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Investing in China as its Economy Starts to Take Off in the 1990s

China’s economic transformation launched its economy to new heights during the 1990s, allowing it to have a stronger international presence. A country with a rapidly developing economy and an enormous population made China an extremely appealing market for American companies to invest in. However, there were still issues that needed to be addressed. This resulted in negotiations taking place regarding various issues ranging from Intellectual Property Rights (IPR) to space launches. As head of the external side of the economic section, Ambassador William Monroe would play an imperative role in these negotiations.

Ambassador William T. Monroe (2014) | U.S. State Department Archive
Ambassador William T. Monroe (2014) | U.S. State Department Archive

Before Ambassador Monroe’s involvement in negotiations with China on numerous issues, China was reforming its economic policies. Beginning in 1978, Deng Xiaoping initiated reform and “openness” policies that allowed foreign investment and capital to permeate society for the first time in China’s history. This drastically improved the living conditions for many Chinese citizens and provided many with new opportunities. Although foreign investment and collaboration would hit a speed bump with the events that occurred at Tiananmen Square, by 1998, per capita income was fourteen times higher than it was in 1980.

Notwithstanding the reforms made to facilitate foreign investment in China, the United States wanted to address issues affecting American companies. These issues included violations of intellectual property rights and restrictions on foreign companies’ competitiveness. Therefore, Ambassador Monroe’s main responsibility was to negotiate on the expressed concerns of the United States. He helped further discussions to have American companies enter and compete fairly in Chinese markets, as well as to protect their private properties.

This was not an easy task for Ambassador Monroe, due to the uncertainty of how the Chinese economy actually worked. Despite making progress and helping China join the World Trade Organization (WTO), the issues of that time still persist today.

William Monroe’s interview was conducted by Charles Stuart Kennedy on September 12, 2018.

Read William Monreo’s full oral history HERE.
Read more about China’s bumpy road to the WTO HERE.

Drafted by Nathaniel Schochet

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Excerpts:

“ I was head of the external side, so we did all the trade negotiations.”

           
View Over Shanghai 1995 (1995) | SnappyGoat
View Over Shanghai 1995 (1995) | SnappyGoat

The Task:
I arrived in summer of ‘93 and left in ‘96. This was an extremely interesting time to be in China. We’ve talked about a couple of jobs I had that were rather low-key. Well, in Beijing, it was the opposite—high profile, I’d never worked harder in my life. I was in the economics section. I was head of the external side, so we did all the trade negotiations. We had trade negotiations on everything from IPR (Intellectual Property Rights) to textiles to space launches to prison labor to market access to WTO (World Trade Organization). Delegations coming in one after the other. It was hard, tough.

“While this is going on you’re supposed to take your fork or chopstick and remove the cooked fish from the body.”

Dinner with delegations:
Q: I’m told that people on the commercial side of things had what was called “death by duck” because the delegations would come in one after another and afterwards you’d get treated to peking duck!

You were lucky if you got peking duck. I can remember one time when a WTO delegation came and we were served scorpions or tarantulas or something like that, clearly aimed at unsettling our delegation. It didn’t look very appetizing. Another favorite trick was to get a fresh fish, chop off the head, quickly cook the body, put the head back on the fish, and serve it on the table while mouth was still opening and closing. While this is going on you’re supposed to take your fork or chopstick and remove the cooked fish from the body. Anything to get the visitors a little off their game!

“It was just non-stop with delegations of high level business groups, business signings”

China opening up:
This was an interesting time because it was after Tiananmen Square. Tiananmen Square, you know, was a shock to the relationship, which was just getting off the ground. But then Deng Xiaoping took over, a year or two before I arrived, and decided to open China up. So I arrived at a fascinating time, especially on the economic side. American companies were rushing in; everyone wanted to get into this huge market that was suddenly opening up. It was just non-stop with delegations of high level business groups, business signings. I can’t tell you how many banquets and signing ceremonies I attended for new deals or factories. It was never-ending. But at the same time, the trade deficit suddenly became a huge issue, we became increasingly concerned about getting market access for our companies, and getting China to play by international trade rules. There was real tension. So we had constant visits by USTR trade negotiators, never-ending take negotiations, which were often testy, and on IPR brought us to the brink of a trade war. And we also began negotiating to bring China into the WTO. I took a couple trips to Geneva to work on the negotiations on China’s accession to the WTO.

