Foreign Businesses In China Rattled By 'Hostage Diplomacy'

Huawei executive Meng Wanzhou's return from Canada this week was lauded as a diplomatic triumph in China, but the celebrations left a bad taste for the expat business community, already rattled by the threat of "hostage diplomacy".

That dread was based on the part of the story Chinese state media were largely silent about -- just as flag-waving crowds prepared to welcome Meng at Shenzhen airport, two Canadians were heading the other way after being detained for nearly three years.

Ex-diplomat Michael Kovrig and businessman Michael Spavor were seized in China in December 2018, just days after Meng was detained in Vancouver on a US warrant in a fraud case.

Beijing insisted these were unrelated events, but the detention of the "Michaels" was widely seen as retaliation, an impression reinforced when they were released exactly as Meng left for China.

"It increasingly seems like business is being more politicized," said Steven Lynch, managing director of the British Chamber of Commerce in China.

And a Shanghai-based Canadian manager said: "The celebratory, nationalist reception of Meng was off-putting to quite a few international executives here."

Foreign firms in China have always trod a fine line on politically sensitive issues to not upset the authorities in the world's second-largest economy.

But the Meng-Michaels case ramped up fears about staff being arrested based on diplomatic hostilities between China and their home countries.

Many firms beefed up their risk strategy and drew up "frantic" contingency plans for possible staff detentions, according to the Canadian manager in Shanghai.

"There was a great deal of concern that anybody could be grabbed off the street at any time."

The Michaels were hit with vague spying charges and barely had any contact with the outside world while in prison.

The episode sent China-Canada ties plummeting, and dented Beijing's image with governments and businesses around the world.

It also increased pressure on foreign businesses in China, which face difficulties because of rising nationalism, trade disputes with the West, strict Covid-19 border controls and a tightening regulatory environment.

Some Canadian firms have decided the risks are too high, and have started winding down their operations in China.

Many other Canadian companies are reluctant to send staff to the country.

"Every foreigner in China has to know that they're on the clock," said the Shanghai-based Canadian manager.

Kovrig and Spavor were not the only foreigners ensnared in apparent retaliation by China.

An Irish businessman has been detained since 2019 after his employer was embroiled in a legal dispute, while Australian national Cheng Lei was taken into custody as relations with Canberra nosedived.

Suspicions of more hostage diplomacy were fuelled Sunday when two American siblings, prevented from leaving China since 2018 for their father's alleged "economic crimes" abruptly returned to the United States.

Even Western diplomats -- especially from Australia, Canada, New Zealand, Britain and the United States -- are reluctant to return to China without full immunity.

"The consequences of getting caught up in another similar spat are just too high," one diplomat told AFP.

China has rebuffed travel warnings -- including about arbitrary detentions -- from Canada and the United States, saying they are based on "shocking and absurd lies".

But that has done little to comfort foreign businesses, many of which simply cannot afford not to operate in China's huge market.

While the risk of arbitrary detention is not likely to be the top daily concern for multinationals, it adds to an increasingly political business environment.

Some of the world's top firms have faced punishment and apologised after upsetting China on sensitive issues such as Taiwan or the treatment of Uyghurs in Xinjiang.

One foreign business chamber official played down the chances of arbitrary detentions, likening them to the risk of being hit by lightning, but the fear of overstepping a line in China is widespread.

"Companies are more careful than ever to stay away from politics and to toe the line, wherever it may lie, in China," said one member of a European business chamber in Hong Kong.

And international condemnation may not have a serious impact, analysts said.

Despite "deteriorating China's image around the world", Beijing is likely to use hostage diplomacy again, said Jean-Pierre Cabestan, professor at Hong Kong Baptist University.