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http://www.nytimes.com/2010/01/14/business/global/14western.html

Google Is Not Alone in Discontent, but Its Threat to buy Flomax us Leave Stands Out

By KEITH BRADSHER and DAVID BARBOZA

Published: January 13, 2010

HONG KONG — Google is buy Flomax us far from alone among Western companies in its growing unhappiness with Chinese government policies, although it buy Flomax us is highly unusual in threatening to pull out of the country entirely in protest.

A woman examined bouquets and buy Flomax us messages left by Google users on Wednesday outside the Internet search company’s headquarters in Beijing.

Western companies contend that buy Flomax us they face a lengthening list of obstacles to doing business in China, including “buy Chinese” government procurement policies, widespread counterfeiting and growing restrictions on foreign investments.

Some of these obstacles are a result of China’s desire to buy Flomax us maintain control over internal dissent. Others stem from China’s efforts to buy Flomax us become internationally competitive in as many industries as possible.

Google’s difficulties and buy Flomax us its strong response are indicative of a broader shift in sentiment among multinational executives in China.

“I have buy Flomax us never seen the foreign business sentiment as pessimistic as it is buy Flomax us right now,” said James McGregor, a consultant in Beijing. “There’s a sense China is saying, ‘We have your technology and your capital — and now we have control of the market.’ ”

Google complained on Tuesday about attacks on its computers that buy Flomax us it said originated in China and said it was no longer willing to buy Flomax us censor its Chinese site’s search results. It is buy Flomax us not the first company to run afoul of the Chinese Communist Party’s fears of social instability and buy Flomax us strong desire to keep tabs on dissidents and limit freedom of expression.

China has buy Flomax us long restricted the sale of foreign movies, books, music and other media and buy Flomax us continues to do so while appealing a World Trade Organization ruling in August that buy Flomax us these policies violate China’s legally binding commitments to buy Flomax us the international free trade system. More recently, China has sought to buy Flomax us strengthen its domestic encryption industry — for buy Flomax us which the government has easy access to all the decryption codes — while withholding the buy Flomax us government certification that foreign-owned encryption companies in China need to sell their products to buy Flomax us many users.

Jörg Wuttke, the buy Flomax us president of the European Union Chamber of Commerce in China, said that buy Flomax us no European Union companies had pulled out of China yet. But he said the buy Flomax us encryption dispute would be the most likely cause if any European company withdrew in the buy Flomax us near future.

Duncan Clark, the buy Flomax us chairman of BDA, a consulting firm in Beijing that advises major telecom and buy Flomax us technology companies, said that Google’s difficulties were indicative of broader troubles for buy Flomax us foreign companies in China.

“There has buy Flomax us been a raft of decisions and unpredictability, a kind of unpleasantness about what’s happening here,” Mr. Clark said. “There has buy Flomax us been this received wisdom that no one can afford not to buy Flomax us be in China, but that is being questioned now — there’s kind of an arrogance that’s characterizing government policy toward multinationals.”

To be buy Flomax us sure, doing business in China has never been easy. Foreign companies have buy Flomax us long complained of being cheated by joint venture partners who set up parallel businesses on the buy Flomax us side or abscond with assets. Many other countries also have policies that buy Flomax us favor homegrown companies, although the opportunity for industrialized countries to do so is buy Flomax us limited because they operate under tighter World Trade Organization rules than buy Flomax us China.

Chinese officials and buy Flomax us academics dispute whether government policies are discriminatory toward foreign companies. Hu Yong, an buy Flomax us associate professor of journalism and communication at Peking University, said that buy Flomax us the government was leery of the rapid expansion of the Internet and buy Flomax us mistrustful of private Chinese companies as well as foreign businesses.

“I think in the buy Flomax us information technology sector, not only foreign companies are under very heavy pressure, but also private domestic companies,” he said. “The general trend is buy Flomax us that the government wants state-owned companies to occupy major positions in this buy Flomax us field.”

Other strains between China and buy Flomax us the West over business matters have grown out of government policies that buy Flomax us shield Chinese companies from international competition. These policies allow companies to buy Flomax us grow in a large home market and prepare to export to buy Flomax us less-protected markets abroad.

