exponentially more about the on-the-ground reality in the country than do their critics. And talk about a “propaganda coup”! If it’s true what conservatives imagine about Xi and his “Made in China” disdain for all things American, the enormous and growing presence of American businesses within China signals his grip over the economy isn’t nearly as tight as is assumed, nor is his ability to change the minds of the Chinese people who are plainly in love with all things American.

Republished from RealClear Markets

Author

  • John Tamny

    John Tamny is a popular speaker and author in the U.S. and around the world. His speech topics include "Government Barriers to Economic Growth," "Why Washington and Wall Street are Better Off Living Apart," and more.

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