| WASHINGTON, June 13
WASHINGTON, June 13 Mitt Romney may be down on
China and threatening to declare Beijing a currency manipulator
from day one if he is elected U.S. president, but his past
dealings with the country show he was not always so hostile.
From his early days at private equity firm Bain Capital to
his time as Massachusetts governor, Romney welcomed investments
from China, and bought and expanded companies that benefited
from its low labor costs and controlled currency. As chairman of
the 2002 Winter Olympics, he also said Beijing should not be
punished for human rights abuses.
All this is in sharp contrast to the Republican presidential
candidate's current line of attack on the world's second-largest
economy, which is now the United States' most important trading
partner and largest foreign creditor. And that makes political
strategists, China experts and business leaders wonder whether
Romney will really follow through on his campaign promises if he
So far in his campaign, Romney has accused China of cheating
Americans out of jobs and said a country that represses its own
people cannot be a trusted partner.
He has also promised to label China a manipulator of the
yuan. On the surface, that would just be a symbolic gesture
because it only requires Washington to start talking to Beijing
about adjusting its currency.
But Beijing could easily see it as threatening enough to
trigger major trade tensions and reduce the chances of Chinese
cooperation over international issues, business executives,
analysts and former U.S. government officials said.
Kenneth Lieberthal, who advised the Clinton administration
on Asia, said Romney would end up taking a softer approach if he
gets into the White House.
"Why walk into office and immediately alienate the folks you
are going to be dealing with?" said Lieberthal, who is now
director of the John Thornton China Center at the Brookings
Institution think tank. "You start off by slapping them in the
face and then say: 'Let's get to know each other?' It's just not
the way the real world works. It may sound great as a campaign
slogan ... but it doesn't work as real policy."
The heated campaign rhetoric does not mesh with a review of
Romney's actions and remarks when he was governor, in charge of
the Olympics or running Bain Capital.
The Romney campaign said he had been consistent about his
position on China. He is a strong supporter of free trade,
including free trade with China, the campaign said.
"Governor Romney has repeatedly discussed the need to
confront China over its unfair trade practices," said Romney
spokesman Ryan Williams. "Unlike President Obama, who promised
to take China 'to the mat,' but has instead been treated like a
doormat, Governor Romney understands the importance of this
issue to the international trading system and the American
(The White House has denied it is soft on China.)
Bain, the private equity firm Romney founded in 1984 and ran
through 1999, invested in companies that have, like many U.S.
corporations, taken advantage of cheaper Chinese manufacturing
costs while also investing in the country to tap rapidly growing
Romney and his campaign have often talked about how three
companies that Bain invested in during this period - the Staples
Inc, Sports Authority Inc and Domino's Pizza Inc
chains - have gone on to create more than 100,000 jobs
What he does not discuss is the role China is playing in
these businesses. For example, of 80 items randomly chosen in a
Sports Authority store in Washington, D.C., earlier this month,
about two-thirds were Chinese produced - including tennis balls,
bikes and boxing gloves.
At a Staples outlet in New York, the figure was more like 40
percent, including staplers, glue and rulers. The percentage may
be bigger on a sales basis because a lot of the higher-priced
goods, like computers and other electronic gear, come from
To be sure, it is not clear how much China-sourcing the
companies did when Romney was at Bain. Staples and Sports
Authority had no comment.
There is nothing unusual about U.S. retailers getting their
wares made in China; the biggest, including Wal-Mart Stores Inc
, do so.
But if China revalues its currency, companies like Staples
would face higher costs and might have to raise prices. The
retailer might also look for cheaper alternatives - it already
produces a significant number of products in countries such as
Mexico and Egypt.
A stronger yuan could increase dollar revenues from China
for companies like Domino's, which sells there, but any major
trade tensions with Beijing could hold back the expansion of
U.S. companies in the country.
