China Is Going Off the Rails: Gordon Chang

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July 1 (Bloomberg) -- Gordon Chang, author of "The Coming Collapse of China," discusses the Hong Kong protests and what the GlaxoSmithKline scandal means for business in China with Trish Regan on "Street Smart." (Source: Bloomberg)

Negative view, as your book title suggests.

What does this protest tell you about what is about to transpire ? i think china is going off the rails.

If we go back to the beginning of june, the democracy movement in hong kong was completely flat on its back will stop it was flagging.

Then on june 10, beijing issues its white paper on autonomy in hong kong and it energizes everybody.

This is a real indication that beijing is either tone deaf or completely arrogant.

It doesn't care about hong kong.

This is symptomatic of what we see in a lot of different areas.

There was a time back in the 80's and 90's and you lived there when it was more a political.

That has changed radically.

You now have thousands of people out there in the streets and people are more political.

Is this because they are getting fed up with the situation in china?

There are a lot of reasons why, but it wasn't tens of thousands, it was hundreds of thousands for this democracy march today.

That means something important because these people were flying union jack's -- the british lag, which was the ultimate insult to the chinese.

I think largely because of economic issues but also because beijing does not want to let hong kong people determine their own fate will stop these are adults and they don't want to be made infants.

Sticking with china, i want to turn to a corporate scandal and that country getting a lot of attention thanks to a sex tape.

The complex timeline goes like this -- someone said they sex tape of glaxo smith line's head and his girlfriend and a few months later, china began investigating glaxosmithkline over bribery charges.

Riley hires a private investigator to look into who recorded and sent the tape, but that investigator was imprisoned.

The details about the sex tape were revealed in the "sunday times." that all brings to the forefront the question, what are the dangers of doing business in china?

Whether you are glaxosmithkline and running the organization over there and you suddenly have someone taping you in your bedroom or you are working -- was it the hp?

You wind up in jail because of difficulties as well.

What do americans need to know about the risks of being over there?

What we have seen in the last two years are more and more investigations of foreign companies.

Foreign companies are involved in transgressions in china, but the domestic companies are not being investigated by aging and this speaks to discriminatory treatment.

And protectionism.

And this is going to get worse.

You are making a face.

We were just talking about the bnp settlement and the foreign banks doing it on the chin and the u.s. banks not.

So you are saying you're no better?

I'm not excusing it, i just wonder if that's where we are in global business.

It does seem especially egregious and if you are a foreign company operating there and you have a strong enough presence, you are then a target.

Any company -- any country that rises to the top, if you are an apple or gm, you will be under scrutiny.

In pharmaceuticals, 12 the most corrupt sectors in a very corrupt country.

I don't think lexus with a was innocent, but you don't see domestic companies doing much worse practices teeing investigated by beijing.

It's a discriminatory practice.

Coming up, with the dow and s&p hitting new highs, you might

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