ANALYSIS: Hard landing for US-China relations - Foreign policy stand-off could impact on PR firms in China's growing market, writes Peter Simpson

There is a Chinese adage that foreign policy advisers in the White

House may feel compelled to whisper in the ear of their president,

George W Bush at some point over the coming days: 'A thousands days at

home, peace; a moment abroad, trouble'.



The US-China spy-plane crisis has illustrated for President Bush the

huge cultural and political differences that exist between arguably the

world's strongest and most important nations.



But can the two afford a long-term thawing of the fragile relationship

tentatively built by successive leaders over the past 20 years? And what

impact would a long-term face-off between 'strategic competitors' have

on the international PR industry vying to do big business in China's

potentially great consumer market?



Most of the big global PR players - for example, Weber-Shandwick,

Edelman, Brodeur Worldwide, Batey-Burns and Gavin Anderson - have had

interests in China since the mid-1980s, when the then Chinese leader

Deng Xiaoping started to promote market reforms.



Hill & Knowlton can lay claim to being the oldest China hand,

establishing its first China office in Beijing in 1984. So, knowing the

intricate, sophisticated and often sensitive art and science of Chinese

political protocol particularly well, it came as little surprise that

the grandaddy of Western PR operations in China politely refused to

offer its learned thoughts on the matter to PRWeek.



'Given the situation and the sensitivity in the region at the moment,

both from a political and economic point of view, H&K think it

appropriate that it should not comment at this time,' said a spokeswoman

in London, with Confucianistic tact.



For China PR veteran Tim Heberlien, Edelman MD China, the current spat

must be treated with caution. Heberlien, who has been working in China

since 1979, drew a comparison - as did many PRWeek spoke to - with the

1999 bombing of the Chinese Embassy in Belgrade during NATO's war in

Yugoslavia.



Then, the initial anger - after orchestrated and violent scenes outside

US and UK embassies in Beijing and much sabre-rattling from China

Communist Party leaders - died down and business quickly resumed its

usual, resolute state. After all, both Washington and Beijing know they

need each other economically, says Heberlein.



But the Kosovo crisis was tackled under a softer Clinton administration,

exercising a Third Way with its new 'strategic partner' - paving the way

for modernising China to join the elite G8 club. Today, however, Bush's

straight-talking, apparently gunboat diplomacy on several global issues

raises eyebrows a great deal higher among those Western CEOs - be they

in Baltimore, Brussels or Beijing - vying for a slice of the Chinese

market.



'We are watching the situation very closely and waiting to see if it

blows over as one would expect. But there is cause for concern for PR

companies doing business in China,' said Heberlein from his Beijing

office.



'It is worrying that two congressional delegations from the States have

cancelled two forthcoming trips to China because of the crisis. There

would therefore be further concern if business delegations from the US

followed suit, and cancelled visits. This could affect future business

in the short term,' he adds.



Heberlein expressed an underlying anxiety by claiming all foreign

interests in Asia need the burgeoning Chinese market - 'so we need the

situation to be resolved as quickly as possible'.



'If it gets to the stage where there are certain bans on US

multinational business activity, such as advertising, or coverage in the

Chinese media, then that could affect brand initiatives and this will

impact on PR companies. If this were to happen, the long-term impact is

anybody's guess,' says Heberlein.



Charles Lankester, chief executive financial communications Weber

Shandwick Worldwide (WSW), has been watching the diplomatic posturing

about the spy-plane from his London desk.



WSW has three China practice groups - consumer, technology and corporate

- with emerging areas in healthcare and financial PR. With 35 staff in

Beijing, Shanghai and Guangzhou working on client accounts - which

include Procter & Gamble, Hewlett Packard, Northwest Airlines,

MasterCard, British Airways, Philips and Siemens - Lankester perhaps has

good reason to remain optimistic about the situation.



'What is happening at the moment, and what needs to be played out is

this political ballet. The crisis is no more serious than when the US

accidentally bombed the Chinese Embassy in Belgrade. Frankly, I would

give economic boycotts by either side a five per cent chance of taking

place,' says Lankester, who spent 10 years at offices in Singapore as

CEO Asia.



Lankester says that any PR company currently practising, or wishing to

practice, in China must understand that the market is sophisticated and

that there are significant differences economically, politically and

socially. 'China is a single political party state and the US a

democracy, so there are obvious differences in the way things are done,'

he points out.