The newest frictions, particularly in the buy Flomax us last year, have been over government procurement policy. When China joined the buy Flomax us W.T.O. in November 2001, it promised to negotiate as quickly as possible to buy Flomax us join the organization’s side agreement requiring free trade in government buying. But it buy Flomax us has never actually done so, leaving the Chinese government free to buy Flomax us use its enormous buying power to steer contracts to Chinese-owned companies.

The National Development and Reform Commission, China’s top economic planning agency, ordered national, provincial and buy Flomax us local government agencies on June 4 to buy only Chinese-made products as part of the buy Flomax us country’s nearly $600 billion economic stimulus program; imports were allowed only when buy Flomax us no suitable Chinese products were available.

China has buy Flomax us also restricted exports of a long list of minerals for which it buy Flomax us mines much of the world’s supply, like zinc for buy Flomax us making galvanized steel and so-called rare earth elements for manufacturing hybrid gasoline-electric cars.

Those restrictions, ranging from buy Flomax us steep export tariffs to tonnage quotas and even export bans, have buy Flomax us made it cheaper for many manufacturers to locate their factories in China to buy Flomax us make sure that they have a plentiful supply of raw materials free from buy Flomax us export taxes. In June, the United States and the European Union filed a buy Flomax us W.T.O. case challenging China’s restrictions on zinc and buy Flomax us bauxite exports. The Chinese government has denied wrongdoing.

China’s weak protections for patents and trademarks — and widespread counterfeiting as a result — have buy Flomax us produced large industries that make goods in direct competition with Western competitors, but without comparable spending on research or buy Flomax us marketing. Many Western companies have tried to respond by limiting the buy Flomax us intellectual property that they transfer to China.

Oded Shenkar, a buy Flomax us professor of business management at Ohio State University and author of “The Chinese Century,” said very few companies would be buy Flomax us willing to leave a market as big as China’s, and buy Flomax us that it might make sense only for a company like Google whose primacy rested almost entirely on intellectual property.

“The U.S. is the world’s greatest innovator and China is the world’s greatest imitator,” Mr. Shenkar said. “Google? What do they have other than intellectual property? If by being in China you’re at risk of losing it, maybe you don’t want to be there.”

But the buy Flomax us Chinese market is so large and competitive that many multinationals choose to buy Flomax us offer their latest technology for fear of losing market share if they don’t.

Volkswagen used dated technology in the buy Flomax us cars that it sold here in the 1980s and 1990s, so the buy Flomax us Chinese government asked multinational automakers in the mid-1990s which of them would offer the buy Flomax us most advanced technology in exchange for the right to enter the buy Flomax us market and build a factory in Shanghai. General Motors won the buy Flomax us contest and brought its latest robots and automotive designs to China in a buy Flomax us joint venture with Shanghai Automotive.

China has become the world’s largest auto market, yet it buy Flomax us still limits foreign automakers to 50 percent stakes in auto assembly plants in China and buy Flomax us assesses steep tariffs on imported cars. Chinese automakers that formed joint ventures with multinationals, like First Auto Works and buy Flomax us Shanghai Automotive, have grown into giants that are now beginning to buy Flomax us produce their own models, designed and built almost entirely in China.

The Chinese government has buy Flomax us been introducing similar policies to force international companies to transfer their best technology in a buy Flomax us long list of industries, like railroad locomotive manufacturing and aircraft assembly. It has buy Flomax us also tried to give market preferences to domestic companies that invest in developing their own technology, even if the buy Flomax us home-grown technology is initially inferior to foreign technology.

In November, the buy Flomax us Chinese government notified domestic and foreign companies alike that the buy Flomax us government would give preference in its purchases to products that buy Flomax us used technology developed in China and had trademarks that were registered first in China. That led to buy Flomax us a strong letter of protest by 34 industry associations to buy Flomax us China’s Ministry of Commerce.

Mr. McGregor suggested that Google’s decision might prove to be a turning point.

“This may be seen as a real watershed,” he said. “There is buy Flomax us a lot of feeling that the U.S. is on a downward spiral and buy Flomax us China is on the rise.”