“It was a challenge, and not easy, I will say that.”

           
View over Shanghai 1985 (1985) Kattebelletje | flickr
View over Shanghai 1985 (1985) Kattebelletje | flickr

The Challenge:
The challenge was indeed to figure out how things worked. We’d have our negotiating teams come in, and they’d present all sorts of questions and try to understand how things worked, how access was blocked or hindered, what kinds of regulations, or subsidies, or illegal practices affected foreign companies trying to enter the market. It was a challenge, and not easy, I will say that.

“It was a popular place to go because China was opening up.”

Visitors:
Certainly congressional delegations were coming in left and right. It was a popular place to go because China was opening up. I think someone estimated that half the Senate visited while we were there. Now they weren’t coming just for trade, but that was certainly on the minds of many. Another big concern was export of goods made by prison labor.

“But really, it would be much better to protect the technology.”

The Arrangement:
China was not that developed at that time—its economy was just taking off when I arrived—and technology transfer was a concern for companies coming to China. If a company wanted to invest and build a factory in China, it would often have to form a joint venture, and the Chinese partner would then have access to the invested technology. The fear was that in time the Chinese would copy the technology, then produce their own version of the product, and start exporting back to the U.S. The gamble, I guess, was that U.S. company could stay far enough ahead on the technology ladder so that it wouldn’t really matter. But really, it would be much better to protect the technology. And as the Chinese got better educated and moved up the technology ladder themselves, these issues were only going to get more challenging.

“That was a great linguistic and cultural experience.”

Travel:
Yeah we did. When I was in Taipei as part of my study program I took a trip with a Taiwanese tour group and we travelled all over China, which was a fabulous experience. Both in seeing China, traveling all over the country, and spending two weeks with a Taiwan tour guide and 15 Taiwanese tourists who spoke little to no English. That was a great linguistic and cultural experience. While we were in Beijing, we traveled some—to Shanghai, Xian, Harbin, Inner Mongolia

“Companies are always looking for cheaper labor.”

           
View over Shanghai 1985 Versus 1995: View over Shanghai 1985 (1985) Kattebelletje | flickr | View Over Shanghai 1995 (1995) | SnappyGoat
View over Shanghai 1985 Versus 1995: View over Shanghai 1985 (1985) Kattebelletje | flickr | View Over Shanghai 1995 (1995) | SnappyGoat

Labor:
We didn’t really focus on labor relations and labor costs. Our big issue with labor, as I said, was with prison labor and the export of goods made in prisons. As for labor costs, they are taking a predictable path. Labor costs are rising, and a lot of those textile plants that used to be in China are now in Vietnam, or Cambodia, or Bangladesh. Companies are always looking for cheaper labor.

“And we were watched.”

Living Conditions:
At that time all the diplomats and journalists lived in diplomatic compounds. In our compound, Jianguomenwai, there were some 15 high rise apartment buildings. Very basic. We lived on the fifth floor in our building. It was not modern, and not particularly nice, but for the kids it was great because it was a gated compound and all their friends lived in nearby apartments. We could just send the kids down and they could play with their friends in the open space below. Access to the compound was restricted, notably for Chinese who couldn’t enter unless they had a card as a maid or something like that. And we were watched. You would come home and find that your computer has been accessed. You would pick up the phone and know that you were being listened to. Lots of strange stories, like one person hearing his own voice played back when he picked up the phone. Or one visitor who checked into her hotel, turned on the TV, and saw herself on the screen—something went haywire there. We assumed, and it was a correct assumption, that we were being watched and monitored all the time.

TABLE OF CONTENTS HIGHLIGHTS

Education
BA in History, Stanford University 1968–1972
Studied abroad in Vienna 1970
MA in Int’l Relations, Fletcher School of Law and Diplomacy 1972–1974
Entered the Foreign Service 1978
Rangoon, Burma—Economic Officer 1985–1987
Beijing, China—Economic Officer 1993–1996
Kuwait City, Kuwait—Deputy Chief of Mission 1999–2002
Manama, Bahrain—Ambassador 2004–2007