'Every nation has it own protocol, or idiosyncrasies. To say saving face

is more important to the Chinese than to Westerners is wrong, as a New

York businessman will also go out his way to save face. The current

situation will blow over soon, if not by the time this article appears,'

he adds.



Gavin Anderson's China-watcher and financial PRO associate director

Tristan Peniston-Bird - who was transferred back to the company's London

office in December after a long spell in Asia - claims it is

'inevitable' that US-China foreign relations will spill-over into

business.



'But what one has to assess is to what extent each government exploits

trade and Chinese market-access as bargaining chips in the current round

of brinkmanship,' he says.



'Foreign companies have been doing business in China for decades under

varying levels of East-West relations. The current escalation of

hostility between China and the US is not that much worse than with the

accidental bombing of Chinese Embassy in Belgrade,' added Peniston-Bird,

who spent three years in Asia.



He adds that should the crisis dig in, the higher echelons of big

business in China would make a distinction made between American and

other Western companies, 'and no doubt non-US companies will seek to

exploit the current situation.'



'However, at the 'street kerb' level, the mass consumer audiences will

typically associate Western and US products as being basically the same,

such that widespread boycotts and the like could hurt all Western

players,' he argues.



So what do the corporates with Chinese interests make of the situation?

Are they rushing for their copy of PRWeek Contact to enlist extra help

should Bush go head-to-head with Beijing for the long haul?



In June 2000, the Anglian Water Group won a 20-year operational contract

to provide drinking water in Hexian, Anhui Province, serving some two

million customers. 'As there is no US aspect to our existing and planned

contracts in China, we do not anticipate any adverse reaction to our

business,' said its spokesman Andrew Macintosh.



'Beijing needs to upgrade its water infrastructure sooner rather than

later. We are confident that (our dealings in China) will go ahead and

will not be influenced by the current situation.'



Other companies contacted by PRWeek expressed a need to keep their

counsel at the moment. The China British Business Council, which seeks

to forge closer ties with Chinese markets and businesses, said it did

not wish to comment, citing 'political sensitivity'. So too industrial

gases specialist BOC Group, which has huge interests in China, but a

spokesman did say: 'President Bush's stance on the Kyoto agreement on

pollution would do more damage to Western businesses around the world

than the current incident'.



PRWeek contacted Bush's PR team at the White House for this article,

speaking to an obviously overworked operative, who informed him

'everything that had to be said has been said', and flatly refused to

answer any queries by slamming down the phone.



In these stressful times, PROs, politicians and CEO alike should perhaps

adhere to the other well-oiled Chinese adage: 'Virtue is the

establishment of perfect harmony'.



PRESIDENT BUSH - FOREIGN POLICY



Scour the headlines over the past few months and it becomes apparent

that George W Bush's idea of a global and domestic charm offensive

differs greatly from modern dictionary definitions: 'Bush sets a strong

Right-wing agenda'; 'US blow to treaty on global warming'; 'Bush sours

North Korea relations'; 'Bush begins with ban on aid funds for

abortions'; 'Star Wars programme angers Russia'. And then, of course,

there's China ...



'Communications with Beijing and the Chinese business community is very

much an art, and Bush's approach to China has so far been in keeping in

what we expected from his West/Texas approach. It's very conservative

and stern in manner and tone, and it's different from that we saw under

Clinton. We will of course have to watch and wait to see how things

develop,' expressed veteran China PR expert Tim Heberlein, Edelman MD in

Beijing, with an air of resignation twinged with anticipation. 'If I

knew what the outcome of Mr Bush's approach was to be, then I wouldn't

be sitting in Beijing doing PR, I would be a wealthy man lying on a

beach in the Bahamas,' he jokes.



Charles Lankester, Weber Shandwick Worldwide chief executive financial

communications, admires Bush's handling of the spy-plane saga. 'He's

handed out the olive branch to China by expressing remorse about the

downed pilot, and has set a strong strategic approach. I think he has

handled the situation very well under the circumstances,' he says.



Meanwhile, BOC spokesman Nigel Abbot says Bush may have been better

served by taking a more apologetic approach.



'I think the bigger story here is George Bush's foreign policy approach

per se. His refusal to cut carbon dioxide emissions at the Kyoto summit

shows a disregard which is extraordinary. This may do more harm for

businesses globally,' he said.



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