Staples now operates in Beijing, Shanghai, Shenzhen and
Domino's had three stores in China by the time Romney left
the private equity firm. Now there are 13, and Shanghai-based
Dash Brands recently signed a deal to become a master franchisee
for Domino's Pizza in China. Domino's had no comment on Romney,
but characterized its experience with Bain as very positive.
Other Bain investments also have China connections.
For example, in 1996, Bain invested $2.1 million in
customized doll maker Lifelike Co, which had operations in the
United States and Hong Kong, according to "The Real Romney," a
2012 biography of the candidate by Boston Globe reporters
Michael Kranish and Scott Helman. The book said Lifelike filed
for bankruptcy in 2004. It was not immediately clear if the
company manufactured in mainland China.
In 1997, Bain invested $8.36 million in Midwest of Cannon
Falls, a company that sells novelties such as holiday ornaments
to small retailers. Former Midwest Chief Executive Officer
Kathleen Brekken told Reuters that at the time, most of the
company's products were made in China, but she declined to
comment on Romney or Bain.
In his own words, Romney has supported China in the past.
Recalling a visit to a factory there in 1998, Romney praised
the Chinese work ethic. "They cared about their jobs," he told a
forum on the future of U.S. cities that year. "They wouldn't
even look up as we walked by."
Skeptics in both Washington policy circles and the business
community see Romney's current rhetoric as designed to play on
the fears of economically frustrated Americans, who worry that
China has been stealing jobs from the United States.
However, a look at Romney's tenure as Massachusetts governor
between 2003 and 2007 also suggests that he may be more measured
towards China if he becomes president.
Romney welcomed Chinese Premier Wen Jiabao to Boston's port
in 2003 and boosted Massachusetts' exports to China by 235
percent, according to state figures. The governor also praised
the role of Beijing-controlled China Ocean Shipping Co in
building the trade relationship.
When Romney was chairman of Salt Lake City's 2002 Winter
Olympics and Beijing was vying for the 2008 summer games, he
said he was against denying China an opportunity to host the
event because of the nation's human rights abuses.
"They have practices, as reported in the media, that violate
my sense of human rights, but we should not build walls even if
we vehemently disagree with many of their practices," Romney
said at a 2001 news conference, according to the Chicago
Tribune. "Building bridges increases the possibility for
spreading the ideas of civil societies."
The saber-rattling from Romney has worried business
executives. Behind closed doors, some grumble that he is wasting
political capital on the currency question when there are bigger
problems to resolve with China, such as access to its financial
markets and protecting U.S. companies' intellectual property.
"Given his background, many of us had assumed he would take
a broader view," said Erin Ennis, vice president of the
U.S.-China Business Council, which represents about 250
companies that do business with China, including Dow Chemical Co
, Ford Motor Co and Apple Inc.
Thomas Donohue, president of America's largest business
lobby, the U.S. Chamber of Commerce, said the yuan's rise in
recent years had taken away the case for declaring China a
currency manipulator. "You can't make that argument anymore," he
said in April.
The yuan has appreciated nearly 30 percent since China broke
its peg to the U.S. dollar in 2005. When adjusted for inflation,
it is up about 40 percent against the greenback, and China labor
and other manufacturing costs have climbed.
Talks between Washington and Beijing about adjusting the
yuan's value are already under way and have shown some progress.
But still, Romney's declaration of China as a currency
manipulator would carry risks. If the United States'
third-largest export market feels it is being unfairly targeted,
it could fight back with more than just words.
In 2009, when the Obama administration imposed tariffs on
low-end tires from China, Beijing immediately launched a formal
anti-dumping probe of American exports of chicken and auto
The World Trade Organization has since ruled that the United
States is entitled to impose the extra duties on Chinese tires.
The two countries are still fighting over the chicken parts, and
new disputes have arisen over solar panels, wind turbine towers
and rare earths.
With the world's two largest economies tightly intertwined
and Washington increasingly seeking Beijing's help on diplomatic
issues, the fear is that China could not only slow the
appreciation of the yuan but also retaliate in other areas
important to the United States, such as U.S. farm exports and
Western sanctions against Iran.