Episode 1447 Scott Adams： Is it Safe to do Business in China？
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Summary
Is it safe to do business in China? What are the risks and rewards of doing business there? And what are the benefits? Is China a place where you can do business safely and profitably? Is it a place you should be doing business if you don't want to get caught up in the political turmoil?
Transcript
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Hello, everybody. Today's topic is, is it safe to do business in China, if you're an
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American company, let's say, for example. Now, I would say that in the past, if you
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looked at the risk and reward of doing business in China, you had a certain amount of risks,
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but the reward was so high because the cost advantage would be great, you could get things
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done quickly, perhaps. And so in the past, it was safe enough to do business in China
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that massive amounts of business went there. But what's changed? A lot. First of all,
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reputationally. If you do business in China, now you're doing business with an entity that
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literally is running, I guess you'd call them, imprisonment slave labor camps for the Uyghurs.
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I'm not sure what the right word is, but you don't want your company associated with that.
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Imagine if you'd been doing business with Nazi Germany, and then suddenly the world decides
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that that's a bad idea. You don't want to be caught in that situation. Likewise, we have
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the allegations that China is using political prisoners, the Falun Gong group, for example,
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as the sources of forced organ transplants. So they're donors. Do you want to be associated
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with that reputationally? It's kind of risky. It's a big risk, I would say. What about China's
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fentanyl trade? They're sending fentanyl to the cartels in Mexico, and then the cartels are
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putting it into pills, sending it to the United States, and tens of thousands of Americans are
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dying every year. Do you want your company associated with prison camps, forced organ donations,
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and drug overdose deaths? Because that's China's brand at this point. And if you do business with
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them, you're taking on a little bit of that reputational risk. What about the ransomware
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attacks? What about the IP theft? What about a number of things that they've been doing? There are
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reports of bogus arrests. If you went to do business in China, could you guarantee that you wouldn't be
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arrested on trumped-up charges? Take me, for example. Do you think I could go to China, and they
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wouldn't be watching me and looking for a reason to maybe pick me up? China is a pretty dangerous place
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at the moment, because they're not answerable to anybody, and they're looking out for their own
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best interests. One of the big risks of doing business in China is that your cost advantage
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might be an illusion. Because a robot, let's say a robot is designed in America to manufacture
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something, that robot's going to cost China the same thing as it costs an American company,
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because they're buying the same robot from the same place. But if the robot makes something in
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America, you don't have these shipping fees for American customers. If the same robot works in
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China, well, then they've got a shipping fee on top of the robot expense. So in theory,
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robotics should make their business go away, and the entire stability of China is going to be at risk
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if robots start taking those kinds of jobs. So that could happen, and it could happen fairly
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quickly. So you don't want to be embedded in a country where the entire country has some instability.
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You want to make sure that you're in a country that has fair trade deals, and they're not going
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to change them after the fact. I don't know if you could trust China there. I don't know that you
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could trust China's courts if you get into any kind of a legal battle in China. How's that going to go?
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Well, I think that they're going to prefer Chinese companies. And so I would say that that's a pretty
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big risk. There's also a big demographic risk in China. There's a climate change problem. There's
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a pollution problem. There's some military provocation going on. And let's not leave out karma.
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I don't know if karma is real. I'm not a new age kind of person. But China is involved in some really,
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really bad stuff. And if that doesn't come around and bite them in the ass, I'd be surprised. Because
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it looks like everything is sort of going in that direction right now. And then also there's a problem
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that China is banning the internet, or at least free use of the internet to its own population.
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What happens to the Chinese government and its stability if people can't breathe and it's
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flooded and they can't get jobs and there's a demographic time bomb and all of it gets blamed
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on leadership? In my opinion, the leadership of China is more vulnerable than maybe we realize.
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I think that they could be a lot closer to having to make a big change because their reputation
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could not be worse. I mean, they have a reputation that's on par with Nazi Germany. And that's real.
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That's actually the way people are starting to see them. So if you're an American company and you've
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not made the decision to do business with China, consider that it's no longer just the cost and
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benefit of how much it costs to do business here versus somewhere else. It's now you taking on a
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reputational risk. And probably somewhere in the neighborhood of 30 to 50% of Americans would
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definitely make the decision to buy American, even if it costs a little bit more if they have the
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option. So imagine American companies simply targeting the Chinese manufacturing companies that
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are the most vulnerable, reproducing them in America. Americans say, hey, thank you very much.
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I like your robotic made stuff. And I like your 3D printers. And we can do that here.
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So bottom line, nobody ever got fired for buying IBM equipment used to be an old saying back when IBM
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was so dominant that if you bought their hardware and it didn't work, well, they'd fix it and it
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wouldn't be your problem. So they would make it work every time. So you never got fired for buying
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IBM for your company because IBM made it work. But could you get fired for making a decision to bring
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some part of your manufacturing or doing business with China when all of these risks are known? These are
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known reputational risks and financial risks and legal risks and everything else. And if you know that there
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risks and you do it anyway, you're putting your own job in jeopardy. So I think things might start
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changing pretty quickly because in the United States, both the Democrats and the Republicans
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seem to be quite united that we should be making and buying things from America. So yeah, and I'm seeing
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in the comments, somebody says, I actually get angry when I see China on a product. Yeah, we're no longer
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talking about dollars and cents. One entity can produce things much cheaper than another. Now
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you have to worry about the emotional part, the anger, the direction of things, the amount of
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animosity that Americans are starting to get against the Chinese government. Not the people. We like the
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people. And that was all I wanted to say today. I just want to put that out there that if you're a
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business leader and you're looking at China, you're putting yourself at great risk reputationally and
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career-wise. And I can predict that things will probably get much worse for China before they get
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better. That's all I wanted to say today. One topic. And thanks for listening.